учебный год 2023 / de la Mata Munoz, Personal Security
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not easy to justify as the mandate creates bilateral obligations for both parties and not solely for the mandator. This has been posited to be the case by the majority of scholars37 and by the Supreme Court itself in other decisions38.
An express acceptance of the order and the conditions of the credit relationship is to be recommended in order to avoid misunderstanding.
VII. The object ofthe contract
The object of this contract is the grant of credit by the mandatory himself with funds from his patrimony to a third party. The grant of credit must be considered in a broad sense, especially within current business practice (to open a credit line, extension of a loan already granted, credit on goods, acceptance of bills of exchange, assignment of concrete things, etc)39.
According to the general rules, the object must be possible, licit and determinable (art. 1346 Italian CC and art. 1271 Spanish CC). It does not have to be determined before the debt becomes due; it must only be determinable (like in the case of a credit line whose final object depends on the use the debtor makes of it). This possibility is considered under art. 1348 Italian CC and art. 1273 in fine Spanish CC; as well as in art. 1938 Italian CC and art. 825 Spanish CC on guarantee for future debts.
VIII. Relationships between the parties to the contract
1. In general
The structure of the m.p.c provides the basis for a complex configuration of relationships between the three parties who are de facto involved within it.
The development of the m.p.c. can be seen as occurring in three different moments; each moment giving rise to a different legal relationship.
At the first stage, the mandator orders the mandatory to grant credit to a third party and the mandatory accepts doing it. The legal scheme is that of a contract of mandate.
37Giusti, 306; Ravazzoni, Le garanzie, 164; Galgano, 447. See also references in Sesta/Cendon, 1769.
38Cass. 9 April 1990 no. 2965, GI, 1991, I, 1, 321 and Cass. 17 Mai 1974 no. 1433, FI 1974, I, 3380.
39Horn/Staudinger, on§ 778, no. 3; Giusti, 296.
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At the second stage, the mandatory performs the mandate by granting credit to the third party. In doing so he creates a credit relationship with this beneficiary. This credit is ex lege automatically guaranteed by the mandator. The structure of this relationship is that of a credit secured with a personal guarantee.
~~rantee_______
Credit
The third stage only occurs upon the default of the beneficiary in repaying his debt. In such a case, the mandatory is entitled to require performance by the mandator of his guarantee obligation and the latter on so doing receives subrogation of the rights against the beneficiary. The relationship among the parties at this stage is the typical of a guarantee contract.
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Right to be repai/ |
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The m.p.c . is concluded in the first stage. The performance of the mandate then gives origin to two different relationships completely independent
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from the contract of m.p.c.: a) a credit relationship between the mandatory and the beneficiary and b) a guarantee relationship between the mandatory and the mandator. As a result, the m.p.c. has been considered as being "lato sensu a trilateral contract"40 . However, it is stricto sensu a bilateral one between the mandator and the mandatory since the credit and guarantee relationships are only consequences of the performance of the m.p.c. and thus remain outside of the scope of the m.p.c.
2. Rights ofthe mandator vis-a-vis the mandatory
a) Right to the performance ofthe mandatory on the agreed terms
The first right of the mandator is to obtain the effective performance of his order by the mandatory. According to art. 1958 and art. 1710 par. 1 Italian CC and 1718 and 1719 Spanish CC, the mandatory is compelled by his acceptance to perform the mandate diligently and according to the terms and conditions agreed. However, if certain circumstances of the mandate have changed in a way that would render it reasonable for the order to be modified and if these circumstances cannot be communicated to the mandator timeously, then the mandatory can validly modify the conditions of the mandate, provided this results in a positive outcome for the mandator (art. 1711 par. 2 Italian CC and art. 1715 Spanish CC).
b) Right to be releasedfrom his guarantee obligation
Art. 1956 par. 2 juncto art. 1958 Italian CC on guarantees for future debts is applicable to the m.p.c.. This application comes into operation if the mandatory grants credit without authorisation from the mandator and if the mandatory is aware that the financial conditions of the debtor have become such as to render the satisfaction of the claim considerably more difficult. Thus the mandator is henceforth released from being guarantor for the extended credit.
A similar provision is not found in Spain. However, according to art. 1726 Spanish CC, the mandatory is liable not only for fraud (dolus) but also for fault (culpa). This will be judged with varying degrees of severity by the courts. Such judgment will largely depend on whether the mandatory has received compensation for the service which he has provided. The m.p.c. is usually an onerous contract. Therefore the mandatory is presumed to behave in an especially diligent manner. If the mandatory has had notice of the financial difficulties of the debtor the diligent course of action is for the mandatory to inform the mandator of this circumstance before the credit is granted. Furthermore the mandatory should not grant credit until
40 Simonetta, Il Mandato di Credito, 150.
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the mandator has authorised the grant in the light of the new circumstances. Such a departure from the instructions received by the mandator contradicts the mandatory's basic obligation to perform the mandate in the agreed terms but it is allowed if it results in a positive effect for the mandator (art. 1715 Spanish CC and also in art. 1711par.2 Italian CC). If the effect is not positive and the mandatory has granted the credit even though he was aware that the debtor might have repayment difficulties, then he is liable for the damage suffered by the mandator.
c) Right to be informed: "render ofaccount"
The mandator also has a right to be informed by the mandatory of the results of his performance (art. 1713 Italian CC and art. 1720 Spanish CC and art. 263 Spanish Comm.C).
d) Right to be subrogated in the rights ofthe mandatory
If the mandate has been performed and the mandator has made payment as guarantor, he is then subrogated into the mandatory's rights against the third party (art. 1949 Italian CC and art. 1839 Spanish CC).
e) Right ofthe mandator to revoke the mandate
The mandator enjoys a right to revoke the mandate in Italy, Navarra and the rest of Spain. As the exercise of this right extinguishes the contract it shall be treated as a way of extinction hereinafter41 •
3. Rights ofthe mandatory vis-a-vis the mandator
a) Right to performance ofthe mandator upon default ofthe beneficiary
This is a right granted ex lege by art. 1958 Italian CC and by the contract of mandate in Spain (art. 1727 Spanish CC and in art. 253 and art. 254 Comm. C., by which the mandator remains liable for the obligations which have been agreed within the limits of the mandate). On performing the mandate, the mandatory automatically obtains a guarantee from the mandator; hence upon default of the third party, the mandatory has the right to be paid by the mandator, in accordance with the rules on the guarantee.
b) Right to perceive the remuneration stipulated
The parties can agree a specific remuneration for the performance of the mandate (see art. 1709 Italian CC and art. 1711 Spanish CC), different to
41 See under Chapter 3, A., IX., 1. Revocation by the mandator, 199.
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the interests for the credit. In this case, the mandatory has the right to receive it from the mandator on the agreed terms.
c) Right to recover costs which are separate from the provision offunds
Art. 1719 Italian CC and art. 1728 Spanish CC enshrines the right of the mandatory to receive from the mandator the means necessary to perform the mandate and to fulfil the obligations which the mandatory has undertaken in his own name. These provisions are not applicable to the m.p.c. as the funds for the credit must belong to the mandatory himself. Otherwise, If it would be the mandator who was actually granting the credit, the economic sense and the legal reason (causa) of this contract would be lost.
d) Right to be indemnifiedfor the damages suffered due to the performance ofthe mandate
Those costs and damages which are incurred by the mandatory in performing the mandate (as distinct from the insolvency of the third party) and which are not caused by his own negligence, shall be covered by the mandator (art. 1720 Italian CC and art. 1729 Spanish CC and 278 Spanish Comm.C.).
e) Right to be discharged ofthe duty to grant credit
This right is expressly provided for the m.p .c. in art. 1959 par. 1 Italian CC and Ley 526 sent. 2 Fuero Nuevo de Navarra. According to this provision, the mandatory can be discharged of ("cannot be compelled to") performing his obligation if the financial situation of the mandator or the third party has become worse and the performance of the debt would therefore be more difficult.
The paying capacity of the beneficiary and the mandator-guarantor are the economic reason for the granting of credit. Therefore it is reasonable to give the mandatory the opportunity to avoid the contract if the relevant circumstances change.
As the mandatory has the right to renounce the mandate, it has been contended that he also has the right to be discharged42 • The difference is mainly that the right to be discharged needs a fair reason (such as the supervening insolvency of the mandator or of the third party). Accordingly, the mandatory is not liable for possible damages which are due to the discharge, which contrasts with the case of renunciation.
42 Arcos, 254 ff.
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j) Right to waive the contract
The mandatory's right to renounce the contract has been recognised as valid in Italy and Spain. As it causes the extinction of the contract it shall be treated hereinafter43 .
IX Extinction ofthe m.p.c.
Since the regulation of the m.p.c. does not contain any provision regarding its extinction, the general rules on mandate shall be taken to be applicable to this matter in Italy, Navarra and the rest of Spain (art. 1722 ff. Italian CC juncto art. 78 Legge falimmentare, applicable by analogy44; Ley 559 Fuero Nuevo de Navarra and art. 1732 Spanish CC). Accordingly, the m.p.c. shall be extinguished by revocation, waiver, death, incapacity or by reason of the insolvency of the mandator or the mandatory.
1. Revocation by the mandator
The mandator has the right to extinguish unilaterally the contract of m.p.c. if his confidence in the mandatory has deteriorated in any way. The right of the mandator to revoke his m.p.c. is expressly established in art. 1958 Italian CC. The nature of the contract justifies this provision, since the mandator is the person assuming the risk of the contract. Furthermore this contract is based on a relationship of trust between the parties. However, the wording of art. 1958 Italian CC contradicts the general rule on revocation of a mandate given in the interest of the mandatory or the third party (art. 1723 par. 2 CC). This suggests that the m.p.c. is constituted as a mandate given for the interest of the mandator himselt45 and therefore art. 1723 to art. 1726 CC shall not be applied to this contract.
Revocation must take place before the credit has been effectively granted (on application of the general contractual rules, art. 1373 CC)46. If only a part of the mandate has already been fulfilled, there may possibly be a revocation of the rest.
In Navarra and the rest of Spain the right of revocation is established within the rules on the mandate (Ley 559 of the Fuero Nuevo de Navarra and art. 1733 to art. 1735 Spanish CC as well as 279 Spanish Comm.C), applicable hereto47• It can be express or tacit if the behaviour of the man-
43See infra Chapter 3, A., IX., 2. Waiver by the mandatory, 200.
44Giusti, 312.
45See Giusti, 309.
46Giusti, 309; Fernandez/Nieto/Bonet, 843. Contra: Sesta/Cendon, 1769.
47Robles, 541 ff.
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dator is absolutely incompatible with the subsistence of the mandate (for example, when the mandator gives the same order to a new mandatory)48 .
The possibility to revoke the mandate is one of the features distinguishing the m.p.c. from the guarantee for future debts. If the mandator revokes his mandate, he will have to indemnify the mandatory for the damages caused (general damage and lost of profit) (art. 1958 par. 2 in fine Italian CC).
The right of revocation is not mandatory. However, the parties to the mandate may contractually stipulate that the m.p.c. will be irrevocable. Spanish case law has established implied irrevocability of the mandate not being based on a personal trustworthy relationship but existing as a consequence of another contract49•
2. Waiver by the mandatory
In Italy, the regulation on the m.p.c. does not explicitly establish the right of the mandatory to waive this contract. However this has generally been held to be a valid legal right by academic theorists in Italy, Navarra and the rest of Spain50•
Some Italian authors justify the approval of this cause of extinction through art. 1256 par. 2 Italian CC (extinction of the obligation if its performance has become impossible for a cause not imputable to the debtor). The waiver would only take place if the patrimonial difficulties are not limited to short-term financial difficulties, the appraisal of this situation depending on the circumstances of the case. At a first stage, the contract might be suspended; i.e. it is not extinguished but only left without effect until the situation becomes clear51 . However in the case of the mandate, the obligation of granting credit does not become impossible only because
48Art. 1735 Spanish CC; Farre, 1752.
49STS 27 October 1989 [RA 1989 no. 6964] and STS 11 May 1993 [RA 1993 no. 3538]: ,,La irrevocabilidad del mandato deviene no solo cuando exista pacto expreso que asi lo establezca siempre que tal pacto sea conforme a su finalidad y no este en contradiccion con la moral en cuanto es una manifestacion de la renuncia de derechos,
sino tambien cuando el mandato no es simple expresion de confianza o del simple interes del mandato, sino que responde a exigencias de cumplimiento de otro contrato en el que estan interesados, no solo el mandante o representado, sino tambien el mandatario y terceras personas; es decir cuando el mandato es en definitiva mero instrumento formal en relacion juridica bilateral y plurilateral que le sirve de causa o razon de ser y cuya ejecucion o cumplimiento exige y aconseja la irrevocabiidad para evitar la frustraci6n del fin perseguido por dicho contrato subyacente por la voluntad de uno solo de los interesados". Contra: Farre, 1752.
50Simonetta, Il Mandato di Credito, 164; Giusti, 310; Arcos, 254; Fernandez/Nieto/ Bonet, 843.
51Ravazzoni, Le garanzie, 168.
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the mandator or/and the beneficiary suffer patrimonial difficulties. Accordingly, art. 1256 CC does not offer a genuinely acceptable legal way to allow the mandatory to waive the contract.
The respective regulations on mandate, applicable hereto, do contain a right for the mandatory to renounce the mandate (art. 1727 Italian CC and art. 1736 Spanish CC and also the Ley 559 par. 2 and 3 of the Fuero Nuevo de Navarra). According to these provisions, the mandatory shall compensate the mandator for damages caused by the waiver unless it is due to a fair cause. In the case of a m.p.c., if the patrimony of the beneficiary or the mandator has been so strongly reduced that it no longer suffices for paying or guaranteeing the credit, then there will be reason enough to waive the mandate without any need to indemnify.
3. Death
If either the mandator or the mandatory dies or is not able to perform the mandate, the contract is extinguished. This results from the rules covering the extinction of the mandate (Ley 559 Fuero Nuevo de Navarra52, art. 1722 juncto art. 1728 Italian CC and art. 1732 Spanish CC). The actual effects of the death of one of the parties depend on the moment at which it occurs.
a) Death before the performance ofthe mandate
If any of the parties die before the mandatory has granted credit, the m.p.c. shall be automatically extinguished. The heirs of the decedent do not have any rights vis-a-vis the surviving party except for the costs of the activity already accomplished and any damages caused before the extinction had taken place. As the credit has not been granted, these costs and damages will be almost irrelevant. Moreover, the damages derived from the extinction of the m.p.c. itself are not included, as art. 1720 Italian CC and 1729 Spanish CC as well as the Ley 559 Fuero Nuevo de Navarra all serve to limit the answerability for the damages to those which are actually sustained in the execution of the mandate. Therefore the mandatory is not entitled to ask the heirs for lost profits caused by the non-performance of the mandate.
b) Death after the performance ofthe mandate
If the credit has already been granted, the general rules on succession apply and the heirs succeed the decedent in all rights and obligations.
52 The mandate post-mortem, specifically regulated by the Ley 559 par. 1 in fine, remains excluded.
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If the mandator dies, the mandatory loses the guarantee for the credit granted, which was one of the main reasons to accept the mandate. The heirs shall be answerable vis-a-vis the mandatory for the damages or losses that the diligent performance of the mandate might cause. Also if the mandatory decides to break the credit relationship with the third party by reason of the mandator's death, the heirs will also be liable for the losses53 .
If the mandatory dies, the obligation to perform cannot be transmitted to his heirs . The latter cannot be compelled to accept the mandate and the mandator cannot accept them as mandatories, since the m.p.c. is a contract which is very much based on personal reliance. The contract of m.p.c. is therefore usually extinguished and the costs and damages to which it has given origin shall be paid off. Yet the rights already acquired by the mandatory for the partial or total performance of the mandate shall be transmitted to his heirs. So the credit that had been granted by the decedent mandatory must be repaid to his heirs.
4. Supervening incapacity
Art. 1722 juncto 1728 Italian CC and art. 1732 Spanish CC54 consider the incapacity of the mandator or the mandatory as a justified cause of extinction of the contract. Art. 1732 Spanish CC also includes the declaration of prodigality as a cause of extinction. The legal reasoning is the same as in the general supervening incapacity; the person is not trustworthy enough to perform the mandate as agreed.
5. Insolvency
Art. 1722 Italian CC juncto art. 78 Legge Falimmentare, as well as art. 1732 Spanish CC include the insolvency of mandator or mandatory as a cause of extinction of the mandate. These rules do not specify if the insolvency must be legally declared or if a de facto insolvency shall be enough to extinguish the mandate. According to the legal reasoning of this provision i.e. mutual personal confidence, a factual insolvency will generally be considered to be enough55 to sanction extinction.
6. Exception in case ofenterprises
According to art. 1722 par. 3 in fine Italian CC 4 'a mandate concerning the completion of transactions connected with the operation of an enterprise is
53Arcos, 248 ff.
54As ammended by the Ley Organica 1/1996, de 15 de enero.
55 Gordillo, 1582.
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not extinguished if such operation continues, subject to the right of the parties or of their heirs to withdraw from the mandate".
X Function ofthe m.p. c.
There are plenty of commercial situations in which a person is interested in the ability of another to obtain credit. He might intend to become a partner in a profitable business or to win customers by enabling them to obtain the essential funds through a credit. The m.p.c. to a third party offers an adequate legal instrument for these instances. The businessman requiring a credit institution to grant credit to one of his future partners/customers is thereby also assuming the guarantee for it. A similar case takes place when a holding requires a bank to provide credit to one of the companies under its control. Another example is an architect who administrates the finances of a construction in progress and requires the supplier to deliver materials on credit. Thus he also assumes thereby the guarantee for the payment of the goods56.
A m.p.c. offers a useful and functional legal solution in normal commercial practice. The development of business traffic and the world of finance has not made this instrument obsolete. Yet it is almost unused in practice as a legal way to obtain credit. This is partly due to the broad use of the guarantee for future obligation or letters of comfort, especially in cases where the m.p.c. could also quite properly be used.
It seems that the scope of application of the m.p.c. may be restricted in practice to minor financing contracts. An example of this could be the situation in which parents order a bank to open an account for their minor
son, whilst declaring that the latter will operate within a maximum amount57.
XI. Similar security rights to the m.p.c.
1. The m.p.c. and the letter ofcomfort
The letter of comfort58 operates to facilitate the granting of a personal security. The issuer of the letter promotes and enables the grant of credit to the third party (the subsidiary) by issuing a letter of comfort which provides the creditor with a certain level of security. The creditor's protection upon default of the debtor depends on the terms in which such letter is drafted. Generally, letters of comfort are divided in so called "strong" and "weak" letters of comfort. The wording used in the letter is key to identify
56OLG Frankfurt, NJW 1967, 2361.
57Giusti, 298 f.
58See Sanchez Guilarte, 871 ff.