Disproportionate Surety Law Reform 2021

Extract

[...] Is the professional creditor obliged to warn the unaware surety of the debtor's delicate situation? This consent must therefore exist, but above all be integral; and this control of integrity is done a priori and a posteriori. Art 2229 CC: "the professional creditor is required to warn the surety physical person when the debtor's commitment is inappropriate to the latter's financial capabilities". In addition, the object of the warning is no longer the same; and if formerly it was necessary to warn the surety about its financial capacity, it is now necessary to warn it about the financial capacity of the principal debtor. [...]

[...] From now on, as soon as the guarantee is disproportionate on the day of the guarantee, it must fall. The 2021 reform maintained this forfeiture, but it is now partial. The guarantee is therefore reduced to the amount up to which the sanction could engage. The manager would be left almost helpless. If he demonstrates that the bank was aware of the risk to him of becoming a guarantor, then disproportion of the guarantee and partial forfeiture of his rights. [...]

[...] Can the manager rely on a disproportion to escape his commitment? Article 2300 of the Civil Code, which states that 'if the guarantee subscribed by a natural person to a professional creditor was, at the time of its conclusion, manifestly disproportionate to the income and assets of the guarantor, it is reduced to the amount up to which he could engage at that date'. The Civil Code states that there must be a disproportion in relation to 'the income and the assets of the guarantor'. [...]

[...] The Court considered in this case that article 1415 could not be applied, since a real security given to guarantee the debt of a third party implies 'no personal commitment to satisfy the obligation of another'. What is called real guarantee is therefore in reality only a real security. This means that for the Court of Cassation, the real guarantee is only a real security and nothing else Art 1422 CC : The spouses cannot, one without the other, dispose of the community assets during their lifetime, gratuitously. They cannot, one without the other, affect one of these assets to the guarantee of a third party's debt. Therefore not possible according to art 1415 CC. [...]

[...] Can she argue that IF IT IS DISPROPORTIONATE AT THE TIME OF CONCLUSION then creditor is dismissed I. that she had thought, wrongly, that the company was solvent? Can the surety invoke an error on the debtor's solvability to release themselves from their commitment? The error, as a vice of consent, is susceptible of being invoked by the sureties, by application of the common law of contracts. This argument is occasionally raised by the sureties, generally an error on the debtor's solvability. It must be demonstrated that they were ignorant. [...]