Tacking an Acknowledgment on to the End of a Contract

You sometimes see a contract that has a paragraph entitled “Acknowledgement” added at the end, after the party signatures.

For example, a search on the SEC’s EDGAR system quickly retrieved this document, a “forebearance agreement and amendment to indenture” between Gulfstream International Group, Inc. and Shelter Island Opportunity Fund, LLC. Here’s what came after their signature blocks:

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS The undersigned, each a guarantor of the indebtedness of Gulfstream International Group, Inc., a Delaware corporation ( Company ) to Shelter Island Opportunity Fund, LLC ( Holder ), pursuant to the separate Guaranty of each dated as of August 21, 2008 (each, as amended from time to time, a Guaranty ), hereby (i) acknowledges receipt of the foregoing Forbearance Agreement and Amendment to Securities Purchase Agreement and Debenture (the Agreement ); (ii) consents to the terms and execution thereof; (iii) reaffirms all obligations to Holder pursuant to the terms of the Guaranty; and (iv) acknowledges that Holder may amend, restate, extend, renew or otherwise modify the Transaction Documents and any indebtedness or agreement of Company, or enter into any agreement or extend additional or other credit accommodations, without notifying or obtaining the consent of the undersigned and without impairing the liability of the undersigned under the Guaranty for all of Companys present and future indebtedness to Holder.

[Signature blocks omitted.]

I haven’t previously given any thought to the practice of tacking acknowledgements on to the end of a contract. I invite you to suggest whether or not that practice makes sense and, if it does, when it’s appropriate to use it.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

5 thoughts on “Tacking an Acknowledgment on to the End of a Contract”

  1. In many cases, a guarantor is deemed to be released from liability under its guaranty if the creditor and debtor modify the debt without the guarantor’s consent. In my experience, having the guarantor sign the modification document in this manner is a common way to establish this consent. It is also my experience that it is usually unnecessary to do this because the standard guaranty contains an agreement by the guarantor that the debt can be modified without the guarantor’s consent. This doesn’t stop lender’s attorneys from requesting the guarantor’s consent out of an (over)abundance of caution.

  2. Hey Ken:

    Can you post a link to the contract found on EDGAR?

    I’m asking because I’d like to see who the Guarantors are.



  3. In several EU member states, it’s a statutory requirement that the partner of a natural person who is married in a ‘community of property’ (in short: after divorce the ex-partners are each entitled to half of the entire property of both) consent to important transactions by that person (e.g., a transfer of shares or securities in, or grant of a guarantee on behalf of, a company owned by that person). If the consent is missing, the transaction is null and void. In practice, such a consent is typically placed underneath the signature blocks (and obviously requires the signature of the partner).

    In the Netherlands, there is important case law that this also applies to securities in investment funds (e.g., established in relation to life insurance policies or mortgage-related financial products).

  4. Thanks for posting the link to the document, Ken!

    In this particular case, it’s completely appropriate. The creditor (Shelter Island) wants to make sure it’s going to get paid back… and doesn’t want to ONLY be able to go after the Gulfstream entity that’s signed the debenture.

    So the guaranty acknowledgment allows Shelter Island the ability to go after these third party entities only to the extent of a financial default (and some might argue that these other entities would also be held liable to guaranty the Gulfstream party’s entire performance under the agreement and for any default, not just financial).

    Without this guaranty, Shelter Island would be limited to recovery only from the Gulfstream entity which signed the agreement… and I’m guessing, based on how airplane contracts typically work, that such entity is really no more than a shell and Shelter Island knows it.

  5. Although the clause is captioned “Acknowledgment”, I would characterize it as a consent, a waiver, and a reaffirmation of an earlier waiver.
    The title of this page led me to expect a discussion of adding a notarial acknowledgment.

    My experience is similar to James Trimble’s. Though arguably unnecessary, lender’s attorneys often require it for several reasons. At least three reasons come to mind.

    First, as a good habit to get into. There is concern that if you rely on waivers in the original guaranty, sooner or later you will forget to add the consent in a deal where the original documents lack a waiver, or where the waiver may have been too narrow.

    Second, there is a perception that the fewer documents you have to put in front of the judge, the better, in order to reduce the risk of the original waiver language being overlooked or misunderstood by the court, and to speed up the dismissal of the guarantor’s defense of release by modification.

    Third, you make it harder for the guarantor (or the guarantor’s trustee in bankruptcy) to argue that the guarantor did not really mean all of those waivers in the original guaranty, or that those waivers do not apply to the obligations as modified, or that they apply to this modification but were then extinguished by this modification so as to allow the next modification to release the guarantor unintentionally. Yes, that’s a weak defense, but courts — and particularly bankruptcy courts — have upheld defenses every bit as weak.

    It is a shame that this practice is necessary. As you have pointed out, Ken, drafting for stupid judges is a losing proposition. But we live in an imperfect world, and as Holmes observed, the life of the law has been experience, not logic. Sadly, experience teaches that lawless judges (especially in bankruptcy court) are an even bigger hazard than stupid judges — as witness Twist Cap, Deprizio, and a host of other bad doctrines adopted by bankruptcy court in defiance of law, logic, and commercial expectation.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.