e-book2013

NEWSLETTER 2013

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The limitation period for the surety’s right of recourse commences

upon satisfaction of the creditor by the surety.

The surety has no right of recourse against the principal debtor for

payment of any obligation that is not actionable or not binding on the

principal debtor as a result of error or incapacity to make a contract.

However, if he has assumed liability for a time-barred obligation at the

behest of the principal debtor, the latter is liable to him pursuant to the

provisions governing representation.

Surety’s Duty to Notify.

Pursuant to Article 597 TCO, where the

surety pays the principal obligation in full or in part, he must notify the

principal debtor.

If he fails to do so and the principal debtor pays it again because he

was not and could not be expected to be aware of the surety’s payment,

the surety forfeits his right of recourse against the principal debtor.

This does not affect any claim against the creditor for unjust

enrichment.

Conclusion

Pursuant to Article 589 TCO, in all cases, the surety’s liability is

limited to the maximum amount indicated in the surety contract. The

creditor may not approach the surety to fulfill the principal obligation

before the date fixed for its payment, even if such date is brought forward

following the principal debtor’s bankruptcy.

Pursuant to Article 591 TCO, the surety is entitled and obliged to plead

against the creditor all defenses open to the principal debtor, or his heirs,

which are not based on the insolvency of the principal debtor. As soon

as the principal obligation falls due, even as a result of the bankruptcy of

the principal debtor, the surety may at any time demand that the creditor

accept satisfaction from him.

Pursuant to Article 596 TCO, the surety is subrogated to the creditor’s

rights to the extent that the surety has satisfied the creditor. The surety

may exercise these as soon as the principal obligation falls due. Where

the surety pays the principal obligation in full or in part, he must notify

the principal debtor.