учебный год 2023 / Drobnig, Personal Security

Chapter 3: Independent Personal Security (Indemnities/Independent Guarantees)

ITALY it is acknowledged that independent personal security contracts always contain a reference to the underlying obligation (Bonelli, Le garanzie bancarie 52 ss.) and that a contract term reducing the security to the amount of the secured obligation does not per se impair the independence of the security (CA Milano 15 Oct. 1999, Contratti 2000, 468). According to an eminent GERMAN author (Canaris, Bankvertragsrecht no. 1137) reducing clauses (Reduzierungsklauseln) have to be admitted as part of the personal security contract and may be raised as defences (inhaltliche Einwendung), although independent personal securities with reducing clauses apparently function like dependent personal securities on first demand (cf. Hadding 704, Staudinger/Horn no. 240 preceding

§§ 765).

15.Also in other countries a general reference to the underlying relationship between creditor and debtor is held not to destroy the independent character of the personal security (AUSTRIA: OGH 9 Nov. 1993, SZ 66 no. 140 p. 328, and 2 Dec. 1975, SZ 48 no. 130 p. 661; Avancini/Iro/Koziol no. 3/6; BELGIUM: Romain 444-447; ITALY: Cass. 3 Feb. 1999 no. 917, Giust.civ.Mass. 1999, 245; Mastropaolo 140 s.; PORTUGAL: CA Lisboa 18 Oct. 1988, CJ XIII, IV-129). In ENGLAND, although the obligation has no reference in law to the debt of another (Yeoman Credit Ltd v. Latter [1961] 1 WLR 828 at 830-831 (CA)), most indemnities contain references to the underlying transaction.

V. Types of Secured Obligations

16.All types of obligation may be secured by an independent personal security. Hence, also claims for reimbursement that a (primary) security provider may acquire against the debtor under a primary security may be secured by a so-called counter security. In

BELGIUM (Delierneux 21-27), GREECE (Georgiades § 6 nos. 168 ss.), ENGLAND (Goode, Commercial Law 1020), DENMARK (known as re-garanti: Pedersen, Bankgarantier 17), FRANCE (Simler no. 914) and PORTUGAL (Almeida Costa and Pinto Monteiro 25) counter-securities are well known and frequently – mostly in an international context – used. The same is true in SPANISH and ITALIAN law (SPAIN: Sa´nchezCalero, El contrato aut+nomo 63, 64; ITALY: Mastropaolo 145, 318 ss.; Cass. 17 May 2001 no. 6757, Giust.civ.Mass. 2001, 989). The GERMAN Supreme Court had recently to deal with a type of counter security and had no doubt concerning its general validity (BGH 10 Oct. 2000, BGHZ 145, 286).

VI. Letters of Credit and Stand-by Letters of Credit

A.Letters of Credit

17.Views on the relationship between independent personal securities and letters of credit are to some degree influenced by the differing sources from which the rules governing personal securities have developed. Where, as in most member states, the relevant rules have been developed from the traditional rules on dependent personal securities, the differences from letters of credit tend to be emphasized. Admittedly, a common denominator is the independence of both types of instruments from any underlying transaction (AUSTRIA: Avancini/Iro/Koziol II no. 3/46 and Avancini/Iro/Koziol II no. 4/15; BELGIUM: Byttebier 56; Van Lier, JT 1980 no. 24; Van Quickenborne no. 904; GERMANY:

Zahn, Eberding and Ehrlich no. 9/15; ITALY: Pontiroli, Il credito documentario 233; CA

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Milano 14 Jan. 2004, BBTC 2005 II 419; FRANCE: cf. exceptionally Ripert and Roblot no. 2385; NETHERLANDS: Dutch Business Law § 6.05 [4] [a]; Croiset van Uchelen 13; PORTUGAL: STJ 17 April 1970, 63029, BolMinJus no. 196, 275; Cortez 566-567; SPAIN: Marimo´n Dura´, Planteamiento 389 ss., 397 ss.).

18.The major difference, however, are the different purposes: The letter of credit is a technique of payment, while the personal security has a security function (AUSTRIA:

Koziol, supra; ENGLAND: Goode, Commercial Law 1017 s.; FRANCE: Ripert and Roblot no. 2384; GERMANY: Zahn, Eberding and Ehrlich no. 9/14; ITALY: Pontiroli, Il credito documentario 12; NETHERLANDS: Boll 88; Mijnssen 20; PORTUGAL: Galva˜o Telles

284; even though a letter of credit may constitute a firm personal security cf. STJ 17 April 1997, CJ(ST) V, II-53; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 109 ss.). AUSTRIAN writers emphasize that the different functions imply also some different rules: The letter of credit obligation is primary, while that of the personal security is subsidiary to non-performance of the secured obligation or non-occurrence of the secured event (Koziol, supra, no. 3/47; Avancini, supra, no. 4/15).

19.However, one AUSTRIAN banking expert, while acknowledging the aforementioned legal differences, underlines that these are marginal from an economic point of view; in letter of credit transactions, whose purpose is not payment, even the legal difference disappears completely (Avancini, supra, no. 17, no. 4/15), e.g. where the letter of credit is intended to secure that another bank accepts or negotiates a bill of exchange drawn by the buyer (Avancini, supra, no. 17, no. 4/91, 4/93).

20.DUTCH and ITALIAN writers base the strong resemblance between independent personal securities and letters of credit also on the fact that historically the rules on those personal securities were developed by the courts by using the regime of letters of credit as a model (NETHERLANDS: Dutch Business Law § 6.05 [4] [a]; Mijnssen 21; ITALY: CC art. 1530 para 2; Portale, Fideiussione 1062 ss.).

21.BELGIAN and ITALIAN legal scholars, besides pointing to the close relationship between letters of credit and independent personal securities, emphasize the differences, which are seen in the different purposes (payment v. security), the documentary character of letters of credit (BELGIUM: Bertrams 57; ITALY: Pontiroli, Il credito documentario 78) and the fact that letters of credit may only be issued by professional credit institutions (BELGIUM: Van Lier no. 2.4). However, the rules on documentary credits are generally used to solve problems resulting from the lack of rules for the independent personal security (ITALY: De Nictolis 43).

22.In ENGLAND letters of credit are rather distinct from personal securities (see national notes on Art. 1:102 sub II B), dependent or independent. They originated in international trade and mainly operate as a payment technique (Todd 6-18), while independent personal securities have evolved in a purely domestic environment and serve a security purpose. It is, however, admitted that letters of credit resemble performance bonds and demand personal securities, which are clearly based on personal securities (Goode, Commercial Law 1017).

B. Stand-by Letters of Credit

23.See national notes on Art. 1:102 sub II B.

(Bisping/Dr. Fiorentini)

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Article 3:102: Security Provider’s Obligations Before Performance

(1)The security provider is obliged to perform only if the written demand for performance complies exactly with the terms set out in the security.

(2)Immediately upon receipt of a demand for performance, the security provider must inform the debtor that the demand has been received.

(3)Unless otherwise agreed, the security provider may invoke defences to which it is entitled as against the creditor.

(4)The security provider must without delay and at the latest within seven working days of receipt of a written demand for performance

(a)perform in accordance with the demand and immediately inform the debtor; or

(b)refuse to perform and immediately inform the creditor and the debtor.

(5)The security provider is liable for any damage caused by failure to perform the obligations set out in paragraphs (2) and (4).

A.Introductory

1. Article 3:102 lays down the requirements for a demand for performance (infra B) and most of the reasons which the security provider may invoke against such a demand and the procedures which it must observe in this respect. The security provider must examine the creditor’s demand for performance (infra C) or a demand to extend the security or pay (infra D). The security provider has to inform the debtor of the creditor’s demand(s) (infra E) and it may raise personal objections and defences which it has against the creditor (infra F). In case of performance of a demand as well as in case of a refusal to honour the creditor’s demand, the security provider has to inform the debtor; in the case of a refusal to perform, also the creditor must be informed (infra G). Finally, the remedies for omissions of the security provider are considered (infra H).

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B.Requirements for Creditor’s Demand

2.The creditor’s demand for performance must be in writing. This requirement has been established for the sake of legal certainty and because of the high sums of money that are usually involved. The writing must specify the contract of security to which it relates and the amount of money or the quantity and kind of other performance which is demanded. The term “writing” covers “communications made by telegram, telex, telefax and electronic mail and other means of communication capable of providing a readable record of the statement on both sides.” (cf. PECL Article 1:301 (b); Directive on e- Commerce 2000/31/EC of 8 June 2000 Article 9 (1)).

3.The creditor’s demand must comply with all the terms and conditions laid down in the security for it to become due. One may distinguish between simple and documented demands. A simple demand is one which merely contains a demand for payment of a definite sum of money or an equivalent act, without requiring further written support. By contrast, a so-called documentary demand is one where the demand for payment must be supported by documents, the type and contents of which must strictly comply with the requirements fixed by the security. The UCP 500 (1993) devote almost 20 elaborate provisions to general prescriptions concerning the minimum requirements as to form and substance of various types of documents which the beneficiary typically may have to present for a demand under a letter of credit (articles 20-38) and the ISP98 contain over

20such provisions (rules 4.01-4.21).

C.Examination of Creditor’s Demand

4.The security provider is obliged to examine the creditor’s demand for performance. In the interest of the debtor of a possibly underlying obligation on whose instruction usually a security is being issued, the security provider is obliged to carefully investigate whether the creditor’s demand strictly satisfies all the terms and conditions of the security. Even if exceptionally the security provider was not instructed by another person, it is in the security provider’s own interest to undertake this examination in order to ensure that it does not pay without having ascertained that the conditions for its payment have been fulfilled. The security provider must also check whether any objections may have to be raised with respect to the validity of the security. Any violation of this duty tends to endanger the security provider’s claim for recourse against the debtor.

5.The security provider’s examination of the demand must take place within a reasonable period of time. Both the UCP 500 (1993) (art. 13 lit. b) and the ISP98 (rule 5.01

(a) (i)) as well as the UN Convention on Independent Guarantees (art. 16 (2)) fix a maximum of seven business days for the reasonable period, unless the parties have agreed otherwise. This maximum appears to be sensible also for Article 3:102 (1). Of course, the parties are free to fix a different time limit (cf. Article 1:103).

6.If the demand or any documents accompanying it do not fully comply with the terms and conditions of the security, the security provider is, vis- -vis the creditor, not obliged to perform. This rule implies that the security provider, in spite of doubts, may

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decide to perform. However, a security provider must take care not to violate its obligations as against the person who has instructed him. If time permits, the security provider should also inform the creditor and ask it to remedy any open point.

D.Creditor’s Demand “Extend or Pay”

7. Occasionally a creditor may set forth the alternative demand of “extend or pay”. This is to be understood as an offer to the security provider to extend the time limit for the guarantee or, if that offer is rejected, to perform the security. If the security provider accepts the requested extension of time, the demand for performance must be regarded as withdrawn. If the security provider does not accept the requested extension, it must examine the demand for performance according to the rules set out supra at C. In the same sense ISP98 rule 3.09.

E.Duty of Information towards Debtor

8. The second paragraph obliges the security provider to inform a debtor who has instructed him of any demand by a creditor and on whether or not it complies with the terms and conditions of the guarantee. The information is not only to be given in order to keep the debtor informed about the creditor’s demand from which other consequences may ensue in the relationship between the debtor and the creditor. A more direct purpose of the information is to prevent the risk of double payment by the debtor as well and provoke the debtor to bring to the attention of the security provider any possible objections or doubts concerning the creditor’s full compliance with the terms and conditions of the security. Also, the debtor may furnish objections which, exceptionally, may qualify the creditor’s demand as manifestly abusive under Article 3:104.

F.Security Provider’s Personal Objections and Defences

9.Apart from objections and defences relating to the validity of the security and as to full compliance with its terms and conditions (supra B and C), the security provider may also invoke objections and defences to which it is personally entitled as against the creditor. This covers also the security provider’s right to set-off a personal monetary claim against the creditor’s claim under the security (cf. UN Convention on Independent Guarantees art. 18).

10.Usually, these objections and defences may be rooted in earlier and different legal relationships between the security provider and the creditor. Consequently, it would be irreconcilable with the independence of the security if the security provider would invoke an objection or defence arising from a claim which another person, especially the debtor of an underlying relationship, had assigned to the security provider. It is equally inadmissible for the security provider to set-off with a claim which had been assigned to him by such a debtor. Invoking such defences or asserting such a set-off would run

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counter to the independent character of an independent security whose essence is the insulation from any underlying relationship between the creditor and a debtor.

11.The parties may expressly or impliedly exclude other personal objections as well. An exclusion may e.g. be implied if the security provider promises “unconditional” performance upon the creditor’s demand.

G.Duty of Information on Refusal of Performance

12.If the security provider’s examination of the creditor’s demand leads it to the conclusion that it must refuse performance of the demand, it must forthwith inform both the creditor and a debtor stating the reasons for refusal. This duty of information serves the purpose of clarifying the situation for the parties directly affected so that they are enabled to consider and prepare any steps which may be appropriate. For instance, the creditor, if time limits allow, may wish to remedy any defect of its demand pointed out by the security provider.

H.Remedies for Security Provider’s Omissions

13.The security provider’s obligation of careful examination of the creditor’s demand is not only meant to protect the security provider himself, but is also intended to protect the interests of a debtor because eventually the latter has to reimburse the security provider. The same is true for the obligation to inform a debtor under paras (2) and

(4). The general remedies for non-performance of these obligations are spelt out in PECL Chapters 8 and 9, especially in Chapter 9 Section 5.

14.The same is true if the security provider violates his obligation to inform the creditor under para (4).

I.Cross-References

15.Article 3:104 deals with manifestly abusive or fraudulent demands under an independent security. And Article 3:105 entitles the security provider to request under certain conditions return from the creditor of a performance demanded by, and performed to, it. For details, cf. the Comments to this provision.

National Notes

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I. Form of the Demand

1.The demand for performance is in all countries usually made in writing (AUSTRIA: Avancini/lro/Koziol no. 3/85; DENMARK: Pedersen, Bankgarantier 17; GREECE: Georgiades § 6 no. 115; ITALY: De Nictolis 101; NETHERLANDS: Boll 110; Mijnssen 44; PORTUGAL: Castelo Branco 78; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 349). For commercial personal securities this form is in GERMANY agreed to be a binding commercial usage (cf. Ccom § 346: Staudinger/Horn no. 233 preceding §§ 765 ss. for personal security on first demand). BELGIAN and SPANISH authors allow to present a demand orally; however, its evident difficulties of proof do not make it adequate for this contract, being never used in banking practice (De Marez no. 97; Sa´nchez-Calero, El contrato aut+nomo 350).

2.Demands transmitted by any telegraphic or electronic technique have been considered valid by BELGIAN, DUTCH, FRENCH, GERMAN and SPANISH authors (BELGIUM:

De Marez no. 59; FRANCE: Simler no. 962; GERMANY: Staudinger/Horn no. 233 preceding §§ 765 ss.; NETHERLANDS: Mijnssen 45; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 349; cf. Rivero 443) as well as by the GERMAN Federal Supreme Court (BGH 10 Oct. 2000, WM 2000, 2334, 2337).

3.By contrast, if the security provider had prescribed a specific formal requirement, this has to be observed strictly (AUSTRIA: an agreed “registered letter” cannot be replaced by a telex: OGH 24 March 1988, SZ 61 no. 79, p. 395; and a local authority’s letter with an official stamp cannot be replaced by a fax: OGH 5 Dec. 1995, SZ 68 no. 230, p. 749753; but some writers plead for more flexibility: e.g. Avancini/lro/Koziol no. 3/86). Also the DUTCH Supreme Court has insisted on strict observance of the agreed method of demand (a simple letter does not suffice if formal service had been agreed, HR 9 June 1995, NJB 1995 no. 639 at p. 3090).

II. Terms of the Demand

4.The legal systems of most member states have adopted the doctrine of strict compliance (garantieformalisme). It is the duty of the security provider to examine whether the demand and also the documents presented comply exactly with the terms and conditions agreed for the personal security (the AUSTRIAN OGH demands a “pedantical” examination, e.g. OGH 5 Dec. 1995, SZ 68 no. 230 p. 750, 751; BELGIUM: De Marez 1725; DENMARK: Pedersen, Bankgarantier 69; FRANCE: Deve`ze, Couret and Hirigoyen no. 3688; Cass.com. 21 June 1988, RD banc 1988, 204; GERMANY: M4nchKomm/

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Habersack no. 30 preceding § 765; BGH 10 Oct. 2000, WM 2000, 2334, 2336: “Garantiestrenge”; for documentary credits cf. Schu¨tze no. 380; ITALY: Bonelli, Le garanzie bancarie 81 ss.; PORTUGAL: Menezes Cordeiro, Direito 609; Galva˜o Telles 289; for documentary credits cf. Calva˜o da Silva 18; SPAIN: Sa´nchez-Calero, El contrato aut+- nomo 377). “There is no room for documents which are almost the same, or which will do just as well” (Equitable Trust Co of New York v. Dawson Partners Ltd [1927] 27 Lloyd’s List Law Rep 49 at 52 (HL)). Also purely terminological deviations may lead to refusal of the demand. In the ENGLISH case of J. H. Rayner & Co Ltd v. Hambros Bank Ltd

[1943] KB 37 (CA) documents evidencing shipment of “coromandel groundnuts” were required by the credit, but the documents delivered referred to “machine-shelled groundnut kernels”. In fact, these are synonyms, but the court held that it was impossible for a banker to know all the different trades he is dealing with. By contrast, the GERMAN Supreme Court and PORTUGUESE authors only require that the content of the creditor’s demand for payment has to correspond to the requirements that have been stipulated in the contract of personal security for the demand; but the wording must not be identical, unless otherwise agreed by the parties (GERMANY: BGH 10 Oct. 2000,

WM 2000, 2334, 2336; PORTUGAL: Pinheiro 449; Almeida Costa and Pinto Monteiro 29). Obvious typographical errors are generally disregarded by ENGLISH and FRENCH courts (ENGLAND: cf. Hing Yip Hing Fat Co Ltd v. Daiwa Bank [1991] 2 HKLR 35 (Supreme Court of Hong Kong); Goode, Commercial Law 977; FRANCE: CFI Paris 27 Sept. 1993, GazPal 1994, 2, Somm.Comm. 464).

5.By contrast, UCP 500 (1993) art. 39 contains a few rules on tolerances regarding strict compliance of the documents presented for the purpose of making a demand with the terms of the personal security, e.g. that a deviation of 5% in terms of quantity is permissible unless the contract otherwise states.

6.In AUSTRIA and the NETHERLANDS, the security provider is obliged to inform the creditor if the latter’s demand does not comply with the terms of the personal security and to invite the creditor to repair any deficiency, provided time permits to do so; violation of this duty of good faith exposes the security provider to a claim for damages (AUSTRIAN OGH 5 Dec. 1995, SZ 68 no. 230 p. 753 ss.; cf. also Avancini/lro/Koziol no. 3/89; DUTCH HR 9 June 1995, NJB 1995 no. 639 p. 3091; cf. also Dutch Business Law § 6.05 [4] [b]).

III. Time for Examination of the Demand

7.Unless expressly fixed by the parties, the time necessary for the security provider to examine the demand and the documents depend on the circumstances of each case. The criterion of “reasonable delay” sounds satisfactory but has been criticized in SPAIN as being vague (Sa´nchez-Calero, El contrato aut+nomo 378). In most countries, the “reasonable delay” is in practice thought to be a period between three and seven days after receipt of the demand. The UN-Convention on Independent Guarantees of 1995 art. 16

(2) allows “reasonable time, but not more than seven business days following the day of receipt of the demand ...”. In DENMARK, GREECE and SPAIN a period of one to three days as established by international banking practice is accepted (DENMARK: Pedersen, Bankgarantier 138 ss.; GREECE: Georgiades § 6 no. 117; Gouskou 136, 149; contra: CFI Athens 9790/1992, EED 43, 522; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 379). In BELGIUM, ENGLAND and GERMANY three (working) days are generally admitted,

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being extended to one week depending on the circumstances (BELGIUM: Schrans 1176;

De Marez no. 30; ENGLAND: Bankers Trust Co v. State of India [1991] 2 Lloyd’s Rep 443 (CA); GERMANY: Staudinger/Horn no. 235 preceding §§ 765 ss. for personal security on first demand; contra Zahn, Eberding and Ehrlich no. 9/113: one to two days; also UCP 500 (1993) art. 43(a)). In FRANCE the customary reasonable delay has been fixed in one case by an appellate court at five days (CA Paris 10 July 1986, D. 1987, Somm.- Comm. 217). In SWEDEN no concrete time limit has been defined (Dalman 202).

IV. Personal Securities with Time Limit and Creditor’s Demand ‘‘Extend or Pay’’

8.Personal securities very often are agreed with a time limit aiming at reducing its costs and risks for the security provider. When the time limit is about to expire, creditors often require the security provider to extend it or perform the personal security. This demand is called “extend or pay”. If the security provider does not extend, it is obliged to perform, of course only insofar as the demand is in full compliance with the formal requirements of the contract of personal security (BELGIUM: De Marez nos. 67-75; GERMANY: BGH 23 Jan. 1996, NJW 1996, 1052; ITALY: Viale 206 s.; SPAIN: Sa´n- chez-Calero, El contrato aut+nomo 333). In case of personal securities on first demand a demand “extend or pay” suffices to oblige the security provider to extend or to perform (BELGIUM: De Marez nos. 77, 93 and no. 103). In FRANCE the demand “extend or pay” is valid as a demand for payment without discretionary character (CA Paris 9 Jan. 1991,

RD banc 1991, 152; Simler no. 957; contra Deve`ze, Couret and Hirigoyen no. 3688). However, some other FRENCH courts consider the demand “extend or pay” as a non-serious demand (CA Paris 28 May 1985, D. 1986, I.R. 155) constitutive of abuse because the creditor seems to oblige the security provider to extend the personal security (Cass.com. 24 Jan. 1989, JCP G 1990, II no. 21425). In ITALY if the debtor does not approve the extension of the personal security, the security provider must perform, no other demand of payment being necessary. The request of extension is made by the creditor to the security provider, the latter being obliged to inform the debtor who is the only person entitled to decide whether or not to extend (Bozzi, Le garanzie 78). The issue of the abusive character of the “extend or pay” clause might arise depending on the circumstances of the case, e.g. if it is proved that the creditor seeks performance of the security only in order to exercise pressure and obtain an extension of the security (CFI Milano, 2 March 1994, Giur.it. 1995 I 308).

9.In ENGLAND in order to extend the personal security, the security provider must without delay inform the party who gave its instructions; it has to suspend payment for a period of time as long as is reasonable for the creditor and the debtor to agree on the extension (Goode, Commercial Law 1029). The silence of the security provider or its declaration to inform the debtor about the demand and to return to the subject later have in GERMANY been regarded as insufficient to extend (BGH 23 Jan. 1996, NJW 1996, 1052; Canaris, Bankvertragsrecht no. 1128).

10.Especially for the demand “extend or pay” it is of special importance whether the security provider is obliged to inform the creditor about any inaccuracy of the demand. While this issue is not finally settled by GERMAN courts, they seem to favour such a duty, at least if the creditor is obliged to present documents (BGH 23 Jan. 1996, NJW

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1996, 1052 referring to UCP 500 (1993) art. 14 d (i) concerning documentary credits; cf. also without this restriction CA Karlsruhe 21 July 1992, WM 1992, 2095 with further references).

V. Consequences of Non-Compliance with Demand

11.Any demand which does not exactly comply with the terms and conditions of the personal security is void. According to most laws, if the demand does not comply with the terms and conditions of the personal security, the security provider is not obliged vis- -vis the creditor to perform the personal security (BELGIUM: De Marez nos. 17-25;

DENMARK: Pedersen, Bankgarantier 69; ENGLAND: J.H. Rayner Co Ltd v. Hambros Bank Ltd [1943] KB 37 (CA); Goode, Commercial Law 974; GERMAN BGH 12 March 1996, NJW 1996, 1673; Staudinger/Horn no. 234 preceding §§ 765; GREECE: Georgiades § 6 no. 122; A.P. 342/1970, NoB 18, 1092; PORTUGAL: Castelo Branco 79; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 371 and 381; SWEDEN: Dalman 202). The FRENCH Supreme Court held that inconsistencies of the documents required to be presented which could only be clarified by reference to the underlying transaction entitle the bank to refuse performance of a stand-by letter credit (Cass.com. 28 March 2006, D. 2006, 1284). In FRANCE and ITALY the security provider is practically obliged to refuse performance (FRANCE: Simler no. 1003; ITALY: De Nictolis 102; CFI Bologna 27 Sep. 1984, BBTC 1986 II 339). According to the rules on agency, the negligence of the security provider in performing the duty of examination makes it liable against the debtor (ITALY: Bozzi, L’autonomia negoziale 248; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 381). In BELGIUM if the security provider violates his duty to examine, he may loose its recourse against the debtor or expose himself to counterclaims by the latter (De Marez no. 33).

VI. Security Provider’s Duty to Inform Debtor

12.In most member states the security provider is obliged to inform the debtor of the receipt of a demand for payment by the creditor, together with the required documents when so agreed, and after it has checked its compliance with the terms of the personal security (AUSTRIA: Avancini/lro/Koziol no. 3/57; BELGIUM: Bertrams 124-127; Poullet

149; Van Houtte 306; DENMARK: Pedersen, Bankgarantier 68; GREECE: Liakopoulos, NoB 35, 290; Loukopoulos 737; Georgiades § 6 no. 117; ITALY: Laudisa 17 s.; Mastropaolo 308; NETHERLANDS: Boll 118-119; PORTUGAL: Castelo Branco 78; SPAIN: Sa´nchezCalero, El contrato aut+nomo 365; SWEDEN: Walin, Borgen 177, contra Bergstro¨m 12). In GERMANY it is disputed whether the security provider is always obliged to inform the debtor of any demand (Staudinger/Horn no. 332 preceding §§ 765 ss.; cf. BGH 19 Sep. 1985, BGHZ 95, 375, 389 for dependent personal securities); or whether this obligation only exists in case the security provider decides to perform (Canaris, Bankvertragsrecht no. 1110; in general Graf von Westphalen 235 s.). According to FRENCH banking customs, it is usual to inform the debtor of the demand for performance by the creditor. Some FRENCH authors claim that the security provider has for practical reasons a duty to inform the debtor (Rives-Lange and Contamines-Raynaud no. 799; Gavalda and Stoufflet no. 18). But there is no legal obligation to do so if the relationship between

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