In the world of bank guarantees, del credere holds a special place. This payment guarantee offered by a credit institution is a valuable but little-known tool for securing commercial transactions.
The diversity of del credere forms
Le bank del credere is defined as a guarantee whereby a credit institution undertakes to pay a seller in the event of default by the buyer. It operates on a simple principle: the bank assumes the risk of the debtor's insolvency.
As stated in the JurisClasseur article, "The del credere banker is the one who, by his intervention, guarantees the risk of insolvency of a debtor".. This guarantee has a major advantage: not only does it guarantee the debtor's solvency, it also guarantees payment on a specific date.
Let's take a look at the main forms this guarantee takes in current banking practice.
The del credere in discounting transactions
Fixed-rate discounting (or non-recourse discounting) is the most common application of bank del credere. This technique allows the banker to discount bills of exchange or receivables assigned in the form of Dailly, waiving recourse against the assignor.
The mechanism is worth clarifying:
- The banker discounts the bills presented by the drawee
- It undertakes to forfeit the drawee's signature
- He waives all recourse against the drawer/assignor in the event of default by the debtor
- Its remuneration includes traditional agios plus a specific commission for the del credere
One essential point: this waiver of recourse is not absolute. If the beneficiary fails to meet his obligations (such as delivering the agreed goods), the banker's right of recourse is restored. This principle is confirmed by legal writers, who point out that "fixed-rate discounting does not deprive the banker of his rights of recourse against a customer who has given him hollow paper"..
The del credere in the international documentary credit
In international trade, the del credere finds a major application in the irrevocable documentary credit. Today, this mechanism is the preferred tool for securing cross-border transactions.
The documentary credit is, in the words of the JurisClasseur, "the transaction by which a banker, acting with a view to the financial settlement of a commercial sale, promises to pay the seller in return for the submission of certain documents proving the performance of the contract"..
The legal nature of this undertaking has been the subject of doctrinal debate. Initially described as a guarantee (Cass. req., 26 Jan. 1926), it is now recognised as an autonomous principal undertaking, comparable to an autonomous guarantee.
The undertaking given by the bank issuing an irrevocable documentary credit has all the characteristics of a del credere:
- Bilateral contract for valuable consideration
- Non-accessory commitments
- Based on a cause distinct from that between seller and buyer
- Having direct effect between the contracting parties
The del credere in the payment card system
The bankcard system incorporates a del credere mechanism that is often overlooked. By joining the card payment system, the merchant benefits from a guarantee from the issuing institutions.
This guarantee applies under certain conditions:
- Retailer compliance with security measures
- Obtaining authorisation above a certain amount
- Transmission of registrations within contractual deadlines
The JurisClasseur stresses that "Combining a guarantee principle with a payment mechanism, the institution is not unlike the documentary credit.. In return for a fee, the banker who arranges the financial settlement guarantees payment up to a certain amount.
There is one particularity worth highlighting: although the contracting bank is the merchant's bank, the guarantee obligation rests with the cardholder's bank (card issuer).
Other applications: factoring and order confirmation
The del credere extends to other areas, including :
- Factoring Factoring companies, often subsidiaries of banks, purchase the receivables and guarantee the risk of non-payment. The factor, as stated in the doctrine, "It does more than cover the solvency of the correspondent. At maturity, it takes the place of the buyer by paying in his place"..
- Order confirmation Specialised companies, often affiliated to banks, confirm orders and waive all claims against the exporter (except for non-conformity of delivery).
La invoking these guarantees generally assumes default by the debtor, which may be defined contractually. This may be the result of a simple failure to pay on the due date, or it may require a judicial declaration of insolvency.
It is essential to consult a specialist lawyer to determine the form of del credere best suited to your business and to negotiate the best possible terms and conditions. Our firm will help you to draft and analyse these guarantee agreements, taking care to secure your position and limit the cases in which guarantees may be excluded.
Sources
- JurisClasseur Droit bancaire et financier, Fasc. 600: Ducroire de banque, November 2016, by Louis Bancal, Christine Lagelee-Charrette and Patricia Rouah
- Monetary and Financial Code, articles L.313-23 et seq.
- Cass. req., 26 January 1926: DP 1926, 1, p. 201, note Hamel
- Cass. com., 22 October 1996, Sté Alban Grosfilex c/ Loustalot : JurisData n° 1996-003944
- Ferronnière and E. de Chillaz, Les opérations de banque, Dalloz, 6th ed. 1980
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