Parent company guarantees and performance bonds are typically used in the construction and engineering industries to provide a developer with some security in the event that the contractor breaches the building or engineering contract or, in some circumstances, upon the contractor's insolvency.

In the current economic climate, contractor default is, unfortunately, even more prevalent in the construction and engineering industries, and so the issues surrounding parent company guarantees and performance bonds are very much in focus for developers.

This past summer, the Minnesota Court of Appeals held that "deepening insolvency" is not a recognized theory of damages in Minnesota. Christians v. Thornton, 733 N.W.2d 803 (Minn. App. 2007). In September, the Supreme Court of Minnesota denied a petition to review, 2007 Minn. LEXIS 572 (Minn. Sept. 18, 2007), leaving in place a decision that is an enormous relief to officers and directors of troubled companies, to banks that have lent to troubled companies, and to professionals such as lawyers, accountants and investment brokers who have provided services to troubled companies.