Acting as guarantor for a close friend or business partner entails significant risks. The law has gradually strengthened the protection afforded to people who agree to guarantee the debts of others. The Order of 15 September 2021 modernised these mechanisms by bringing them together in the Civil Code.
Here are the four legal shields that protect sureties today.
1. The creditor's duty to warn
The professional creditor must alert the guarantor when the loan appears to be unsuited to the debtor's financial capabilities.
This duty, first created by judges, is now set out in article 2299 of the Civil Code. The Court of Cassation had initially reserved it for "lay" guarantors, but the legislator extended it to all guarantors who are natural persons, with specific features depending on their category.
In practice, the banker must notify the guarantor if:
- The debtor takes on more debt than he can afford
- The project financed lacks economic viability
- A number of factors point to a probable failure
The penalty is severe: the negligent creditor loses his right against the guarantor to the extent of the loss suffered. If the guarantor proves that, properly informed, he or she would never have signed, he or she may be released in full.
2. The proportionality requirement
A commitment that is disproportionate to the guarantor's income and assets may be reduced by the court.
Article 2300 of the Civil Code limits excessive guarantees imposed by professional creditors. To assess disproportion, we examine:
- Assets: regular income and assets (excluding unseizable assets)
- Liabilities: existing debts and other guarantees already given
- A reasonable economic outlook
The judge carries out this analysis on the date the guarantee is signed. Unlike the previous system, the creditor can no longer rely on a subsequent improvement in the guarantor's financial situation.
The penalty is appropriate: the guarantee is not cancelled but reduced to the amount that the guarantor could reasonably have borne at the time of his commitment.
3. Information obligations
The creditor must keep the guarantor informed of the progress of the debt and any payment incidents.
There are two obligations:
- Annual information (article 2302): before 31 March, the creditor communicates the amount of the debt at the previous 31 December, with a reminder of the term of the commitment.
- Information in the event of non-payment (article 2303): from the first incident not settled within the following month
These obligations apply to all guarantors who are natural persons. Since 2021, they have also applied to grantors of security interests for third parties and to sub-guarantors. The law stipulates that the cost of providing annual information is to be borne exclusively by the creditor.
Failure to comply with these obligations will result in the forfeiture of interest and penalties for the corresponding period. The guarantor remains liable for the capital, but the creditor loses the ancillary debt.
4. Living expenses
The creditor's action cannot deprive the guarantor of a minimum subsistence level.
Under article 2307 of the French Civil Code, any guarantor who is a natural person is guaranteed a "living allowance" equivalent to the amount of the RSA (approximately €630 per month for a single person in 2023).
This protection:
- Applies to all creditors, whether professional or non-professional
- Applies regardless of the initial amount of the commitment
- Applicable even if the commitment was proportionate at the outset
- Intervenes at the time of enforcement on the guarantor's income
This rule differs from the proportionality requirement, which examines the balance of the undertaking when it is made. The "reste à vivre" protects the guarantor at the time of prosecution, even if his or her situation has deteriorated since the agreement was signed.
To block an excessive seizure, the guarantor must apply to the enforcement judge.
Practical advice before taking out a guarantee
To limit the risks, a few precautions are essential:
- Request a fixed term for the guarantee (in particular for directors acting as joint and several guarantors of a business loan).
- Cap your commitment at a specific amount
- Check the debtor's financial health
- Consider a partial guarantee if possible
- Terminate the guarantee as soon as the situation permits
These protections balance the effectiveness of suretyship as a credit tool with safeguarding the legitimate interests of those who agree to guarantee the debt of others. For a practical application of these legal protections or to defend your rights as a guarantor, our lawyers specialising in surety bonds offer you strategic, personalised support.
Sources
- Civil Code, articles 2297 to 2307
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
- Judgment of the Commercial Chamber of the Court of Cassation of 20 September 2005 (no. 03-19.732)
- Judgment of the Commercial Division of the Court of Cassation of 17 June 1997 (no. 95-14.105)
- Répertoire Civil - Cautionnement, Gaël Piette, 2022
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