Surety Agreement Requirements

In today`s world, many of us will eventually be called upon to vouch for the debts of another person or company, either for a friend, a family, or as a director of a company. Before engaging as a guarantor, it is necessary to understand the nature and consequences of a guarantee contract The main criteria for distinguishing between guarantee agreements and guarantee agreements are as follows: (a) Primary ancillary and ancillary obligation: the most notable difference between a contract of suretyship and a contract of guarantee is that; While the guarantee imposes an additional and secondary performance obligation (depending on the nature), a guarantee imposes a primary and independent obligation. Under a surety contract, the surety is only liable if the underlying contractual relationship is valid and enforceable. According to Article 492 of the TCO, “in the event of termination of the underlying contract, the guarantor is exempt from his performance obligation”. The guarantor obligation is of an independent nature since it is separate from the underlying contractual relationship between the principal debtor and the creditor. In this respect, the collateral enterprise (contract) remains effective even if the underlying contractual relationship between the creditor and the debtor becomes invalid, so that the guarantor is liable for the performance of the collateral enterprise vis-à-vis the creditor. In other words, upon repayment to the creditor, the guarantor would fulfil its own obligation under the collateral contract, but not the debtor`s obligation under the underlying relationship. (b) Objections (pleas): under Article 497 of the TCO, “the security benefits from all objections arising from the primary liability relationship which belong to the debtor” whereas this possibility is not granted to the guarantor, so that the guarantor cannot make these defensive arguments against the creditor. (c) Right of recourse: the guarantor is the guarantor of the creditor`s rights against the debtor, limited to the amount that the guarantor has paid to the creditor. . . . .

Author: Franck Pertegas

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