Understanding the effects of surety bonds: a practical guide

By Yasmine EDDAM18 March 2025

When you become a guarantor, you undertake to pay the debt of a third party in the event of default. This creates a complex legal relationship between the guarantor, the creditor and the principal debtor. It gives rise to a network of obligations and rights. Understanding these mechanisms is vital for anyone considering becoming a guarantor.

I. Guarantor-creditor relations: rights and obligations

A. Creditor's information obligations

The legislator has imposed various information obligations on the creditor in order to protect the guarantor.

Article 2302 of the Civil Code provides for annual information. Before 31 March, the creditor must notify the guarantor of the amount of the debt at the previous 31 December. This document also specifies the term of the commitment or the option to terminate it.

In the event of non-payment, article 2303 requires the creditor to inform the guarantor as soon as the first incident is not rectified within one month of the due date.

Failure to comply with these obligations is punishable. The creditor forfeits interest and penalties accrued between the date of the incident and the date on which the guarantor is informed.

These obligations apply to all professional creditors. The burden of proof is on them. They must prove that they actually sent the information, and a simple copy of a letter is not enough.

B. Proceedings by the creditor against the guarantor

The creditor can only sue the guarantor if the debt is due. This condition seems obvious, but raises practical questions. Can the guarantor invoke a term granted to the debtor? Does the guarantor benefit from grace periods?

The guarantor has a number of ways of defending itself.

First, the guarantor may raise all the defences inherent in the debt (nullity of the main contract, set-off, prescription). Since the Order of 15 September 2021, the guarantor may even raise objections that are personal to the debtor, apart from incapacity.

A simple guarantor has the benefit of discussion. They may demand that the creditor first seize the debtor's assets. This right is denied to joint and several guarantors and legal guarantors.

If there are several guarantors, each can invoke the benefit of division, obliging the creditor to divide his proceedings.

Finally, the law protects the individual guarantor's minimum subsistence. The creditor's action can never deprive the guarantor of a "living allowance" equivalent to the RSA.

II. Guarantor-debtor relations: recourse mechanisms

A. Personal recourse after payment

The deposit is not intended to cover the final cost of debt. Once it has paid, it has a personal right of recourse against the principal debtor.

Article 2308 of the Civil Code specifies that this remedy covers:

Amounts paid to the creditor
Statutory interest (which accrues automatically)
Costs incurred after the debtor has been notified of the proceedings

The guarantor may also obtain damages for losses other than mere payment (irreducible costs, administrative hassles).

The advantage of this recourse is that it can cover more than the guarantor has paid. Its major disadvantage is that the guarantor remains an unsecured creditor, with no specific guarantee.

In the event of partial payment, the guarantor enters into competition with the original creditor. Creditors often include a non-competition clause to avoid this situation.

B. Subrogatory action

At the same time, article 2309 provides the guarantor with a subrogatory remedy. The guarantor finds himself "in the shoes" of the original creditor.

The major advantage of this mechanism is that the guarantor benefits from the securities held by the creditor (mortgages, pledges, other sureties).

But this recourse has its limits:

It cannot exceed what the guarantor has paid
It is subject to the limitation period for the creditor's action
It does not cover damages

In practice, the guarantor may exercise the two remedies simultaneously, but obviously cannot claim them concurrently.

III. Relationships between joint venturers

A. Prosecution Division

When several people guarantee the same debt, they are joint guarantors. The guarantor who has paid in full can take action against the others.

Unlike the recourse against the principal debtor, this recourse between guarantors is divided. Each co-guarantor is liable only for his share.

If one of the co-guarantors is insolvent, his share is divided between the solvent guarantor and the other solvent guarantors.

This distribution is usually made in manly (equal) shares. However, when the guarantors have committed different amounts, a proportional split is applied.

B. Types of recourse between guarantors

Article 2312 gives the solvent guarantor personal recourse against the co-guarantors. This recourse is limited to each party's share of the debt.

The guarantor also has a subrogation right. But it follows the same rule of division: the guarantor can only claim from each co-surety its share.

These remedies may only be exercised after payment has been made. The guarantor may, however, call his co-guarantors as guarantors when the creditor takes legal action.

IV. Special situation of ex-spouses

A. The mechanism of Article 1387-1 of the Civil Code

Article 1387-1 of the Civil Code creates a specific mechanism for the business debts of divorced spouses.

The text states: "when the divorce is granted, if debts or sureties have been granted by the spouses, jointly or severally, in connection with the management of a business, the court may decide to make the spouse who retains the business assets bear the sole burden of these debts or sureties".

This provision has given rise to controversial interpretations. There are two conflicting interpretations:

Some see it as a way of extinguishing the debt obligation. The judge would release the former spouse from his or her obligation to the creditor.

Others interpret it as a rule of contribution to the debt. The former spouse would remain liable to the creditor, but could exercise full recourse against his or her former entrepreneurial spouse.

B. Protection and limits

Case law favours the second interpretation. It preserves the rights of the creditor and the binding force of contracts.

In a November 2006 decision, the Tribunal de Grande Instance d'Évreux ruled that Article 1387-1 does not remove the obligation to pay the debt. It merely allows the judge to decide, as part of the liquidation of the community and only between spouses, that the final contribution to the debt will be borne by the person who keeps the business.

This solution safeguards the legitimate interests of the creditor while offering protection to the former spouse, who has a specific remedy.

The Court of Cassation has not yet definitively ruled on this issue. In its first ruling on this text (5 September 2018), it avoided taking a position on the exact scope of the provision.

The effects of a guarantee form a complex network of obligations and rights. Guarantors, debtors and creditors must know their respective positions. Recent reforms, in particular the Order of 15 September 2021, have strengthened the protection of sureties without compromising the effectiveness of this security.

If you're going to be a guarantor, it's best to understand these mechanisms before committing yourself. For the creditor, it is crucial to comply with their information obligations. As for the debtor, he must measure the risks he is passing on to his guarantors.