Solidary Guarantor Liability: Understanding Rights and Remedies under French Law
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Law of Security, Solidary Guarantor, Pledge without Dispossession, Civil Code, Consumer Code, Court of Cassation, Subrogatory Action, Judicial Liquidation
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Abstract
Unlock expert insights on the Law of Security through a real-life case study. Discover how Edouard's commitment as a solidary guarantor is impacted by the pledge without dispossession and the possible remedies against co-guarantors. Learn about the scope of guarantor obligations, the effect of releasing security without consent, and the reduction of payment obligations under French Civil Code articles 2333 and 2300. Understand the implications of judicial liquidation on guarantors and the importance of subrogatory actions. Dive into the nuances of security law and protect your business from potential risks
Extract
[...] In law, article 2314 of the civil code states that 'When subrogation to the rights of the creditor can no longer take place in his favor due to his fault, the guarantor is discharged to the extent of the prejudice he suffers.' In addition, by a ruling of November the Court of Cassation clarified that the creditor who proceedsfrom the release of a security without the consent of the guarantor may lead to a reduction of the obligation of the latterRegarding this, it means that if the guarantor suffers a prejudice as a result of this release, they may request to have their commitment reduced to the extent of the prejudice suffered. In the eventThis, Édouard became a guarantor in 2019 for a company. In guarantee, the bank had constituted a pledge without seizure. However, it lifted this pledge as part of the collective procedure. This release deprives Édouard of a security that could have allowed reducing a part of the debt. Thus, he could request a partial discharge of his commitment, by demonstrating the prejudice he has suffered. [...]
[...] He has just learned of the principal debtor's default and is therefore called upon to pay the debt, which amounts to 19,500?. His assets amount to approximately 130,000?. In what measures can Édouard try to escape his commitment? The possible disproportion In law, article 2300 of the civil code states that "If the guarantee subscribed by a physical 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". [...]
[...] Thus, even if Bernard considers his commitment to be disproportionate, he remains bound to contribute to the repayment of the debt to Édouard. 2. PART II The following practical case may bethree divisionsit is divided into two distinct parts. First, it will be necessary to examine the consequences of the bank's release of the pledge on Édouard's obligation as a guarantor. Then, it will be a matter of analyzing the means he has to contest his guarantee commitment subscribed in January 2022. [...]
[...] However, this protection only concerned the relations between the guarantor and the creditor, and could not be invokedand between cofidco-signers. In the espisthis, Bernard indicated to Édouard that, if the latter was called to pay the total debt and then exercised a recourse against him as co-signers, he would try to échapper to his obligation by invoking the disproportion of his commitment in relation to his income and his assets. However, this argument is not possible given that la disproportion applies only between the creditor and the guarantor, and not between co-guarantors. [...]
[...] However, due to this non-delivery, Lady De Torth is in theimpossibilitis to register and use her motorcycle. The damage she suffers appears disproportionate to the ridiculously small amount of the debt. Thus, DragonFire might be forced to return the vehicle registration card, their refusal appears abusive. [...]
