How to cancel a bond deposit?

As a surety, the bank asks you to pay the loan you have taken out for your business. In which cases can you cancel the bonding contract or at least reduce the amount you owe?

The bonding contract is invalid

The bonding contract is invalid

The consent was vitiated

Consent must not have been given in error; because physical or moral constraints have been exercised or because the surety has been manipulated by the creditor (being manipulated by the debtor is not sufficient to void the bond), for example having lied or concealed facts about the situation of the debtor.

Thus, a creditor who makes a bond of surety, without informing the future surety that the debtor is definitely insolvent (for example a judicial liquidation procedure), commits a fraud.

Bail is disproportionate

A professional creditor can not rely on a suretyship contract entered into by a natural person whose commitment at the time of his conclusion was manifestly disproportionate to his property and income.

If the expected income from the guaranteed operation can not be taken into account in assessing the disproportionality of the security at the time it was taken out, it must, on the other hand, be taken into account the regular income received by the surety until the date of its engagement, even if these would come from the company whose commitments are guaranteed by the suretyship (Cass.. 5-9-2018 No. 16-25.185 FS-PB). Still, they must be regular; thus, an exceptional income (for example from the sale of a good) should not be taken into consideration.

However, the bond returns if, on the day it is called, the bailder’s financial situation has improved and enables him to meet his obligations.

The guarantee contract does not contain all the mandatory information

The guarantee contract must include the handwritten mention provided for by article L 341-2 of the French Commercial Code (for a loan agreement) or the mention provided for by the law of July 6, 1989 + manual reproduction of article 22-1 Law No. 89-462 of 6 July 1989 (paragraph 1) which specifies the conditions under which the surety may terminate his commitment (for a lease) or the handwritten signature of the surety.

The bonded bond has been renewed but not the bond

The bonded bond has been renewed but not the bond

This assumption refers to the novation of the contract, that is to say its renewal by tacit renewal or the renewal of a lease expired. The renewal of the contract automatically releases the bond, which can only be held for the payment of debts incurred before.

Exceptionally, the renewal does not release the bond when the guarantee contract provides for a clause covering the renewal.

Debt is prescribed

Debt is prescribed

The limitation periods vary according to the nature of the claims. After this period, neither the organization nor the surety are liable for unpaid bills.

For a residential rent, the limitation period is 3 years.

For the repayment of a loan, the limitation period is 2 years. The starting point for the limitation period differs depending on whether the action relates to unpaid monthly payments or outstanding capital. In the first case, the prescription runs from the due date of each monthly payment; in the second, from the lapse of the term of the loan (which entails the immediate payment of all the sums due).

The bond was given by an officer who ceased his duties

In principle, an officer remains liable to pay the debts of which he is a surety, even after the termination of his duties.

If the suretyship contract indicates that his surety is related to the exercise of his functions, it is enough for him to resign so that the surety ceases to produce its effects.

If the contract does not contain a term, the director who has ceased his duties may at any time request the termination of his engagement. This faculty is a consequence of the prohibition of perpetual engagements. It remains little practiced, either because the surety ignores it (this is probably why the recent texts require creditors who have granted credit to a company, guaranteed by a bond, to remind the surety the existence of this prerogative ), because the creditor immediately makes an argument to put an end to the credit.

To be validly exercised, the termination must comply with the conditions laid down in the deed of guarantee, if any, and clearly show the intention of the manager to suspend his guarantee on the date of termination. The mere notification of the end of his duties is not enough to release him from his engagement.

This is not necessarily enough to make him miss any payment. The Court of Cassation has decided that the guarantor who undertakes to guarantee, without any determination of purpose or duration, the obligations contracted or which would be payable by the debtor to the creditor, must be guaranteed by all fixed-term obligations agreed upon prior to the unilateral termination of the bond, even if the performance of these obligations would continue, by virtue of the contractual stipulations, after the date of such termination. However, a manager who ceases his duties and whose surety is not destined to disappear may obtain from his successor that he surety and obtain from the creditor that he accepts surrogacy sureties.

Note that if the organization is the subject of a collective procedure, sureties are the subject of specific provisions.

The debt is extinguished

The debt is extinguished

The deposit is released:

  • by the payment of the debt by the principal debtor to the creditor;
  • if the debtor reimburses the creditor by means of a flat asset, provided that it corresponds to the value of the debt and the creditor accepts the property as payment;
  • through a transaction between the debtor and the creditor terminating the debt (debt forgiveness);
  • if there is compensation between the debt of the debtor and a debt that the creditor owes to the debtor;
  • if a court decision relieves the debtor of the payment of the debt (for example, when a claim is refused on the list of receivables in the event of receivership);
  • if the creditor has not fulfilled his obligations to the principal debtor;
  • if the creditor caused the extinguishment of the debt by not declaring his debt to the bankruptcy of the debtor.

The creditor has committed a fault

The creditor has committed a fault

The surety is relieved of his obligation, in proportion to his loss, when he can no longer act against the debtor in repayment of sums paid by the creditor. Any contrary clause is null. This refers to the following cases:

  • the creditor lost by his fault a security interest he had on the debtor (mortgage on property, other surety, pledge…) and that this security could have been used by the surety;
  • the security has lost its effectiveness because of the creditor (for example, in the event of a breach of a security right due to the creditor’s inaction);
  • it can no longer act against the debtor or other surety for the creditor (for example, if he discharges the debtor of a retention of title in a property).

The deposit is not discharged if:

  • the creditor proves that his fault or negligence is not entirely attributable to him;
  • or, the creditor establishes that the lost interest would have had no interest for the guarantor: the debtor is insolvent, he granted an extension of term to the principal debtor without loss of security, he withdrew his financial assistance to the debtor in the rules…

Information has not been communicated to the surety

In this case, the guarantor will not be able to obtain the cancellation of his commitment but only a reduction of the amount that he owes.

  • the credit institution creditor is obliged to inform the surety, a natural person, once a year, of the evolution of the amount of the secured claim and the costs and penalties. If the appointment is for an indefinite period, he must also remind the surety of the possibility of terminating the bonding contract. This rule applies when the bond is given by a credit institution or a natural person to guarantee the professional debts of an individual entrepreneur, regardless of the nature of the bonded debt. If the creditor forgets to do so, the surety is not required to pay the fees and penalties related to the debt;
  • the professional creditor must notify the guarantor, from the first unpaid unregulated, within one month. Otherwise, the guarantor does not have to pay late fees for the period between the first unpaid and the date on which it was informed.