Surety bonds, a cornerstone of surety law, always expire eventually. This personal guarantee can disappear in two distinct ways: as an accessory or as a principal guarantee. Understanding these mechanisms is essential for creditors and guarantors alike. For any legal expertise in the fieldOur lawyers are at your disposal.
I. Extinction by accessory means: when the principal debt disappears
A. The accessory principle
Le guarantee is an accessory contract. Its fate depends on the principal obligation it guarantees. Article 2313 of the Civil Code sets out this fundamental rule: when the principal obligation is extinguished, the guarantee also disappears.
This extinction arises from the accessory nature of the guarantee. The guarantor undertakes to pay the debt of another. Without a debt, no guarantee is possible.
B. Cases where the principal debt is extinguished
1. The payment
Payment of the debt by the principal debtor releases the guarantor. It is up to the guarantor to prove this payment if the creditor sues. Partial payment only extinguishes the guarantee to the extent of the sums paid.
In the case of a partial guarantee, payment is made first against the unguaranteed part of the debt. This rule protects the creditor.
2. Compensation
Set-off between the creditor and the principal debtor extinguishes the guarantee. The guarantor may take advantage of this even if the debtor has waived it. This rule applies to simple and joint sureties.
3. Dation in payment
When the creditor accepts an asset in payment of the principal debt, the guarantee is extinguished. Dation in payment presupposes free and genuine acceptance by the creditor.
4. Confusion, novation, remission of debt
Confusion arises when the qualities of creditor and debtor are combined. For example, when the creditor inherits from the debtor or vice versa.
Novation extinguishes the old obligation by creating a new one. It also extinguishes securities, including guarantees.
The remission of debt granted to the debtor also releases the guarantors. But not vice versa: the remission granted to the guarantor does not release the debtor.
5. Prescription and nullity
The prescription of the principal debt extinguishes the guarantee. The guarantor may invoke it even if the debtor does not.
If the principal contract is null and void or rescinded, the surety bond lapses. However, the guarantor remains bound by the obligation to make restitution, particularly in the case of cancelled loans.
II. Extinction by principal means: when only the guarantee is extinguished
A. Termination of the settlement obligation
1. Payment by the guarantor
Payment by the guarantor extinguishes the guarantor's obligation to the creditor. The payment must be valid and in full. The guarantor then has recourse against the principal debtor.
Under certain conditions, the executive acting as guarantor can deduct the sums paid from their taxable income.
2. Waiver of debt granted to the guarantor
The creditor may remit the debt to the guarantor. This remission only extinguishes the guarantor's commitment, not the principal debt. It does not benefit co-guarantors, with certain exceptions.
3. Limitation period for guarantees
The guarantor's obligation may be extinguished by prescription. This is generally five years from the date on which the principal debt falls due.
If the principal debt has a longer term than the guarantee, the guarantee may be extinguished first.
B. Termination of the hedging obligation
1. The extinctive term
In a fixed-term depositWhen the term expires, the obligation to provide cover ends. The guarantor no longer guarantees debts arising after this term.
The obligation to pay remains for debts incurred prior to the term.
2. Unilateral termination
A guarantor who has made a commitment for an indefinite period may terminate it at any time (article 2315 of the French Civil Code). Such termination releases the guarantor for the future.
This option is crucial for guarantors who guarantee future debts, such as the balance of a current account.
3. Death of the guarantor
The death of the guarantor extinguishes only the obligation to provide cover (article 2317 of the Civil Code). The guarantor's heirs remain liable for any debts that arose prior to the guarantor's death.
This rule protects heirs against the indefinite extension of the guarantee.
4. Restructuring operations
When a debtor company simply changes form, the guarantee remains in place. For an in-depth analysis of the implications in the event of debtor insolvency proceedingsSee our dedicated article.
However, the merger, demerger or dissolution of the debtor or creditor company limits the guarantee to debts incurred prior to the transaction (article 2318 of the Civil Code).
III. The benefit of subrogation: the sanction of a creditor's fault
A. The subrogation benefit mechanism
Article 2314 of the Civil Code allows the guarantor to be discharged when the creditor compromises the subrogation of the guarantor's rights and guarantees.
This benefit punishes the creditor's negligence in forfeiting collateral from which the guarantor could have benefited after payment.
B. Conditions governing subrogation
1. Loss of preferential rights
There must be a loss of a right conferring a particular advantage for recovery. This includes mortgages, liens, pledges, charges, rights of retention or other guarantees.
The concept goes beyond simple securities and encompasses any mechanism that facilitates the recovery of the debt.
2. An act of the creditor
The loss must be attributable to the creditor. The burden of proving this fault lies with the guarantor.
This fault may be an action (release of hyposubrogation) or an omission (failure to renew a registration).
3. An infringement of legitimate expectations
The guarantor must have legitimately believed in the existence of the lost right.
This belief may be based on rights existing at the time of his engagement or on rights that he could reasonably expect to arise.
4. Prejudice to the guarantor
The creditor can avoid discharge by proving that the guarantor has not suffered any prejudice.
This loss is assessed on the date on which the guarantor's obligation falls due.
C. The effects of subrogation
1. A proportionate discharge
The guarantor is discharged to the extent of the loss suffered, corresponding to the value of the rights lost.
This discharge may be total if the value of the rights lost equals or exceeds the amount of the bond.
2. No other penalties
The benefit of subrogation does not entitle the guarantor to damages. To obtain such damages, the guarantor must demonstrate a loss distinct from the loss of preferential rights.
The creditor cannot be forced to guarantee the guarantor. Discharge is the only sanction provided for.
Sources
- Civil Code, articles 2288 to 2320
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
- Court of Cassation, Mixed Chamber, 17 November 2006, no. 04-19.123
- Court of Cassation, Commercial Division, 19 February 2013, no. 11-28.423
- Document "Répertoire Civil - Cautionnement" by Gaël PIETTE, February 2022
EN 
FR