Agenda

IN CASE OF THE GUARANTOR’S FAULT, ITS LIABILITY CANNOT BE LIMITED BY THE BANK GUARANTEE AMOUNT, THE SUPREME COURT SAYS

03/07/2020

 

An important decision has been recently ruled by the Supreme Court (case N 305-ES19-25839 dated 11.06.2020). In this matter, a loan agreement was concluded between two legal entities. Repayment of the loan was secured by a bank guarantee. The debtor did not return the money. The creditor applied for payment under the guarantee, but was unlawfully refused. It further received the guarantee amount through the court.

Consequently, the creditor filed a claim for the recovery of interest on the money due, since it wasn’t paid in time. Courts of first and two subsequent instances have dismissed the claim.

However, the Supreme Court did not agree with them and sent the case for a new trial. The Supreme Court indicated that the guarantor does not have unlimited freedom in formulating provisions regarding its liability. In particular, in a bank guarantee, it is unacceptable to set provisions for avoiding liability in case of intentional breach of obligations. Thus, a bank cannot be exempted from such liability, regardless of the amount paid under the guarantee.

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