учебный год 2023 / Drobnig, Personal Security

Chapter 4: Special Rules for Personal Security of Consumers

as well (cf. Andrews and Millett no. 17-003), see however national notes on Art. 1:101 no. 65).

10.In GERMANY first demand securities may be assumed by consumers if two restrictions are respected: First, securities on first demand provided in standard conditions are binding only upon persons that are familiar with this kind of security so that consumers are excluded (cf. BGH 5 July 1990, NJW-RR 1990, 1265; BGH 2 April 1998, NJW 1998, 2280, 2281; BGH 8 March 2001, BGHZ 147, 99 for dependent and Staudinger/Horn nos. 232 and 25 preceding §§ 765 ss. for independent securities). Second, if a first demand security is individually negotiated, the creditor is obliged to inform the provider of security about the special risks linked to this type of security if the security provider is obviously without experience in this matter. If these restrictions are not respected, the security provider is only liable as if it had assumed a dependent security (for dependent securities cf. BGH 2 April 1998, NJW 1998, 2280, 2281; M4nchKomm/Habersack § 765 no. 100; Palandt/Sprau no. 14 preceding § 765).

11.In GREECE, the so-called “guarantee letters”, which are independent securities, are usually issued by credit and financing institutions. However, it is generally possible for

anyone to issue an independent security (Georgiades § 5 nos. 7 ss., § 6 no. 2 fn. 2, 3).

12.In ITALY, in the absence of a specific prohibition it is thought to be possible to create independent securities between private persons (De Nictolis 34 and 37). Since the ITALIAN Civil Code covers both civil and commercial law, there is no clear differentiating element between both kinds of contracts. The most important authors, however, underline the commercial character of the independent securities, as opposed to the civil character of the dependent security (Portale, Le garanzie bancarie 15).

(Dr. Poulsen/Hauck)

Article 4:107: Creditor’s Obligations of Annual Information

(1)Subject to the debtor’s consent, the creditor has to inform the security provider annually about the secured amounts of the principal obligation, interest and other ancillary obligations owed by the debtor on the date of the information. The debtor’s consent, once given, is irrevocable.

(2)Article 2:107 paragraphs (3) and (4) apply with appropriate adaptations.

Comments

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Article 4:107: Creditor’s Obligations of Annual Information

A.Basic Idea

1.For ordinary dependent security, Article 2:107 imposes upon the creditor a limited number of obligations to notify the security provider on certain important changes that affect the secured obligation. Apart from instances of non-performance or inability to pay, these required informations refer to major events affecting the extent of the secured obligation, such as an extension of maturity (Article 2:107 (1)) and major increases of the secured obligations under a global security (Article 2:107 (2)).

2.For personal security assumed by consumers it seems appropriate to extend the basic idea underlying Article 2:107 and to impose an annual information to be furnished to the consumer. Such annual information is apt to remind the consumer periodically of the potential risk which it had assumed which otherwise, especially in the case of long-term credits, might be forgotten. The obligation of annual information does not impose a major burden upon the creditor since business people usually strike such a balance for each account, often at the end of the calendar year or else at the end of the respective business year.

B.Debtor’s Consent

3.Contrary to Article 2:107, the annual information under Article 4:107 requires the debtor’s consent (para (1) sent. 1). This difference between the two rules is justified by the fact that the two most important items to be communicated under Article 2:107, i.e. the debtor’s non-performance or inability to pay, concern vital events with respect to the secured obligation; they may trigger the security provider’s duty to make payment to the creditor (cf. Article 2:106 (2) and (3)). Because of this importance for the security provider, these notifications must be communicated to the security provider even without the debtor’s agreement. By contrast, the periodical, annual information of the security provider refers to the amounts of principal obligation, interest and other ancillary obligations and therefore affects very sensitive data. This justifies it to require the debtor’s consent.

4.The second sentence of Article 4:107 (1) supplements the preceding sentence by providing that the debtor’s consent, once given, cannot be revoked by the debtor.

C.Scope of Items to be Disclosed

5.The text enumerates the principal obligation, interest and other ancillary obligations that have to be disclosed. It is the amount of each of these items that must be contained in the annual information. It is the sum total of these items that is relevant for the security provider in order to demonstrate its total potential indebtedness.

6.In order to be realistic, the figures to be given by the creditor must be as of the date of the information.

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D.Exception

7. By referring to Article 2:107 (3), an exception made by that provision is adopted and incorporated into Article 4:107. The annual information required by Article 4:107 (1) need not be given if and in so far as the security provider already knows that information. The exception also applies if the security provider can reasonably be expected to know that information. Both actual and constructive knowledge may, e.g., be held by a security provider who is the spouse of a director of the indebted company.

E.Sanction

8. Likewise, the cross-reference to Article 2:107 (4) incorporates into Article 4:107 the sanction which that provision establishes. For further details, cf. the Comments to Article 2:107.

F.Mandatory Rule

9. According to Article 4:102 (2), Article 4:107 may not be deviated from to the disadvantage of a security provider who is a consumer.

G.Application to Co-Debtorship for Security Purposes

10.The creditor’s duty to report annually on the amount of the debtor’s outstanding obligations applies correspondingly to a co-debtorship for security purposes. The creditor must inform the “security debtor” about the obligations of the “real debtor” to the creditor.

National Notes

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I. Generalia

1.In the member states, the legal basis for the security provider to obtain information about the secured obligation in the absence of any default of the debtor is sometimes not framed as a duty of the creditor to inform but rather as a duty of the creditor to answer questions (see infra sub no. 2). Throughout the following national notes – as regards the duty of information dealt with in this Article as opposed to the creditor’s duty of information in the case of a default by the debtor (cf. notes to Art. 2:107) – such a duty to answer questions is considered as being to a large degree functionally equivalent. The only difference is whether or not the security provider has to ask the creditor before the latter is bound to give information in regular intervals.

II. Duty to Inform the Security Provider without Default by Debtor

A.Legal Systems with such a Duty

2.In BELGIUM, the creditor has to inform the provider of security for a consumer credit – whether or not a consumer security provider – about respites of payment granted by the

creditor as well as of any amendment of the credit agreement (ConsCredA art. 35 sent. 2). In ENGLAND, the creditor is bound to answer questions of the security provider about the amount for which the security provider is liable under the security (O’Donovan and Phillips nos. 4-28, 11-06). The situation is similar in SCOTLAND (Royal Bank of Scotland v. Greenshields 1914 SC 259 (CA); Stair/Eden no. 898). Under ENGLISH law, the information to be given includes the amount of the secured debt (up to the maximum amount of the security) and any interest charged (O’Donovan and Phillips ibid.). In both ENGLAND and SCOTLAND, even more far-reaching information rights exist under the ConsCredA 1974 (secs. 107-109): here the creditor has to provide inter alia copies of the credit agreement and statements showing the total sums already paid by the debtor, payable at the time of the information or becoming payable under the credit agreement (Halsbury/Worsley, Rosenthal, Bourne and Riley-Smith para 202). In

FINLAND the security provider under a global guarantee must be informed by the creditor every six months about the amount of the debtor’s secured obligation (LDepGuar § 13 para 1). According to § 13 para 2 the liability of the security provider of a global guarantee can be reduced if the creditor neglects its duty of information (RP 189/ 1998 rd 49).

3.In FRANCE three distinct provisions exist, which provide for a duty of information towards the consumer security provider. Firstly, CC art. 2016 para 2 (since 2006: CC art. 2293 para 2) stipulates that information on the changes in the amount (any increase or decrease) of the secured debt including its ancillary obligations should be given to a consumer provider of dependent security at least once every year. Although the provision applies according to its wording only to indefinite dependent securities, the courts have extended it also to definite dependent securities (Cass.civ. 16 March 1999, D. 1999 I.R. 99). Secondly, according to the Consumer Code the provider of dependent security has to be given exact information about the amounts of principal and interest and not only about the changes in the amount of the debt (ConsC art. L 341-6 sent. 1 for all credit types). Finally the Madelin Act of 1994 requires the same information but only where a dependent security without a time limit is assumed by a natural person for the

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professional purposes of an individual entrepreneur (Art. 47 II para 2 of Madelin Act juncto MonC art. L 313-22). All these three information duties should have been replaced according to the Grimaldi Commission’s proposal by one provision to be located in the Civil Code (CC proposed new art. 2307 para 1), which would have been very similar to the present ConsC art. L 341-6; however, this proposal was not adopted by the legislator of 2006. In ITALY, the bank’s duty of annual notification to the client to provide it with complete and clear written information regarding the development of the relationship is applicable also to consumer security providers (DLgs no. 385 of 1 September 1993 on Banking Law art. 119; Petti 484).

B.Whether Duty Depends upon Security Provider being a Consumer

4.In ENGLAND, the general duty to answer questions as to the amount of the secured debt does not depend upon whether the security provider is a consumer; rather, this duty derives from a general duty of creditors to answer direct questions of security providers and, in answering these questions, to give information honestly and to the best of their ability (Hamilton v. Watson (1845) 8 ER 1339 (HL); O’Donovan and Phillips no. 4-27). The more far-reaching information duties of the ConsCredA 1974 secs. 107-109 apply only if the security is given in relation to a regulated agreement under this Act (cf. national notes Art. 1:101 no. 65) and if the security itself is also a non-commercial

agreement (ConsCredA 1974 secs. 107 para 5, 108 para 5, 109 para 4). In FRANCE it is irrelevant whether the secured debt is owed by a consumer or a professional, as long as the provider of dependent security is a consumer (cf. CC art. 2016 para 2 (since 2006: CC art. 2293 para 2) and ConsC art. L 341-6 sent. 1). Equally, the Grimaldi Commission had proposed to require regular information to every natural person, whether acting for private or for professional purposes (CC proposed new art. 2307 para 1); however, this proposal was not adopted by the legislator of 2006. In ITALY the bank’s duty of annual information to the client (supra no. 3) does not depend upon the qualification of the client as a consumer, for it is a general duty imposed upon banks in their relationship with all kinds of clients (Petti 484).

C.Periodicity of Duty to Inform

5.For ENGLISH law it is said that there is a general right to inquire periodically the amount of the secured debt (O’Donovan and Phillips nos. 4-28); however, there does not seem to be any case law as to the precise duration of the interval between such inquiries of the security provider. Requests for information according to the ConsCredA 1974 ss. 107-109 can only be made after one month has passed since the last information was given in relation to the same credit agreement (ConsCredA 1974 ss. 107 para 3, 108 para 3, 109 para 2). According to FINNISH LDepGuar § 13 para 1 the security provider under a global guarantee must be informed every six months. In FRANCE this information has to be given every year (cf. CC art. 2016 para 2 (since 2006: CC art. 2293 para 2; ConsC art. L 341-6 sent. 1, art. 47 II para 2 of the Madelin Act juncto MonC art. L 313-22) and in ITALY at least once a year (Banking Law art. 119, supra no. 3).

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Article 4:108: Limiting Security With Time Limit

D.Consent of Debtor

6.It seems that under ENGLISH law the creditor is bound to answer questions of the security provider as to the amount of the secured debt only if the debtor has given permission to do so (cf. O’Donovan and Phillips nos. 4-28; Andrews and Millett no. 5-026; Hapgood 712). The debtor’s consent implies the permission for the creditor to answer specific questions of the security provider; thus, the scope of the consent being limited in this way, it seems that the question of revocability of the debtor’s consent in relation to information to be given to the security provider does not arise.

E.Sanctions

7.In ENGLAND, a specific sanction exists for the failure to comply with the information requirements under the ConsCredA 1974: according to secs. 107 para 4, 108 para 4 and 109 para 3, the creditor is not entitled to enforce the security while the default continues (cf. O’Donovan and Phillips nos. 3-179; Andrews and Millett no. 17-008). Similarly in FRANCE, if the creditor does not give the required information, the consumer provider of dependent security is discharged from certain ancillary obligations, e.g. penalties or default interest, until the creditor makes its notification (ConsC arts. L 341-6 sent. 3 and MonC art. L 313-22 para 2). By contrast, in case of a global security, if the creditor omits or delays the required information, the consumer provider of dependent security is definitely released from any liability in relation to ancillary obligations (FRENCH CC art. 2016 para 2 (since 2006: CC art. 2293 para 2)). ITALIAN Banking Law art. 127 entrusts the Ufficio italiano cambi, a special body of the Bank of Italy, and the Minister of the Economy with the task of controlling banks’ compliance with those rules. Repeated violations of these rules may lead to suspension of the bank’s activities for no more than thirty days (art. 127 para 5).

III. No Duty to Inform the Security Provider without Default by Debtor

8.In some member states, however, there is no such duty of annual information as provided for in this Article or a corresponding duty to answer questions, cf. the national notes on Art. 2:107 concerning member states that do not impose any information duties on the creditor.

(Bo¨ger)

Article 4:108: Limiting Security With Time Limit

(1)A security provider who has provided a security with an agreed time limit may three years after the security became effective limit its effects by giving notice of at least three months time to the creditor. The preceding sentence does not apply if the security is restricted to cover specific obligations or obligations arising from specific contracts. The creditor has to inform the debtor immediately.

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(2)By virtue of the notice, the scope of the security is limited according to Article 2:109 paragraph (2).

Comments*

A. General Idea

1. Protection against unforeseeable liability. For providers of dependent or independent security – whether consumers or not – these Rules provide protection by Articles 2:109 and 3:106 (2), respectively, according to which contracts of dependent or independent personal security – with the exceptions mentioned in Articles 2:109 (1) sent. 2 and 3:106

(2) sent. 3 – must have either an agreed time limit or be subject to the possibility of a time limit to be set by any party. For the consumer security provider, however, also securities with an agreed time limit can be regarded as creating an intolerable level of risk: consumer security providers will typically lack business experience; if they assume a security which is agreed to cover unspecified future obligations of the debtor over a period of several years they might not be able to foresee the extent of obligations of the debtor which over the course of time could fall under this security. Article 4:108 provides additional protection for consumer security providers by allowing them to limit the duration of securities with an agreed time limit if these securities run over a period of three years or more.

B. Scope of Application

2. Securities with a time limit. Article 4:108 applies to securities with an agreed time limit only. This limitation may seem to be amazing since the need to limit a security obviously is more pressing if the parties had not agreed upon a time limit. However, this gap is easily explained by the fact that securities without an agreed time limit may be limited as a matter of general principles (cf. supra no. 1; note that Article 2:109 is applicable to consumer providers of an independent security and consumer security providers in a co-debtorship for security purposes as well, cf. Articles 4:106 (c) and 4:102 (1), respectively). Whether the agreed time limit in question constitutes a time limit for resort to a security within the meaning of Article 2:108 (cf. Comments on Article 2:108 nos. 7 ss.) is irrelevant for the application of Article 4:108 (for the effects of a limitation according to Article 4:108 in the case of an agreed time limit for resort to the security see infra no. 11).

*The Comments on Article 4:108 are by Ole Bçger, LL.M.

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3.Applicability to all types of security. As in general all provisions in Chapter 4, Article 4:108 is applicable regardless of the type of personal security assumed by the consumer security provider. The fact that in respect of the consequences of the limitation of a security by the consumer security provider, Article 4:108 refers to Article 2:109 in the Chapter on dependent security, does not, however, give rise to any difficulties since the provisions in Chapter 2 are applicable to consumer providers of an independent security and consumer security providers in a co-debtorship for security purposes already by virtue of Articles 4:106 (c) and 4:102 (1), respectively.

4.Excluded cases. According to para (1) sent. 2, the right to limit a security on the basis of Article 4:108 does not apply where the security is restricted to cover specific obligations or obligations arising from specific contracts. This exception, which resembles Article 2:109 (1) sent. 2, intends to protect the creditor who may have entered into the contract from which the secured obligations arise only on the strength of the security provided in relation to these obligations. Moreover, the risk of an unforeseeable extent of the consumer security provider’s liability appears to be less pressing in these situations as the reference to a specific obligation or a specific contract should make the potential scope of the security more easily determinable even for the consumer security provider. See also Comments on Article 2:109 nos. 9 s.

5.Scope of application limited by Articles 4:106 (a) juncto 2:102 (3). The scope of application of Article 4:108 is further in effect limited as a result of Article 4:106 (a) to securities with an agreed maximum amount. The right to limit the scope of a security is of interest especially in cases where the security is agreed to cover not only existing, but future obligations as well (cf. Comments on Article 2:108 no. 8). Should a security lack an agreed maximum amount, such a fixed amount will be determined on the basis of Articles 2:102 (3) (for dependent securities other than global securities) and Articles 4:106 (a) juncto 2:102 (3) (for all types of securities). Often in cases of securities covering also future obligations the amount of the secured obligations at the time the security becomes effective, i.e. normally at the time the security is assumed, will be very low or nil, so that a future limitation on the basis of Article 4:108 will not be of much interest for the security provider in these situations.

C. Limitation of Security by Consumer Security Provider

6.Limitation by security provider giving notice. The security may be limited by a simple declaration (cf. Comments on Article 2:109 no. 4); contrary to Article 2:109, only the security provider is entitled to limit the effects of the security according to Article 4:108.

7.Limitation after minimum period of three years. A security with an agreed time limit may only be limited by the security provider if at least three years have passed since the security became effective. It is assumed that even the consumer security provider should be able to foresee the risks to be incurred over such a period of limited time, so that the additional protection provided by Article 4:108 does not appear to be necessary in these cases.

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8. Period of notice. As in Article 2:109, the limitation of the security can become effective only after a period of notice of at least three months has expired. See Comments on Article 2:109 no. 5.

D. Effects of Limitation

9.Limitation of the scope of the security. For the limitation of the scope of the security, Article 4:108 (2) refers to Article 2:109 (2). For the effects of the limitation under this provision see Comments on Article 2:109 nos. 6 ss.

10.Creditor’s duty to inform the debtor. According to Article 4:108 (1) sent. 3, the creditor has to inform the debtor once it receives a notice of limitation of the security by the security provider. This provision is necessary because often not only the creditor, but also the debtor will have relied on the security running until its agreed time limit.

11.Limitation according to Article 4:108 and agreed time limit for resort to security. The limitation of the security by the security provider according to Article 4:108 does not in itself create a time limit for resort to the security within the meaning of Article 2:109 (see also Comments on Article 2:109 no. 8). However, should the parties have agreed on such a time limit for resort to the security, its effects will not be affected if the security provider limits the security according to Article 4:108. While the scope of the security will be limited according to Articles 4:108 (2) juncto 2:109 (2), the creditor will still be able to resort to this security until expiration of the original time limit agreed by the parties.

National Notes

I. Member States with Specific Rules on Limitation of Securities by Consumer Security Providers

1.The DUTCH regulation of time limits for consumer providers of security is quite elaborate. It is limited, though, to personal security for future obligations of the debtor (CC art. 7:861 para 1). Such a dependent security can be terminated at any time if no time limit had been agreed for it (lit. a); and after five years, if it had been agreed for a limited period (lit. b). In both cases, the security remains valid for obligations that had already arisen at the time of termination (para 2). These rules are mandatory in favour of consumers (CC art. 7:862 lit. a).

2.Under BELGIAN law personal securities for a credit without an agreed time limit assumed by security providers – without distinguishing between consumer and other security providers – are automatically limited to five years. This period of five years can

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be prolonged at the end of the period for another five years with the express consent of the consumer security provider (ConsCredA art. 34 para 3, as amended in 2003).

3.In FRANCE consumer security providers are not allowed to assume indefinite dependent personal securities; these must have a time limit but no maximum period has been fixed (for all credit types: ConsC art. L 341-7 and for consumer credit only: ConsC art. L 313-7).

II. Member States without Specific Rules on Limitation of Securities by Consumer Security Providers

4.Under ENGLISH, FINNISH and GERMAN law, the possibilities for security providers to limit the scope of personal securities as described in the national notes to Art. 2:109 follow from general principles (ENGLAND: general equitable rules, cf. O’Donovan and Phillips no. 9-43; FINLAND: LDepGuar § 19 para 2; RP 189/1998 rd 57; GERMANY: cf. national notes to Art. 2:109 nos. 6 s.). No special provisions do exist for the limitation of securities by consumer security providers. In ITALY, in the absence of an agreement of the parties to the contrary, as a general rule a security provider may limit its security at any time only if the latter was without time limit (Cass. 6 Aug. 1992 no. 9349, Giur.it 1993 I 1, 1255; Petti 154; see supra, national notes to Art. 2:109 no. 3), but also this is a general rule which applies independently from the qualification of the security provider as a consumer.

(Bo¨ger)

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