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Bonding underwent a major transformation with Ordinance no. 2021-1192 of 15 September 2021. This reform, which came into force on 1 January 2022, meets a need to clarify a law that had become complex and sometimes inconsistent. It makes sweeping changes to this personal surety, which enables a creditor to obtain a commitment from a third party (the guarantor) to guarantee the debt of a debtor.
I. Reform through the Order of 15 September 2021
Incorporation into the Civil Code
The reform has repatriated to the Civil Code rules that were scattered across various codes, notably the Consumer Code. This centralisation makes the surety bond law more legible.
Article 2297 of the French Civil Code introduces a standard form. From now on, guarantors who are natural persons must affix a statement expressing the nature and extent of their undertaking. Gone is the requirement for a strict handwritten statement, which led to massive litigation over commas and capital letters.
The end of the distinction between exceptions
Article 2298 of the Civil Code puts an end to a distinction criticised in case law between defences "inherent in the debt" and defences "personal to the debtor". The guarantor may now raise against the creditor all defences that belong to the debtor, whatever their nature.
This simplification puts an end to an abundance of litigation in which the guarantor tried to qualify one exception or another as inherent in the debt in order to rely on it. Only the principal debtor's incapacity remains unenforceable by the guarantor.
Reform of the proportionality requirement
Article 2300 of the Civil Code has recast the proportionality requirement. If an individual guarantor's commitment was manifestly disproportionate to his or her income and assets at the time it was entered into, it is now reduced to the amount that the guarantor could reasonably assume.
The penalty has therefore changed: it is no longer a total forfeiture but a reduction. This more balanced solution protects the guarantor without completely depriving the creditor of its guarantee.
II. What's new in the coverage and settlement obligation?
Hedging obligation and extinctive term
Article 2316 of the Civil Code establishes the distinction between a covering obligation and a settlement obligation. The former concerns future debts and ends when the term expires or the guarantee is terminated. The second survives for debts arising before that term.
In the case of a current account, article 2319 stipulates that the guarantor can no longer be sued five years after the end of the guarantee, which avoids situations of perpetual commitment.
Death of the guarantor
Article 2317 confirms that the death of the guarantor terminates his obligation to provide cover. The heirs are therefore only liable for debts incurred before the death, even if they are not yet due. Any clause to the contrary is deemed unwritten.
The impact of company mergers
Article 2318 deals with the consequences of restructuring operations. In the event of a merger or demerger, the guarantor only guarantees debts arising before the merger or demerger becomes effective against third parties, unless the guarantor has expressly agreed to guarantee subsequent debts.
III. Strengthening the protection of sureties
The unified duty to warn
Article 2299 enshrines theprofessional creditor's duty to warn. The guarantor must alert the individual guarantor to the fact that the principal debtor's commitment is unsuited to his financial capacities.
This obligation now applies to all guarantors who are natural persons, even if they are well-informed. Failure to warn will result in forfeiture of rights against the guarantor to the extent of the loss suffered.
Protected "living expenses
Article 2307 introduces a "living allowance" for the individual guarantor. The creditor's action cannot deprive the guarantor of the minimum resources set out in article L. 731-2 of the Consumer Code (equivalent to the RSA). This protection applies to all creditors, including non-professional creditors.
Recourse by the guarantor after payment
Articles 2308 and 2309 maintain the two recourses of a guarantor who has paid the creditor: a personal recourse against the debtor and a subrogatory recourse. The first allows the guarantor to obtain reimbursement of sums paid, interest and costs, and even damages. The second allows the guarantor to benefit from the securities enjoyed by the creditor.
Elimination of appeals before payment
The reform abolished the guarantor's pre-payment remedies, which were deemed obsolete. However, two palliatives do exist: in the event of an extension of the term, article 2320 allows the guarantor to pay or to apply for a legal security; in the event of collective proceedings, article L. 622-34 of the Commercial Code authorises the guarantor to declare his claim even before having paid.
IV. Major developments in case law
The reversal on the enforceability of defences
The Cour de cassation anticipated the reform by accepting that the two-year limitation period in the Consumer Code constituted an exception inherent in the debt that the guarantor could invoke (Civ. 1re, 20 April 2022). This reversal brings the case law into line with the solution adopted by the ordinance.
Case law on the benefit of subrogation
Article 2314 maintains the benefit of subrogation. The guarantor is discharged if, through the fault of the creditor, he can no longer be subrogated in a preferential right. Case law has specified that a creditor who guarantees himself by a suretyship and another surety undertakes to make that surety definitive and effective.
The impact of insolvency proceedings
The reform of the law governing distressed companies (Order 2021-1193) extended the benefit of the reorganisation plan to natural person guarantors, whereas it was previously limited to the safeguard plan. This change weakens the effectiveness of surety bonds in the event of a reorganisation plan. collective procedure.
V. Practical consequences for the various players
For credit institutions
Banks must revise their guarantee forms to comply with the new formalism. They must also put in place procedures to assess more accurately the proportionality of the commitments made by guarantors.
The duty to warn extends to all guarantors who are natural persons, which means that greater vigilance is required with regard to the information provided.
For guarantors who are natural persons
Individual guarantors benefit from enhanced protection. The new formalities are more flexible but still protective. The guarantor may raise all the objections belonging to the principal debtor, which broadens its defence options.
For company directors
The situation of directors who act as guarantors for their companies has been clarified. They now expressly benefit from the duty to warn, regardless of their qualifications. In the event of a merger or demerger of their company, their liability is limited to debts incurred prior to the transaction, unless they give their express consent.
The reform of surety bonds modernises this security for the benefit of legal certainty. It maintains the balance between the effectiveness of the guarantee for creditors and the necessary protection for individual guarantors. It puts an end to the abundant litigation concerning handwritten information and the enforceability of exceptions. For a detailed legal analysis of these new provisions, or for an effective defence, please do not hesitate to consult our lawyers specialising in surety law.
Sources
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
- Civil Code, articles 2288 to 2320
- Court of Cassation, 1st Civil Division, 20 April 2022, No. 20-22.866
- Document "Répertoire Civil - Cautionnement" by Gaël PIETTE, Professor at the University of Bordeaux, February 2022
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