Lawyer - Bank guarantee

Becoming a bank guarantor is never a simple formality. A guarantee is a legal commitment that involves paying someone else's debt, sometimes unexpectedly. Company directors, partners, tenants, private individuals - each profile has its own risks: joint and several liability, incorrectly assessed amounts, lack of information or disproportionality, serious consequences in the event of default by the principal debtor.

Solent Avocats works to protect your interests at every stage: upstream advice, verification of contract drafting, defence in litigation, negotiation with the bank or professional creditor. Our firm, founded by Charlotte GAUCHON and Raphaël MORENON, lawyers at the Marseilles Bar, specialises in banking and finance law, surety law, consumer law and commercial law. Our experience of banking litigation, personalised strategy and support from signature to legal proceedings mean that each case is dealt with in a practical and tailored manner.

Understanding and anticipating the risks of a bank guarantee

It is sometimes said that bank guarantees are "formal". Yes, the form is important: a poorly drafted guarantee deed, an incomplete handwritten note, a lack of information or a warning, and the ground is ripe for dispute. But the substance is never far away: the contract of guarantee only commits the guarantor to the extent authorised by law. There are conditions to be met, and articles of the Civil Code and the Consumer Code set the bar. Moreover, the Commercial Chamber of the Court of Cassation regularly points out that in the case of disproportionate guarantees, a defect, lack of proportionality or absence of a duty to warn is all that is required to render the contract null and void.

More often than not, problems arise from confusion over the actual scope of the undertaking. For example, the guarantor may think he is only guaranteeing the main loan, but the deed also covers other debts, or the guaranteed company takes out new loans. The guarantor thinks he is committing himself to a specific sum, but the creditor invokes joint and several liability and demands repayment of everything, including interest. Another point, which is not just a detail, is that the personal guarantor commits all his or her assets, and sometimes those of his or her spouse, making it a family issue. The risks are very real: default by the principal debtor, seizure of the property, judicial recovery, declaration of the claim in collective proceedings, or even judicial liquidation.

If in doubt, it is essential to check the handwritten note, compare the amount guaranteed with the guarantor's actual capacity, examine the guarantor's signature and analyse each obligation imposed by the bank. The law also imposes a benefit of discussion, or even division, depending on the type of deed. In some contracts, there is a clause allowing the guarantor to request that the creditor first sue the principal debtor (principle of the benefit of discussion), but this option all too often disappears in the practice of banking contracts.

Over the years, we've seen all kinds of mistakes: a guarantee deed signed in haste, a lack of advice, disproportionate commitments or commitments without a ceiling, or the omission of a handwritten note. These are the details that ultimately make the difference in court.

Defending and securing sureties: defence practices and practical levers

In bank guarantee cases, defence is never a purely theoretical issue. In practice, the arguments in dispute are sometimes unexpected. A deed of guarantee signed without respecting the rules, a credit agreement for which the amount has exploded, or a bank that neglects its obligation to provide annual information... these things happen more often than you might think. In each case, therefore, we need to look at the formal defect, the question of disproportion, the liability of the professional creditor, the actual function of the guarantor, the nature of the principal debtor, and compliance with the procedure laid down in the Civil Code and the Consumer Code.

For example, the cancellation of a commitment on the grounds of disproportion or failure to warn may be based on an analysis of the asset situation in the year in which the commitment was signed, or on an exact measurement of income or financial capacity at the time the commitment was made. Some courts take the guarantor's previous situation into account, while others judge more severely depending on the type of creditor or banking institution involved. Case law is evolving: the Cour de cassation, the Chambre commerciale, and also the Cour d'appel de Paris and other courts, are constantly refining the rules governing the penalty of nullity, forfeiture or the conditions for cancellation.

Often, the discussion focuses on the actual beneficiary of the guarantee, the proportionality of the sums claimed, or the liability of the bank. We sometimes forget that the existence of insolvency proceedings, related litigation or even a simple error in the wording can turn everything upside down. The slightest detail - the status of guarantor, the status of borrower, the nature of the contract, even the date (a deed marked "1 January": beware!) - can be used as leverage.

Small point on the ground:
We regularly meet customers who are convinced that they will never pay "because the bank didn't send the right document" or that "the principal debtor will pay". Sometimes this is true. But there are also many cases where the defence is based on something else: lack of information, disproportionality, or failure to comply with a principle of banking or consumer law.

To remember:
Before you sign, or if you are approached by the bank, it is crucial to check the conformity of the deed, the signature, the amount, the proportionality, the handwritten note, and even the nature of the underlying loan. Never neglect the weight of a contract of guarantee, as it is often the last barrier between your personal assets and the debt of others.

Special cases, pitfalls and tricks of the trade

There are a thousand examples to cite, but to give just a few:

• Joint and several surety in a company : it is not uncommon for several partners or directors to commit their personal assets, without realising the extent of the joint and several liability. The professional creditor, often the bank, will naturally demand full repayment from the most solvent.

• Tenant or guarantor : in commercial leases, the role of personal guarantor is a delicate one: the slightest error in drafting, proportionality or the maximum amount guaranteed can lead to the risk being released or limited.

• Consumer or business loans: The distinction is crucial: the Consumer Code protects uninformed guarantors and requires them to provide a handwritten statement, verify capacity, provide information and respect the rights of the beneficiary.

• Judicial liquidation of the principal debtor : some people think they will be released automatically. In reality, the insolvency proceedings may suspend the lawsuit, but the guarantor remains liable for payment, subject to arguments to be made before the court or even the Court of Cassation.

• Error in beneficiary, amount, function, capacity : Sometimes, cancellation or forfeiture can be as simple as a word too many, an incomplete sentence, or an incorrectly postponed date.

Defence is then a matter of measurement, discussion and strategy as to which legal means to use and when to act.

The 3 fatal errors of bank guarantees :

• Believe that the handwritten statement is merely a formality (this is never the case in banking and finance law).

• Accepting a guarantee with no ceiling on the amount, and no real analysis of income or assets.

• To think that a signature "under pressure" or a "facade" of solidarity will not pose a problem (the court will only consider the text).

Why choose Solent Avocats for a bank guarantee case?

In this area, there is no ready-made solution. What our firm offers is not a recipe: it is a method, forged by many years' experience of situations where negotiation sometimes prevails over procedure, or vice versa. Amaury Ayoun is a lawyer specialising in banking law and surety law, as well as private law, consumer law, commercial law and business law. He practises at all levels of court, from Marseille to Paris, including the commercial division.

We have seen cases overturned for a simple question of drafting or a poorly applied article. Others have been won out of court, based on a discussion with the bank, an argument about disproportionality, or the demonstration of a lack of duty to warn. The firm's advice is based on the reality of the case, compliance with the Civil Code, the Consumer Code and recent case law, and above all constant attention to the client's actual circumstances (function, capacity, assets, contractual obligation, extent of the debt, etc.).

Choosing a law firm that knows how these things work means ensuring that your defence is not just a matter of form. It's a question of strategy, experience and - it has to be said - the ability to deal with the vagaries of litigation, the courts and sometimes even the last minute.