Simple or joint surety

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A simple or joint surety is a person who undertakes to pay the debts of another in the event of non-payment. This commitment is generally made in support of a bank loan.

Definition of surety

The security deposit is defined in article 2288 of the Civil Code as a natural or legal person who undertakes to fulfil an obligation to a creditor if the debtor fails to do so. For a in-depth understanding of the mechanics of bonding and its pitfallsWe invite you to consult our complete guide.

When signing a deed of guarantee, the guarantor or surety promises to reimburse the creditor if the debtor fails to pay.

This means that if the debtor defaults on payment, the guarantor takes the place of the debtor to honour his or her financial commitments.

The person who gives a simple or joint guarantee to a debtor may be a natural person or a legal entity.

The obligation secured may be a property loan or a business loan taken out by a company.

The contract of guarantee brings together three people:

• the creditor (a bank)
• the debtor (a borrower)
• simple or joint surety (a natural or legal person)

A surety bond is a contract in which the surety, whether joint or several, promises to pay another person's debts to the creditor if the latter fails to do so.

A suretyship is an accessory contract, in the sense that it necessarily depends on the existence of a principal obligation. If this obligation disappears, the guarantee is extinguished with it. This accessory nature is one of the essential aspects of this personal surety.

However, guarantees are subject to specific rules set out in the guarantee contract, depending on whether they are joint or several. In addition to this distinction, there are others forms of guarantee (civil, commercial, etc.) that you can explore for a full understanding. These two types of surety are discussed below.

Simple surety

A simple guarantor is someone who undertakes only to pay after the creditor has unsuccessfully sued the principal debtor.

The guarantor must be informed each year by the creditor of the amount of capital outstanding and interest due. If the creditor does not comply with this obligation, he loses his rights to interest against the guarantor.

By opting for a simple guarantee, the bank guarantor can claim two benefits against the bank:

• The benefit of discussion : 

The main advantage for the simple guarantor lies in this benefit of discussion. 

This mechanism allows a simple guarantor to require the creditor to first sue the principal debtor and attempt to recover the sums due from his assets, before turning against the guarantor.

This means that the creditor will only be able to take action against the guarantor to recover the sums owed to it once all the procedures have been completed.

This mechanism is provided for in article 2305 of the French Civil Code.

However, the guarantor may waive the benefit of discussion. In practice, this waiver is often used.

If this is the case, it must be written on the guarantee deed, in particular in the handwritten note.

The banker will then be able to take direct action against the guarantor to obtain what is owed to him or her, without the need for any prior legal action.

• Division profit :

This mechanism is used when there are several guarantors for the same lender. In this case, the banker divides the amount owed by the debtor by the number of guarantors.

In other words, the simple guarantor pays only a proportional share of the debt if there are several guarantors.

Joint and several guarantee

A joint and several surety has a heavier commitment than a simple surety. This commitment is particularly marked in the case of a business loans, where managers face specific risks.

A joint and several guarantor undertakes to pay the creditor without waiting for the creditor to take legal action against the principal debtor.

Unlike a simple bank guarantee, a joint and several guarantor cannot invoke the benefit of division, i.e. he or she must pay the entire debt even if there are several guarantors.

Paragraph 3 of article 2306 of the French Civil Code provides that ". Guarantors who are jointly and severally liable, or guarantors who have waived this right, may not claim the benefit of division.

Every year, the creditor must inform the joint and several guarantor of the amount of capital outstanding and interest due. If the creditor does not comply with this obligation, he loses his rights to interest against the guarantor.

The joint guarantor must be informed as soon as the debtor's first payment incident occurs.

Conclusion

Guarantees are therefore a form of security for creditors, but in the event of default by the principal borrower, they represent a major commitment for the person providing the simple or joint guarantee. For in-depth legal advice on your commitment, our lawyers are at your disposal.

Guarantors must be fully informed of their rights and obligations.

A good understanding of the difference between simple surety and joint surety is essential, because the consequences of defaulting on payment can be significant.

 

 

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