19 May 2016
The duration of the guarantee must be specified in handwriting, failing which the guarantee instrument may be declared null and void
When providing a guarantee by private deed to a professional creditor, the guarantor must insert the handwritten wording provided for under Article L.341-2 of the French Consumer Code before its signature, failing which his/her guarantee commitment may be declared null and void.
In its decision dated 9 July 2015 (Appeal Nr 14-24287), the first Civil chamber of the French Supreme Court ruled that, regarding a fixed-term guarantee, the guarantor must write by hand the exact duration of the guarantee given, instead of inserting a reference to the terms of a separate document including such duration.
In the above-referenced case, the handwritten wording was as follows:
"By acting as a guarantor for SARL X for a maximum amount of €69,000 (sixty-nine thousand Euros) covering payment of the principal amount, accrued interest and any penalties or default interest, and for the duration of the covered transaction extended by two years ".
In its decision, the Court of appeal considered the guarantee as null and void since its duration should have been expressly stated in the handwritten note, thereby making it unnecessary to refer to any hardcopy of the covered contract. The Court of appeal deemed that instead, the inaccuracy of the handwritten note undermined any clear understanding of the duration of the guarantor’s commitments, and thus the validity of the guarantee itself, even if the duration of the covered transaction (in this case, eighty-four months) was stated at the top of the guarantee instrument.
The Court of appeal’s stance was confirmed by the first Civil chamber of the French Supreme Court, which rejected the appeal lodged by the creditor, on the ground that “in its decision, the Court of appeal was right in considering that, even if the provisions of Article L.341-2 of the Consumer Code don’t specify how the duration of the guarantee must be stated in the handwritten note, given that said information is crucial to the guarantor’s understanding of his/her commitments, it should nevertheless have been indicated so as to make any reference to a separate hardcopy of the covered contract unnecessary; and consequently that the Court of appeal was right in concluding that the guarantee in dispute could be declared null and void”.
Nasser Merabet
Attorney at law
avocat@nmerabet.fr