учебный год 2023 / Van Erp, Accessority of Suretyship

European Review of Private Law 3-2005 [309–331] © Kluwer Law International | Printed in the Netherlands

Surety Agreements and the Principle of Accessority – Personal Security in the Light of a European Property Law Principle

SJEF VAN ERP*

Keywords: Personal Securities, Surety Agreements, Accessority

Abstract: The surety’s duty is both subsidiary and accessory to the principal debtor’s duty. Subsidiarity means that the surety only has to pay in case the principal debtor is unable or unwilling to do so. Accessority means that the (continued) existence, extent and contents of the surety’s duty depend on the (continued) existence, extent and contents of the principal debtor’s duty. The accessority principle applies particularly to real securities, but it also plays an important role with regard to personal securities, protecting (nonprofessional) sureties. It is submitted that the accessority principle should be seen as a fundamental principle of surety protection, not only at a national, but also at a European level.

Résumé: Le devoir du garant est à la fois subsidiaire et accessoire au devoir du débiteur principal. La subsidiarité signifie que le garant doit seulement payer dans le cas où le débiteur principal serait insolvable ou réticent à payer. L’accessoirité signifie que l’existence (continue), l’ampleur et le contenu du devoir du garant dépendent de l’existence (continue), l’ampleur et le contenu du devoir du débiteur principal. Le principe d’accessoirité est appliqué surtout en ce qui concerne la caution réelle, mais il joue également un rôle important de protection des cautions personnelles (nonprofessionnelles). Il est suggéré que le principe d’accessoirité devrait être reconnu comme principe fondamental de la protection des garanties, non seulement au niveau national, mais également au niveau européen.

Zusammenfassung: Die Verpflichtung des Bürgen ist subsidiär und akzessorisch zur Verpflichtung des Hauptschuldners. Subsidiarität bedeutet, daß der Bürge nur zahlen muß, wenn der Hauptschuldner zahlungsunfähig oder -unwillig ist. Akzessorität bedeutet, daß das (Fort-) Bestehen, der Umfang und der Inhalt der Bürgschaftsverpflichtung vom (Fort-)Bestehen, Umfang und Inhalt der Verpflichtung des Hauptschuldners abhängen. Das Akzessoritätsprinzip findet insbesondere im Bereich der dinglichen Sicherheiten Anwendung, spielt aber auch bei den persönlichen Sicherheiten eine wichtige Rolle, indem es den (nicht professionellen) Bürgen schützt. Im Folgenden wird ausgeführt, daß der Akzessoritätsgrundsatz sowohl auf nationaler als auch auf europäischer Ebene als grundlegendes Prinzip des Bürgenschutzes angesehen werden sollte.

1Introduction

In his book ‘Dimensions of Private Law’ the Canadian author Stephen Waddams in a very lucid and thought provocative way draws attention to how legal scholars tend to

*Professor of civil law and European private law, Maastricht University; Marie Curie Fellow and Lehrbeauftragter für Sachenrecht, Zentrum für Europäische Rechtspolitik (ZERP), University of Bremen.

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analyse the interrelationship between concepts and the erroneous ways in which this interrelationship sometimes has been approached.1 The image of ‘legal mapping’ (a picture of the law as a map of concepts and connections between concepts) proves to be inadequate in his view.2 According to Waddams ‘the study of any legal question may take as a starting point a legal system, located in time and place, and examine the evidence of what the law has actually been at particular times’ or ‘a legal study may start with an idea adapted […] ‘to all times and races, and all places and circumstances’, and apply the idea to a particular legal system, rejecting what is there found to be incompatible with the idea’.3 He then goes on to conclude that the concurrence of both approaches can to some extent not be avoided, because the assessment of the law at the time of assessment or at any previous time, ‘is itself a complex process, requiring elements of historical enquiry, of judgment, of synthesis, and of prediction’.4 I will take this mixed approach, which is both positivist as well as idealist, as my starting point in this article. The law of suretyship is a legal area on the borderline of contract and property law. Suretyship is a contract between a principal creditor and a surety, aimed at securing payment of a debt owed a third party, the principal debtor. As such it is a contract, but its aim is to secure payment of a debt. Suretyship is, therefore, seen not merely as a contract, but also as personal security, meaning that the liability of the surety is of a contractual nature, but agreed upon for security purposes. It is this latter aspect of the suretyship agreement that makes it a legal relationship in the border area of obligation and property. Securing payment of a debt is, generally speaking, part of the law of property (cf. hypothec, mortgage and pledge). As Waddam’s book shows, the border area of obligation and property is very suited for the combined positivist and idealist approach, given its mixed nature.5

The relationship between property and obligation has always been an attraction to academic lawyers with an interest in theoretical conceptions. It is, however, also a borderline area, which is of highly practical importance. The law of suretyship is a good example. Let me explain this by elaborating somewhat more on the nature of a suretyship as ‘personal security’. If a principal creditor is given certainty that a loan to the principal debtor will be paid back by a third party (the surety) in case the principal

1S. WADDAMS, Dimensions of private law. Categories and concepts in Anglo-American legal reasoning, Cambridge University Press, Cambridge, 2003.

2S. WADDAMS, Dimensions of private law. Categories and concepts in Anglo-American legal reasoning, p 1 et seq. See also the article by S.A. SMITH, ‘A map of the common law?’, Canadian Business Law Journal, 2004, p 364 et seq., also to be found electronically at: <http://ssrn.com/ abstract=627463> and R.A. HILLMAN, ‘The many dimensions of private law, Commentary on Stephen Waddams, Dimensions of Private Law: Categories and Concepts in Legal Reasoning’, Cornell Legal Studies Research Paper No. 04-020, to be found electronically at: <http://ssrn.com/ abstract=589342>.

3S. WADDAMS, Dimensions of private law, p 222 (reference and footnote omitted).

4Ibid., p 222.

5Ibid., p 172 et seq.

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debtor is unable or unwilling to do so and if this certainty is based upon a personal promise by the third party to repay the loan, then it is the personal promise by the surety, which secures repayment of the loan. For the principal creditor it is a type of security, but it is at the same time not ‘real’, but ‘personal’. It constitutes merely a contractual right for the principal creditor and does not give him any specific property entitlement or preferential right with regard to any specific asset that belongs to the surety. However, I should immediately add that the use of the word ‘personal’ is, at least to some degree, erroneous, because the creditor – like any creditor – can seize the surety’s property if he does not fulfil his contractual promise. At the end of the day it will be the whole of the surety’s assets (in civil law terminology: his patrimony), which will be liable. In that sense also a personal security is ‘real’.

This is, nevertheless, not the relationship between property and obligation that I meant earlier. The security nature of a surety agreement finds its expression in the application of a property law doctrine, which has been developed in the area of real security law. The liability of the surety is not only seen as subsidiary to, but also as depending upon the liability of the principal debtor. It is a subsidiary liability, as the surety is only liable if the principal debtor fails to pay. In other words: the surety is a secondary debtor. At the same time it is a liability that is depending upon (in other words: accessory to) the existence of a debt, which is owed by the principal debtor to the principal creditor. It is here that surety law meets the law of real security interests, because according to a general principle of security law the creditor can only invoke his rights, such as a right of hypothec, if an underlying debt exists that is secured by that right. Of course, as always in law, many exceptions exist, but this does not mean that the principle itself is no longer adhered to.

Taking as a starting point the mixed positivist and idealist approach described by Waddams, I will be looking for leading principles, underlying policies, fundamental concepts and basic rules, focussing on the law of suretyship from the perspective of the accessority principle. In the following paragraphs I will, first of all, make some general remarks concerning the contract of suretyship and the accessority principle, followed by a discussion of suretyship in the light of the (new) acquis communautaire, especially the draft new consumer credit directive.6 At the end of this article I will defend a multi-level remedial approach towards protection of sureties, taking into account as policy weighing factors the status of the parties involved, whether the surety is informed or not about his (potential) liability and whether the underlying agreement between principal creditor and principal debtor is of an

6Amended proposal for a directive of the European parliament and of the Council on the harmonisation of the laws, regulations and administrative provisions of the member states concerning credit for consumers repealing Directive 87/102/EC and modifying Directive 93/13/EC, COM(2004)747 final, 2002/0222 (COD), Brussels, 28.10.2004, to be found at: <http:// europa.eu.int/comm/consumers/cons_int/fina_serv/cons_directive/credit_cons_en.pdf>.

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abstract nature. I will sometimes take Dutch law as an example, because the law on suretyship has recently been revised and modernised as part of the new Netherlands Civil Code.7

2 Surety Agreements and Accessoriness

2.1General Remarks

Although suretyship is an agreement between a principal creditor and a surety, the legal position of the surety cannot be understood without also taking into account the contract between the principal creditor and the principal debtor, as well as the legal relationship between the surety and the principal debtor. Suretyship involves several parties and consequently several legal relationships. It is a typical example of a legal relationship, which can only be understood if all the legal relationships existing between the parties involved are analysed. The following distinctions can be made:

(1) the agreement between surety and principal creditor, (2) the legal relationship between surety and principal debtor, (3) the agreement between principal creditor and principal debtor. All three legal relationships will have to be analysed as such, as well as with regard to their impact upon one another to understand the position of the surety. I will briefly analyse the three aforementioned relationships, to be able to understand better what the principle of accessority implies.

Let me begin with the legal relationship between surety and principal creditor. The surety’s obligation is, as was remarked earlier, of a subsidiary nature, meaning that he only has to perform if the principal debtor does not perform his obligation. This is not the only connection between the surety’s obligation and the principal debtor’s obligation. Although the agreement between the surety and the principal creditor is seen as the legal basis for the duty of the surety to perform in case the principal debtor does not perform his obligation, the surety’s obligation to some degree also depends upon the principal debtor’s obligation. This means that if the surety agreement is invalid, the duty of the surety to pay vanishes. In this sense, the surety’s obligation is dependent upon an existing valid legal relationship between him and the principal creditor. This obligation finds its legal cause in the surety agreement and the surety’s duty is for that reason not of an ‘abstract’, but of a ‘causal’ nature. The duty of the surety to pay is, however, not dependent upon any existing valid agreement between the surety and the principal debtor. If this agreement would prove to be invalid, the surety’s duty still exists, as it arises from the agreement between the surety and the principal creditor. In this respect, the surety’s obligation

7See Book 7 Netherlands Civil Code (Special Contracts), Title 14 (Surety), articles 7:850 et seq. Part 1 of Title 14 contains general provisions, part 2 concerns surety agreements concluded by a non-professional and part 3 is about recourse. For a recent commentary, with many references to foreign law, see: A.C. VAN SCHAICK’s chapter on suretyships in: Mr. C. ASSER’s Handleiding tot de Beoefening van het Nederlands burgerlijk recht, Bijzondere Overeenkomsten, Deel IV, p 143 et seq., Kluwer, Deventer 2004 (hereinafter: ASSER-VAN SCHAICK).

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is independent from his legal relationship with the principal debtor and hence, from this perspective, ‘abstract’. This is, however, different with regard to the legal relationship between the principal creditor and the principal debtor. The agreement between these two parties does affect the duty of the surety. Not only is the surety’s obligation to pay dependent upon the existence of a valid legal agreement between principal creditor and principal debtor, but also dependent upon the continued existence of this agreement.8 In German legal literature the first mentioned aspect of dependence is called ‘Entstehungsakzessorietät’, i.e. the surety is only bound if a primary (principal) duty to perform exists, because his duty is accessory to this primary duty. Another aspect of accessority concerns the content of the surety’s obligation. The content of this obligation depends upon the content of the principal debtor’s duty.9 This form of interconnection is also expressed by saying that the surety’s duty is accessory to the principal debtor’s duty.

The problem whether a legal relationship is of an abstract or of a causal nature should be clearly distinguished from the problem whether a particular duty is accessory to another duty.10 The former problem concerns the interconnection between one contract and another. Under Dutch law, to give an example, a valid transfer requires a valid underlying legal act, such as a sales contract.11 Transfer according to Dutch law is therefore of a causal nature. This is different under German law. The latter above mentioned problem concerns the dependence of an obligation upon another obligation. No debt, no enforceable security. That is why the interconnection between the primary obligation of the principal debtor vis-à-vis the principal creditor is qualified as accessory to the secondary obligation of the surety vis-à-vis the

8Cf. article 7:851, paragraph 1 Neth. C.C.: ‘De borgtocht is afhankelijk van de verbintenis van de hoofdschuldenaar, waarvoor zij is aangegaan’.

9A. STADLER, Gestaltungsfreiheit und Verkehrsschutz durch Abstraktion. Eine rechtsvergleichende Studie zur abstrakten und kausalen Gestaltung rechtsgeschäftlicher Zuwendungen anhand des deutschen, schweizerischen, österreichischen, französischen und US-amerikanischen Rechts, J.C.B. Mohr (Paul Siebeck), Tübingen, 1996, p 18-19. The author also mentions that the requirement of accessority might be less strictly applied with regard to the continued existence and enforcement of the accessory right: ‘Im übrigen kann die Akzessorietät für den Umfang und die Durchsetzbarkeit des Nebenrechts unterschiedlich, also mehr oder weniger streng sein. Regelmässig erlöschen akzessorische Nebenrechte mit Wegfall des Hauptrechts’. A. STADLER,

Gestaltungsfreiheit und Verkehrsschutz durch Abstraktion, p 19.

10See W.W. RADKE, Bedingungsrecht und Typenzwang. Eine Untersuchung zu Grundlagen und Grenzen privatautonomer Gestaltung, Berlin, Duncker & Humblot, 2001, p 108-109, where he discusses the difference focussing on property law: ‘Denn Akzessorietät bedeutet nur, dass sich der Inhalt des Sicherungsrechts in gewissem Umfang nach dem Bestand der zu sichernden Forderung richtet, während sich der Begriff der Abstraktion auf die Unabhängigkeit des dinglichen Geschäfts von einem schuldrechtlichen Grundgeschäft bezieht. Grundgeschäft in diesem Sinne ist aber nicht die zu sichernde Forderung. Das Grundgeschäft, von dem die Bestellung des Sicherungsrechts abstrahiert ist, ist vielmehr die Sicherungsabrede. Insofern sind auch akzessorische Sicherungsrechte abstrakt’. See also RADKE, p 117–118.

11See article 3:84, paragraph 1 Neth. C.C.

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principal creditor. It should, nevertheless, be realised that the principle of accessority can also function as a mechanism through which some elements of abstraction might enter the legal relationship between the surety and the principal creditor. If the primary debt, which is owed by the principal debtor to the principal creditor is formulated in general terms, such as that any debt is covered arising from the relationship between principal creditor and principal debtor, irrespective of the type of transaction which gave rise to the debt and irrespective of when the transaction was concluded and even future debts are covered, the impact of the accessority principle is minimised to a large degree. The surety’s obligation to pay will in such a situation not cease to exist quickly, as in fact it is has been disconnected from any specific debt the principal debtor owes the principal creditor. The surety agreement then secures any debt the principal debtor might owe the principal creditor and the accessority principle will not lead to releasing the surety from his secondary obligation. As the primary obligation will remain in existence, so will the secondary obligation.

The accessority principle can also be circumvented in other ways. A clause that would abolish application of the accessority principle between the surety and the principal creditor would make the difference between a suretyship and an abstract guarantee disappear. In the case of an abstract guarantee the duty of the guarantor to pay does not depend upon the validity of the agreement between the principal creditor and the principal debtor. If the surety would have to pay irrespective of the (continued) existence of the primary obligation, the surety agreement will be just as abstract as in the case of an abstract guarantee. Also a waiver of defences, which the surety might have against the principal creditor or the assignee of the principal creditor would make the difference between a suretyship and a guarantee disappear. Whether such a clause abolishing accessority or a waiver of defences can be made depends on the answer to the question whether and, if so, to what degree the accessority principle is seen as mandatory. This is a point that will be discussed below. Even if accessority could be abolished by a contractual provision, it could still be seen as changing the fundamental nature of a surety agreement with the result that no longer the rules on suretyship apply, but other rules such as concerning abstract guarantees.

2.2The Accessority Principle: Advantages and Disadvantages

If a right is accessory to another right, it means that the former right, as far as its creation, extent, continued existence and contents are concerned, depends upon the latter right. In surety law the right of the principal creditor to claim payment from the surety is considered to be a secondary right, closely linked to the right that the principal creditor has against the principal debtor, which is seen as his primary right.12 The principal creditor’s secondary right is, therefore, seen as accessory to his primary right. The

12Cf. M. HABERSACK, ‘Die Akzessorität – Strukturprinzip der europäischen Zivilrechte und eines künftigen europäischen Grundpfandrechts’, JZ (Juristenzeitung), 1997, p 857 et seq., p 862.

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principle of accessority is applied both in the law of real security as well as in the law of personal security to protect the party who gives security. For a surety it is the expression of the secondary nature of his obligation. In the view of Habersack application of the accessority principle also simplifies the law and diminishes the need to create a whole set of technical rules that would otherwise be needed if each problem area (e.g. existence and contents of the surety’s obligation) would have to be dealt with separately. Furthermore, by qualifying the obligation of the surety as accessory to the primary obligation owed by the principal debtor it is also easier to understand and regulate that transfer of the primary obligation implies transfer of the secondary obligation, because the two obligations are intimately linked.13 In Habersack’s view the accessority principle should not be understood as ‘starres Dogma, sondern als offenes, der Überlagerung durch gegenläufige Interessen zugängliches Strukturprinzip’.14 In other words, it should be understood as a flexible concept, in the light of the various interests involved, given the aim and purpose of the principle. The advantages of the accessority principle have been summarised by Wachter as follows (focussing on the application of the principle in real security law):

‘Si l’on examine les activités de législation au sein de la Communauté européenne au niveau du droit privé, l’on constate que la protection des consommateurs occupe une place prépondérante. Par le principe de l’accessoriété, le droit du créancier découlant du droit de gage immobilier et celui découlant de la créance sont liés, ce qui assure que le créancier ne pourra utiliser la garantie que dans la mesure oú il existe un besoin effectif de sûretés. Le principe de l’accessoriété comprend donc nécessairement la protection du donneur de garantie.

En ce qui concerne la garantie de crédit à la consumation, le droit de gage immobilier accessoire constituerait donc en même temps une contribution à la garantie d’une protection efficace des consommateurs en Europe […], sans qu’il ne soit nécessaire d’intervenir dans la liberté contractuelle’. 15

Wachter has also stated several disadvantages of the accessority principle, as has also been done by Stadler.16 Both authors focus on real security, but some of the arguments can also be applied mutatis mutandis to personal security. A disadvantage of accessority is that it is more difficult and complicated to make changes concerning

13M. HABERSACK, note 12 above, p 862 – 863.

14M. HABERSACK, note 12 above, p 864.

15Th. WACHTER, ‘La garantie de crédit transfrontalier sur les immeubles au sein de l’Union européenne’, L’Eurohypothèque, Notarius International 1999, p 174 at 184.

16Th. WACHTER, ‘Die Eurohypothek – Grenzüberschreitende Kreditsicherung an Grundstücken im Europäischen Binnenmarkt’, WM (Wertpapier Mitteilungen) 1999, p 49 at 57; A. STADLER,

Gestaltungsfreiheit und Verkehrsschutz durch Abstraktion, p 606 et seq.

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the primary obligation, because this will also require changes with regard to the secondary obligation to avoid losing, at least in part, the security. If changing the secondary obligation proves to be impossible, the secondary obligation will only be linked to the primary obligation as it was agreed upon originally and any changes will not be secured. It might also be more efficient not to apply the accessority principle, because in this way transaction costs, such as resulting from renegotiations concerning any changes in the secondary obligation when the primary obligation is altered, can be avoided. But not only existence and contents might be affected by nonapplication of the accessority principle. It could also affect the continued existence of the surety agreement. If the accessority principle would not apply it would, e.g., in case of a surety agreement that secures payment of a current account credit become irrelevant whether at some point in time the balance of this account is nil. The surety agreement will still remain in existence, although – at least for the time being – no underlying debt (primary obligation) is owed anymore.17 A non-accessory suretyship also makes it possible for the principal creditor to transfer the rights under the suretyship agreement separately from his primary claim against the principal debtor. To put it briefly: if the accessority principle is not applied and, consequently, the secondary obligation arising from the surety agreement becomes independent from the primary obligation ensuing from the underlying credit agreement, the principal creditor is better secured.

Non-application of the accessority principle creates, however, serious risks for the (surety-) debtor. To give but one example, if the primary debt no longer existed, this would not automatically mean that the secondary obligation also extinguishes. If the surety would still have to pay, he would have to take recourse against the principal debtor with all the (procedural) hazards involved. As a consequence, particularly the non-professional surety will need protection. Because the accessority principle no longer applies, the required protection cannot be given at the level of property law, but can only be given at the level of contract law. Provisions will have to be added to the surety agreement – either on a voluntary basis or as a result of mandatory law – that the surety’s liability will be limited and will cease when, e.g., the principal debtor has performed the primary obligation, as it existed at the moment the surety agreement was signed.

The prime example to show how contract law has to step in to replace the original protection given to the debtor by property law is the way in which the German and Swiss Grundschuld function. The Grundschuld is a non-accessory real security

17The same result can be reached by applying the accessority principle in a more flexible way. Cf. for Dutch law Art. 3:231, paragraph 1 Neth. C.C.: ‘Een recht van pand of hypotheek kan zowel voor een bestaande als voor een toekomstige vordering worden gevestigd. De vordering kan op naam, aan order of aan toonder luiden. Zij kan zowel een vordering op de pandof hypotheekgever zelf als een vordering op een ander zijn’.

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interest with regard to land. It can be laid down in a document and after the debtor has repaid the loan, this document can be returned to the debtor. The debtor then acquires a security interest on his own immovable property for his own benefit. He then can re-apply for a loan and offer a security interest which does not have to be established, but already exists and can be given by transfer of the document. The protection of the interests of the debtor is to be found in the contract between him as mortgagor and the mortgagee. In this contract the conditions under which the nonaccessory real security will be enforced are laid down. His protection is therefore of a contractual, not of a property nature. The Grundschuld is the model that interest groups involved in real mortgage credit would like to use as a basic model for a uniform European type of mortgage: the Euro-mortgage. It can, therefore, be no surprise that in a recent study called ‘The integration of the EU mortgage credit markets’, published by the Forum Group on Mortgage Credit, several of the above mentioned disadvantages of the accessority principle have been restated to argue in favour of such a non-accessory Euro-mortgage.18 Although the study focuses on the introduction of, among other proposals, such a non-accessory mortgage and does not deal with surety law, it still is highly interesting to read why in the area of real mortgage law the principle is considered to be problematic. According to this study, a strong link between the loan agreement and the security agreement (i.e. strong accessoriness), does not facilitate changes to either. In the words of the study the result is ‘inflexibility, constituting limited economic freedom for the private customer, as well as an obstacle for lenders’. The study concludes by stating that accessoriness can arise in many ways and to differing extents and that it can inhibit the use of mechanisms for refinancing or balancing risk management.19 Particularly the latter remark seems to imply that the principle of accessority is more seen as a major stumbling block for financiers than as a protection for the customer. On the contrary, it is even argued that also customers would benefit from the abolishment or at least relaxing of this principle. Different voices can, however, also be heard. Habersack has defended the thesis that the accessority principle belongs to the basic principles of European private law and Wachter is of the opinion that, also at a European level, the accessority principle should be maintained as a leading principle and that a Euro-mortgage can also be created without abandoning this principle.20

18FORUM GROUP ON MORTGAGE CREDIT, The integration of the EU mortgage markets, European Commission, Brussels, 2004, nr 110 et seq. More information on the current state of play can be found on the following web site: <http://www.euractiv.com/Article?tcmuri=tcm:29- 135522-16&type=News>.

19FORUM GROUP ON MORTGAGE CREDIT, The integration of the EU mortgage markets, nr 110.

20Cf. M. HABERSACK, note 12 above, p 857 et seq; Th. WACHTER, note 16 above, p 50 et seq. and Th. WACHTER, ‘La garantie de crédit transfrontalier sur les immeubles au sein de l’Union européenne’, note 15 above, p 183 et seq.

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2.3Accessority and Suretyship: Protection through a Property Law Principle or through Contract Law (‘Ersatzakzessorietät’)?

It can be concluded from the above brief overview of advantages and disadvantages of the accessority principle that at the end of the day a balance has to be struck between the interests of the creditor and the interests of the (in the case of surety agreements: secondary) debtor. The outcome of this balancing process might differ with regard to real security, compared with personal security.

With regard to real security the creditor is protected by the property nature of his rights. A security right creates a droit de préférence, a droit de priorité and a droit de suite. It gives the creditor a preferential right, depending upon the moment the right was created, with respect to any proceeds of sale in case the debtor becomes insolvent and his assets have to be sold. It also gives him an absolute right, for a transfer of ownership of these assets will not limit his rights. Property law, through the principle of accessority, also protects the debtor. The (continued) existence, extent and contents of the security right are dependent upon the existence, extent and contents of the outstanding loan. If the right of the creditor becomes independent from the underlying loan agreement and the parties have equal bargaining strength, the debtor knows what he is giving up. If the parties are of unequal bargaining strength, the creditor, by concluding a non-accessory agreement, will be able to gain various advantages uncompensated by any advantages on the side of the debtor. This will be to the detriment of the debtor. He will need protection in order to restore the equality between him and the creditor. This can be done through the security agreement, but contracts only bind the parties to the agreement and do not – as a matter of principle – bind third parties. In my view, if the accessority principle does not apply, the protection that the contract then should give to the non-professional debtor vis-à-vis the creditor must be very strong and should have third party effect. By the latter I mean that any third party who acquires the security right by transfer and who had, or should have, notice of the security agreement should be bound by the terms of such agreement. If the nonprofessional debtor is given inadequate protection at the level of contract law, there is no longer a true balance of interests.

Given that surety agreements are also aimed at providing security, based upon the fact that the performance of someone else’s obligation has be ascertained, what was said above concerning real security also applies to personal property. The security nature of surety agreements is expressed by giving the surety, through the applicability of the accessority principle, the same protection as providers of real security. The balance of interests between the principal creditor and the surety is reached by a strengthening of the inherently contractual position of the surety through application of a property law principle. The surety needs the same protection as a mortgagee or pledgee. If the accessority principle is not applied here, the surety looses an essential part of his protection. The result is an abstract personal security, which might benefit the principal creditor far more than the surety. The protection of the surety

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