Banks require a bank guarantee to guarantee in case of failure of the primary borrower and the application is legally founded. That said, the catuion here is they must be well informed of possible consequences in case of insolvency problem of that borrower.

This issue of bonds becomes recurrent as the failures are notorious … sureties signed without information, without verification of the bank deposits made blindly signed for the main bank is the fact that the act of security was signed Thus the reality appears then some years later and the bank strong signature bangs .. holder of the RSA are asked tens of thousands of euros the consequences of signing a service rendered in complete ignorance.

Certainly there is an urgent demand that the banks are actually more demanding in the formatting of any contract of guarantee. Disproportionate commitments are clear and the surety did not necessarily have knowledge of the issues, protection of the leader as a guarantor may cause fear.

From the late 90 the Court of Cassation has implemented a law that over time has emerged to protect individuals having brought sureties for amounts ranging well beyond their financial capacity. So credit institutions that have signed a bond disproportionate to any individual was ordered to pay damages in the amount from the amount that the surety was not liable to pay in terms of its capabilities.

Subsequently, the legislature has incorporated this precedent in the law of 1 August 2003 on economic initiative, included in Article L341-4 of the Consumer Code. This requires that the bank may have had access to information concerning the assets of the surety person. It is to be considered that the principle of proportionality is of immediate application that is to say not only that it came into force on August 7, 2004 the day the bill was passed by parliament but in addition it applies to contracts of guarantee entered into before that law.

Furthermore, when a credit institution has been a principal debtor defaults on repayment of the loan it has entered, he must inform the deposit from the first difference found otherwise, the deposit would free of any commitment vis-à-vis the amount owed and, in accordance with Article L341-1 of the Consumer Code. Clearly, if the creditor does not comply with this obligation, the guarantor can not be required to pay penalties or default interest accrued between the date of this first incident and the date it was informed.

To strengthen the protection of individual bond when signed commitment, the legislature has imposed the addition, out of contract, a handwritten statement specified in Article L341-2 of the Consumer Code, in which Figure the amount for which the person becomes surety, this, so that it takes well aware of the scope and amount of its commitment.

Again the legislature introduced a provision, intended to act as a safeguard to the Sureties leaders for their society, to ensure that the guarantor is aware of the height of its commitments, since no can take out a bond trading, which is essentially supportive, without its amount is determined in advance, as specified in Article L341-5 of the Consumer Code, which states that the provisions of solidarity and renunciation benefit of discussion contained in a bond granted by a natural person for the benefit of a professional creditor shall be deemed unwritten if the guarantor’s undertaking is not limited to an aggregate amount, expressly and contractually determined, including the main , interest charges and accessories.

Finally, it should be noted that the only sanction available to the bank following a disproportionate commitment of the deposit is the payment of damages and especially by the cancellation of the bond knowing that the calculation of the amount of compensation can be the equivalent of the entire debt but only to the extent exceeding the property that the surety could offer as collateral, and referring to an annulment decision of July 2003. For more info visit http://www.asiafinanceblog.com/