Le surety bond is a daunting undertaking for anyone who takes it on. However, this legal mechanism, which allows a third party to guarantee the debt of a principal debtor, is still misunderstood by many signatories.
Consent: the cornerstone of surety bonds
The bond requires a free and informed consent. The guarantor - the person making the commitment - must clearly express his or her wishes. Since the reform of 15 September 2021, article 2297 of the Civil Code imposes strict formal requirements.
If you are a guarantor, you must sign an explicit statement indicating that you are a guarantor:
- Your status as guarantor
- Your undertaking to pay if the debtor defaults
- The maximum guaranteed amount (in figures and words)
A simple signature at the bottom of a document is not enough. The document must contain this precise statement, written by you.
Capacity and powers: who can commit?
Only an able-bodied person may act as guarantor. A minor or a protected adult of legal age cannot generally give a valid undertaking.
In the case of spouses, article 1415 of the Civil Code states that when one spouse gives a guarantee without the express consent of the other, only his or her own assets and income are committed - not joint assets.
Company directors must also comply with certain rules. The guarantee must fall within the company's objects and serve its interests. In the case of a public limited company, the prior authorisation of the Board of Directors is required.
The content of the contract: object and cause
The object of the guarantee must be determined or determinable. In other words, the guaranteed debt must be identifiable. If the debtor is not specified, the guarantee may be cancelled.
The cause, although less emphasised since the 2016 reform, remains important. It explains why the guarantor makes the commitment. A surety bond can guarantee a present or future debt, such as a future bank overdraft.
Warning is now mandatory. The professional creditor must warn the guarantor that the debtor's commitment may be unsuited to his financial capacities.
The evolution of formalism: towards greater protection
The formal requirements have been tightened considerably. Initially limited to consumer credit and residential leases, it has now been extended to all guarantees given by individuals.
Case law has long groped over the interpretation of this formalism. Should the legal model be reproduced exactly? The Cour de cassation finally adopted a flexible position: minor differences do not invalidate the guarantee if they do not alter the meaning of the undertaking.
Order of 15 September 2021 has simplified these formalities by doing away with the mandatory models, while maintaining the requirement for a clear statement.
And in practice?
If you are considering becoming a guarantor:
- Read all documents carefully
- Write the handwritten note yourself
- Check that the amount is clearly indicated
- Understand the exact scope of your commitment
If you are a creditor, make sure you comply with the formalities required to avoid any guarantee void.
Failure to comply with the formal requirements will render the guarantee null and void. This nullity is relative, which means that only the guarantor can invoke it.
Sources
- Civil Code, articles 2288 to 2320
- Order no. 2021-1192 of 15 September 2021
- Cass. com. 16 October 2012, no. 11-23.623
- Cass. com. 6 July 2022, no. 20-17.355
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