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The Spanish legal system establishes a system of contractual guarantees based mainly on a series of characteristics that aim to preserve the debtor's assets and prevent a possible insufficiency of their assets to meet their obligations. In this way, greater security is achieved in the collection of the debtor's debts in favor of the creditor. All of this is done to avoid the application of the general regime provided for in Article 1911 of the Spanish Civil Code, which, in summary, establishes that the debtor is liable for the fulfillment of their obligations with their universal assets, that is, with all their present and future assets. In this article, we will analyze what contractual guarantees exist and how they are applied.
Difference between personal and real guarantees
Guarantees can be configured as personal or real. In summary, personal guarantees are based on the fact that not only the debtor is liable for its obligation to the creditor, but also a third party, who undertakes to guarantee the effective fulfillment of the obligations assumed by the debtor, without prejudice to any right it may have to recourse against the principal obligor (the debtor).
However, real guarantees ensure the fulfillment of the obligation assumed by the debtor by linking it to a specific asset owned by the debtor or a third party. Thus, in the event that the debtor breaches the contract, the creditor would be compensated by acquiring the asset provided as collateral in favor of the creditor.
In view of the above, an example of a personal guarantee is a surety bond, where one party undertakes to perform in the event that the principal obligor fails to do so. In contrast, a typical security interest is a mortgage, where the debtor ensures the performance of its obligations through the mortgaged asset (a piece of real estate).
How should contractual guarantees be configured?
Depending on how the guarantor claims fulfillment of the obligations assumed by the debtor, the contractual guarantees described above can be configured as first demand, joint, or joint and several guarantees, whose main characteristics are as follows:
- In the event that a guarantor grants a first demand guarantee in favor of a creditor, the guarantor assumes an abstract and independent obligation to pay the obligation of the guaranteed party (the creditor) from the moment it is requested by the latter and without raising any objections whatsoever. Thus, for the guarantor to be liable to the creditor, it is not necessary to prove that the debtor has defaulted, and therefore the creditor's mere claim is sufficient.
In summary, and in accordance with established case law, the main characteristic of first demand guarantees is that they are immediate and independent guarantee obligations that lose their accessory nature to the principal obligation guaranteed and, therefore, the obligation to respond arises from the moment the claim is made against the guarantor.
As a result of the above, the terms in which the guarantee is drafted are of vital importance, given its autonomy, and therefore interpretation in accordance with Article 1281.1 of the Civil Code is practically essential. This provision establishes that, if the terms of the contract are clear, the literal meaning of its clauses shall prevail.
Joint and several obligations arise when several persons guarantee the obligations assumed by the debtor and are regulated in Articles 1137 to 1148 of the Civil Code. In summary, their characteristic features are as follows:
- In the case of joint and several guarantees, the beneficiary may claim payment of the guaranteed amounts in full from any of the guarantors, and whoever assumes compliance will have a right of recourse against the other guarantors who have not responded in favor of the creditor. However, if the parties decide to establish a joint guarantee in favor of the creditor, the beneficiary may only claim from each guarantor the part of the guaranteed obligation that corresponds to them.
The Spanish Civil Code establishes in Articles 1137 and 1138 a presumption of joint and several liability, unless the parties agree otherwise. Thus, for the contractual guarantee granted in favor of the creditor to be joint and several, it is necessary for the parties to expressly agree to this in the contractual documents they formalize for the establishment of the corresponding guarantees.
Benefits of joint guarantees
When setting up joint guarantees, the guarantor can take advantage of the benefits established by the Civil Code, namely the benefits of division, order, and excussion. Thus, joint and several guarantees and first demand guarantees entail an implicit waiver of these benefits.
In summary, in order for the guarantor to take advantage of the benefit of excussion, they must oppose it to the creditor and indicate the debtor's assets within Spanish territory that are sufficient to make the payment. The benefit of division consists of the fact that, if there are several guarantors for the same debt, it must be divided equally, applying the regime of joint or several obligations. The benefit of order implies that until the beneficiary makes a claim against the debtor, they cannot go against the guarantor. Consequently, for these benefits not to apply, the parties must expressly agree to this.
Given the above, the characteristics and needs of each party when establishing a contractual guarantee in favor of a creditor may require legal advice to analyze which regime is most beneficial. For this reason, we recommend that before formalizing any contractual document, you consult with a legal advisor who can help you understand and adopt the measures that best suit your needs.
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