учебный год 2023 / Drobnig, Principles of European Law of Personal Security

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

7.However, in AUSTRIA an exception from the preceding rule is made if the security provider performs an independent security, although it knows or ought to know that the

creditor’s demand is unjustified or abusive. In this case, only the debtor is entitled to reclaim performance from the creditor (OGH 11 May 2005, BA 2005, 899, 902 and 23 June 2005, BA 2005, 902, 904). Also in FRANCE, the debtor is entitled to claim restitution of the performance in case of an unjustified demand (Simler no. 1002).

V. Bases of Security Provider’s Claim

A.Unjust Enrichment Including Undue Payment – cf. Para (2)

a.The Rule

8.In several countries, the security provider’s claim for restitution is based upon unjust enrichment (AUSTRIA: Avancini/Iro/Koziol no. 3/156; DENMARK: cf. also Vinding Kruse chap. 8 although there are no general rules on unjust enrichment; GERMANY: M4nchKomm/Habersack no. 20 preceding § 765; Hadding, Ha¨user and Welter 727 ss.; GREECE: Georgiades § 6 nos. 127 ss. and 144, § 11 no. 65; PORTUGAL: Pinheiro 455).

9.In BELGIUM, ITALY, the NETHERLANDS and SPAIN, the claim for recovery of the performance can only be based upon the more specific provisions on return of a payment

erroneously made but not owed (BELGIUM: CC arts. 1235 para 1 and 1376 ss.: Vliegen nos. 252-255; Dirix, Obligatoire 264 s.; ITALY: CC art. 2033; Rossetti 16; Cass. 6 Oct. 1989 n. 4006, Giust.civ. 1990 I 731; NETHERLANDS: CC art. 6:203 ss.; Pabbruwe, Bankgarantie 63 s.; Croiset van Uchelen 25, 27; SPANISH CC art. 1895-1901). Undue is a payment if the debt had already been fulfilled, or the debt had been discharged by set-off, or the person accepting the payment was in reality not the creditor, or the one paying (the solvens) was not the real debtor (cf. BELGIAN CC art. 1377; SPANISH CC art. 1901). It is not necessary that the solvens made a mistake; his fault does not impede a claim for repayment on the ground of undue payment. A mistake will only have to be proved if it is doubtful whether the payment was really undue: e.g. if the solvens knew that the money was not due but paid, it will have to be found out why the solvens really paid and whether the payment was really undue (Vliegen no. 252). The consequences of a claim founded on undue payment are stipulated by BELGIAN CC arts. 1377 to 1381, especially in art. 1378: “If there was bad faith on the part of the one who received, he is required to make restitution of the capital as well as interests or fruits from the day of payment”. Corresponding provisions are to be found in the NETHERLANDS (CC arts. 6:206, 3:121) and in SPAIN (CC art. 1896 para 1).

10.In ENGLISH law, the security provider’s claim against the creditor for recovery of money paid may be based upon a mistake of fact (cf. Edward Owen Engineering Ltd v. Barclays Bank International Ltd [1978] QB 159, 170 (CA); Bank Tejarat v. Hong Kong and Shanghai Banking Corporation [1995] 1 Lloyd’s Rep 239, 244 (CFI)). However, it is argued that a mistake of fact concerning the genuineness or conformity of the documents as a restitutionary basis for the recovery of money will only be available for a security provider against the creditor in cases involving fraud on the latter’s part or the tender of documents that are totally valueless. It is thought that the claim for recovery of money

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would amount to a rejection of documents which had already been accepted and that this as a matter of policy should be discouraged (cf. Goode, Commercial Law 998; Jack, Malek and Quest no. 5.81).

11.By contrast, in FRANCE, some authors consider that neither the case law rules on unjust

enrichment nor the rules on undue payment (cf. supra no. 9) may be applied (see Simler no. 1004; Malaurie and Ayn7s/Ayne`s and Crocq no. 346). The payment is not unjust because it is based on a (independent security) contract. But see infra no. 14.

b.Restrictions

12.If the security provider has satisfied the creditor fully knowing the lacking justification of the creditor’s demand, especially an abuse, a claim for unjust enrichment may be

excluded according to AUSTRIAN CC § 1432, GERMAN CC § 814 and GREEK CC art. 905 (AUSTRIA: OGH 23 June 2005, BA 2005, 902, 904; Avancini/Iro/Koziol no. 3/156; GERMANY: Staudinger/Horn nos. 349, 358 preceding §§ 765 ss.; Hadding, Ha¨user and Welter 727; GREECE: Georgiades § 6 no. 144 and § 11 no. 65 for letter of credit). Similarly, in ITALIAN law the right of restitution of the security provider is excluded if he knew or had evident proof of the abusive character of the demand (CFI Milano 13 Dec. 1990, BBTC 1991 II 588). In SPAIN it is said along the same lines that merely negligent ignorance of the creditor’s fraud, due to negligent checking of the tendered documents, does not bar the security provider’s right to restitution from the creditor (Sa´nchez-Calero, El contrato aut+nomo 403). By contrast, in PORTUGAL the decisive element is the security provider’s intention to perform, his knowledge of the lack of justification of the creditor’s demand being irrelevant (Pires de Lima and Antunes Varela 464).

B.Breach of Contract

13.Damages may also be claimed for the creditor’s breach of contract (GERMANY: Horn, FS Brandner 630). Also in ENGLISH law, there is some discussion whether a creditor presenting non-conforming documents is liable for damages for breach of an implied warranty that the documents are genuine and that there is no latent non-conformity with the terms of the security (cf. Goode, Commercial Law 998; for the contrary view see

Jack, Malek and Quest no. 5.81).

C.Tort

14.Additionally, GERMAN CC § 826 and GREEK CC art. 919 allow the provider of independent security in some cases of abusive demand the right to claim damages for immoral, wilful and malicious injury (GERMANY: Staudinger/Horn no. 358 preceding §§ 765 ss.; GREECE: Georgiades § 6 no. 144). Also in FRANCE such a claim is considered, especially in cases of manifest abuse (cf. Simler no. 1004); of course the creditor’s fault has to be proved (see CA Paris 14 March 1988, D. 1989, Somm.Comm. 152).

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VI. Cross-Reference

15.On restitution after assignment of the independent security, cf. national notes on Art. 3:107 no. 13.

(Seidel/Hauck)

Article 3:106: Security With or Without Time Limits

(1)If a time limit has been agreed, directly or indirectly, for resort to a security, the security provider exceptionally remains liable even after expiration of the time limit, provided the creditor had demanded performance according to Articles 3:102 paragraph (1) or 3:103 at a time when it was entitled to and before expiration of the time limit for the security. Article 2:108 paragraph (3) applies with appropriate adaptations. The security provider’s maximum liability is restricted to the amount which the creditor could have demanded as of the date when the time limit expired.

(2)Where a security does not have an agreed time limit, the security provider may set such a time limit by giving notice of at least three months to the other party. The security provider’s liability is restricted to the amount which the creditor could have demanded as of the date set by the security provider. The preceding sentences do not apply if the security is given for specific purposes.

Comments*

A.General Remarks

1. General idea. Within this Part, it is intended that dependent and independent personal securities should follow substantially identical rules as regards the question of agreed time limits and their legal consequences. This approach is in line with the position under international regulations, which at least in relation to matters of time limits for resort to a security subject independent securities to rules similar to the one contained in Article 2:108 of these Rules for dependent securities (cf. UCP 500 (1993) art. 42, UN Convention on Independent Guarantees of 1995 art. 11 (1) (d) juncto art. 12 (a)).

2. Content of the rule. Paragraph (1) covers independent securities with an agreed time limit for resort to security, while para (2) deals with the possibility of the security

*The Comments on Article 3:106 are by Ole Bçger, LL.M.

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provider to limit its liability in cases where the security is given without a time limit. In both paragraphs the rules are drafted in a way closely resembling the provisions of Articles 2:108 and 2:109, respectively. However, minor differences stem from the independent nature of the personal securities covered by this Chapter.

B.Security with Time Limit for Resort to Security – Para (1)

3.Scope. An independent security can be subject to different types of time limits. Some time limits relate to the point of time at which the conditions for liability under the security, if any, must be fulfilled. A time limit for resort to security as covered by para (1), however, exists where the parties have agreed that the security provider ceases to be liable after a certain point of time. This will typically be the case where the parties have used formulas such as “This security expires August 31” or “The security provider is liable under this security only until August 31”. Cf. also Comments to Article 2:108 nos. 5 ss.

4.Consequences of expiration of time limit. As follows indirectly from para (1) sent. 1 (“the security provider exceptionally remains liable”), the general rule is that the security provider is no longer liable at all towards the creditor after expiration of the agreed time limit. The security provider remains liable after expiration of the agreed time limit only if the creditor had demanded performance at the proper time (see infra no. 5) and in a manner consistent with Articles 3:102 (1) or 3:103, respectively.

5.Time for demand for performance. Obviously, the demand for performance can have the effect of continuing the security provider’s liability only if it is made before expiration of the agreed time limit. Moreover, for reasons equivalent to those described supra in the Comments to Article 2:108 no. 15, the creditor generally must be entitled to performance at the time of the demand, i.e. the additional conditions for liability under the security, if any, must be fulfilled. In situations where these conditions are fulfilled only close to expiration of the agreed time limit, this rule could cause difficulties for the creditor; in order to solve this problem, Article 2:108 (3) is declared applicable with appropriate adaptations. Thus, where the aforementioned conditions (replacing in the context of independent securities the maturity of the secured obligations as referred to in the text of Article 2:108 (3)) are fulfilled at the moment of, or within fourteen days before, expiration of the time limit of the security, the demand for performance under the security may be made earlier than otherwise possible, but no more than fourteen days before expiration of the time limit.

6.Security provider’s maximum liability. Even if a demand for performance is made in accordance with the preceding requirements, the security provider’s maximum liability is limited to the amount which the creditor could have demanded under the security as of the date when the time limit expired. Subsequent developments cannot increase the security provider’s liability; from the agreed time limit itself also follows that the security provider is liable only if and in so far as the conditions for liability under the security are fulfilled until that time.

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C.Security without Time Limit – Para (2)

7.Scope. Paragraph (2) covers securities that do not have any time limit, i.e. neither a time limit for resort to security as covered by para (1) nor any other kind of restriction according to which the liability of the security provider effectively depends upon certain conditions being fulfilled before a certain time. Whether or not a security does have such a time limit, is a matter of construction of the parties’ agreement; some general guidelines for interpretation might be found in the Comments to Article 2:108 nos. 23 ss.

8.Possibility to set time limit. According to para (2) sent. 1, the provider of an independent security without a time limit may set such a limit by simple declaration with a notice period of at least three months. For the rationale behind this minimum period of notice, cf. Comments to Article 2:109 no. 5.

9.Effect of limitation. If the security provider sets a time limit according to para (2), its liability after expiration of this time limit is restricted to the amount which could have been demanded by the creditor at that point of time. In the exceptional case of a nonmonetary obligation of the security provider under the security, the extent of that obligation at the moment of expiration of the time limit set by the security provider is decisive. In any case, the security provider is only liable if and in so far as any conditions for liability under the security are fulfilled when the time limit expires. The limitation by the security provider does not, however, give rise to a time limit for resort to the security.

10.Exceptions. Paragraph (2) does not apply if the security is given for specific purposes. Similar to Article 2:109, the possibility to limit a security under Article 3:106 (2) is therefore of importance predominantly in situations where the security is assumed in order to secure the creditor against risks that are not exactly specified, resembling a global security, e.g. where the security provider undertakes to secure the payment of all demands that the creditor may make against the debtor arising from their business relationship. As under Article 2:109, no recourse to the general principle in PECL Article 6:109 is possible where the special exception in Article 3:106 (2) sent. 3 applies (cf. Comments to Article 2:109 no. 9).

National Notes

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Article 3:106: Security With or Without Time Limits

I. Independent Securities with a Time Limit for Resort to Security

1.In international commercial practice only rarely independent personal securities are issued without agreed time limits. Often also the meaning of these time limits will be spelt out in detail in the parties’ agreement. In the absence of such an agreement, it is a very debated question in the member states especially in relation to time limits for resort to the security whether the equivalent rules on time limits for dependent personal securities are applicable.

2.Most member states seem to embrace the general idea of these Rules by applying substantially identical rules with respect to time limits for resort to security in relation to both dependent and independent security. In a few states, this result is achieved by extending the rules on time limits for dependent securities to independent securities as well (infra nos. 3 and 4); others apply identical principles of general contract law concerning this issue in both types of securities (infra nos. 5 and 6). Some member states, however, expressly rule out the applicability of these rules and developed rules specific to independent securities (infra nos. 7 ss.).

A.Application of Identical Rules for Dependent and Independent Security

a.Recourse to Rules on Time Limits for Dependent Security

3.According to GREEK court practice, CC art. 866 on the time limit for resort to dependent securities applies to independent securities (A.P. (Plenum) 10/1992, NoB 41, 70 ss.); however, it constitutes jus dispositivum (A.P. 133/1956, NoB 4, 617-618). On the other hand, some writers deny its application to independent securities (Gouskou 90 ss.; Psychomanis, NoB 42, 1619 ss.).

4.Some ITALIAN authors think that the rules on the dependent security with a time limit for resort to the security (CC art. 1957) also apply to the independent security (Bianca 520; critical Portale, Fideiussione 1070 s.); according to CC art. 1957 para 1, the provider

of a security with time limit remains liable six months after the secured obligation has fallen due, provided that the creditor within six months commenced and diligently pursued its actions against the debtor. But this is not the majority’s view in doctrine and it is not shared by the majority of recent case law (see infra no. 11).

b.Application of General Contract Law Rules to Both Types of Personal Security

5.In BELGIUM and PORTUGAL, obligations from dependent as well as independent securities expire according to rules of general contract law. Obviously the termination of the main contract does not affect the existence of the independent security. But the issuer of a security does not have to respond to demands on the security after its expiration (BELGIUM: T’ Kint nos. 858-859; PORTUGAL: Castelo Branco 77; Pinheiro

449).

6.Also in SPANISH law, specific rules concerning the time limits for resort to dependent or independent securities do not exist. Therefore, rules of general civil law are applicable to both kinds of contracts. CC art. 1117 provides that “the condition that a certain event will occur within a given time shall extinguish the obligation after the passing of the time, or when it becomes certain that the event will not occur.” Therefore, the

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issuer of a security with a time limit should no longer be liable after expiration of the agreed time. Regarding specifically the contract of independent security, it has been doubted whether the extinction of the obligation should take place if no demand for performance is received or if terms and conditions of the security (the agreed event) do not occur within the time limit. This problem is solved in international practice by an explicit clause providing an express time limit for resort to the security, so that after expiration of such a time limit a call on the security is no more valid (Sa´nchez-Calero, El contrato aut+nomo 351).

B.Application of General Contract Law Rules to Independent Security

7.According to DANISH literature it is not possible to apply the rules on dependent securities generally to independent securities (Pedersen, Kaution 14). The meaning of a time limit in an independent security must be ascertained by interpretation (Ussing, Kaution chap. 37; Pedersen, Kaution 14 and Bankgarantier 138).

8Also in ENGLAND, it has been said to be rather doubtful in general whether independent personal securities with time limits follow identical rules as applicable to dependent securities (cf. City of London v. Reeve & Co Ltd [2000] C.P.Rep 73 (CFI)). However, the inclusion of a date of expiration is regarded as a vital statement in an independent security, especially in commercial practice (cf. Goode, Commercial Law 981); it is

thought to be generally accepted practice that a claim for payment under such a security has to be made before it expires (cf. Gorton, Independent Guarantees 250).

9.The analogous application of the rules on dependent securities is also excluded in FRANCE (Simler nos. 951 ss.). Because of its autonomous character, the duration of the independent security does not depend on the terms of the underlying obligation. Contrary to the dependent security, the expiry of the independent security discharges entirely the provider of independent security from its obligation (Simler nos. 952 and 955). Beyond these two basic assertions, rules of general civil law are applicable to the contract of independent security (Simler no. 953).

10.In GERMANY independent securities are in general limited in time by the parties (Staudinger/Horn no. 205 preceding §§ 765 ss.; Canaris, Bankvertragsrecht no. 1126; Graf von Westphalen 50, 113). If an express agreement is missing, a limitation may be derived from other contractual stipulations by interpretation as well as from the circumstances (Staudinger/Horn no. 207 preceding §§ 765 ss.). Whether the demand has to be made or the secured event has to occur before expiration of the agreed time depends on the stipulation of the parties (Canaris, Bankvertragsrecht no. 1126). The corresponding rule for dependent securities in GERMAN CC § 777 is not applicable, so that after expiration of an agreed time the provider of independent security may refuse payment (GERMAN CC §§ 163, 158 para 2; Staudinger/Horn no. 205 preceding §§ 765 ss.; cf. also Hadding, Ha¨user and Welter no. 712; in favour of the application of § 777 M4nchKomm/Habersack no. 19 preceding § 765); consequently, an additional period as according to § 777 para 1 sent. 2 is not available, unless the contract has to be interpreted otherwise (cf. Staudinger/Horn no. 206 preceding §§ 765 ss.).

11.In ITALY the majority of recent court decisions (Cass. 21 April 1999 no. 3964, RN 1999 1271; Cass. 1 June 2004 no. 10486, Assicurazioni 2005 177; Cass. 31 July 2002 no. 11368, BBTC 2003 II 245; CFI Milano 2 July 2004, BBTC 2004 II 620) and writers regard the statutory provision of CC art. 1957 para 1 on time limits for dependent personal security

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to be inapplicable to independent security (contra Bianca 520; cp. also Portale, Fideiussione 1070 s.). However, opinions widely diverge as to the alternative solution of the issue. The Supreme Court refers to the interpretation of the contract of security to find out whether the parties wanted or did not want the application of CC art. 1957 to independent security. The opinions of legal writers are quite diverse: According to one opinion based on CC art. 1340, an independent security is subject to a general implicit time limit to be derived from commercial customs; if there is no commercial custom, the time limit shall be derived from the nature of the contract according to CC art. 1374 (Mastropaolo 227). Another opinion considers that, unless a time limit has been agreed by the parties, according to CC art. 1183 no. 1 the judge must fix a reasonable one, which could be a six months period, according to art. 4 of the Uniform Rules for Contract Guarantees of 1978 (Bonelli, Le garanzie bancarie 61).

II. Independent Securities without a Time Limit

12.In BELGIUM as well as in FRANCE, independent securities without time limits can be terminated by one of the parties after giving notice (BELGIUM: Vliegen 202; contra

T’Kint no. 859; FRANCE: Simler no. 952). Without special contractual stipulation, unlimited contracts of independent security may in GERMANY not be terminated in general (Staudinger/Horn no. 209 preceding §§ 765 ss.; Hadding, Ha¨user and Welter 713; Canaris, Bankvertragsrecht no. 1155). But since securities are long-term relations (Dauerschuldverha¨ltnisse, cf. Hadding, Ha¨user and Welter 713; contra: Canaris, Bankvertragsrecht no. 1133a at p. 772), they must be terminable to re-establish freedom from contract at least under special circumstances: If a security has been assumed for a long period of time or even without any time limit, it may be terminated if there is exceptionally a grave reason. Furthermore, the contract of security may be open to the interpretation that it impliedly contains a right of termination. In both these cases any termination may only be effective ex nunc (Hadding, Ha¨user and Welter 713; cf. Staudinger/Horn no. 209 preceding §§ 765 ss.). In PORTUGAL the rules for dependent securities are applicable to independent securities without a time limit in respect of an eventual release according to CC art. 648 lit. e) (Pinheiro 450).

(Dr. Poulsen)

Article 3:107: Transfer of Security

The creditor’s right to demand performance from a security provider can be assigned, except in the case of an independent personal security on first demand.

Comments

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A.The Issues

1. One must distinguish between two closely related issues, i.e. the transfer of the proceeds of a security by contractual assignment, on the one hand (infra no. 2) and the transfer by contractual assignment of the creditor’s right to demand performance, on the other hand (infra no. 3 ss.).

B.Transferability of Proceeds

2. The transferability or assignability of the proceeds which result from the performance of the independent security upon the creditor’s demand, is everywhere affirmed (cf. UN Convention on Independent Guarantees of 1995 art. 10). This is in line with the principle of free disposition. On this, therefore, no rule is needed. The consequences of an assignment are governed by PECL Chapter 11.

C.Transferability of the Demand for Performance

3.Article 3:107 deals only with the second issue which in part is quite controversial and therefore requires regulation.

4.Many international instruments prohibit transfer of the creditor’s right to demand performance, unless otherwise agreed by the parties (UN Convention on Independent Guarantees of 1995 art. 9; UCP 500 (1993) art. 48; ICC Rules for Demand Guarantees art. 4; ISP98 rule 6.01 lit. a.). The reason for this deviation from the general principle that one can freely dispose of rights is the fear that a new creditor as transferee of an independent security may abuse the right to demand performance. However, as a general assumption that fear appears to be unfounded. Moreover, to exclude transferability of the right to demand performance practically would prevent the assignee of the claim for proceeds from making use of the assigned right to the proceeds.

5.It goes without saying that the parties may guard against the fear of abuse of the security by agreeing that the right to demand performance is to be not transferable (cf. UCP 500 (1993) art. 48 and ICC Rules for Demand Guarantees art. 4). In the present Rules such a clause is authorized by Article 1:103.

6.The more risky type of an independent security, the security on first demand, is declared to be non-transferable by Article 3:107. This exception is justified by the fact that an independent security on first demand is a rather risky instrument because the security provider may not even invoke its personal defences and exceptions (cf. Article 3:103 (3)). Article 3:107 therefore seeks to strike an adequate balance between the general principle that, as a rule, everybody can freely dispose of its rights, on the one hand, and means of defence against potential risks of abuse, on the other hand. However, the parties may deviate from this rule and allow assignment (cf. Article 1:103).

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7.Finally, it is necessary to distinguish between straight and qualified demands for performance. A straight demand is one where the creditor merely needs to put forward its demand, without additional declarations or documents. The assignment of such a straight demand is risky since the assignee merely has to submit the agreed demand for performance. In these cases the debtor and the security provider may wish to protect themselves against abuse of the security by an unknown third person by excluding assignability of the security (supra no. 5).

8.The risks of a straight demand for security are avoided or, at least, considerably mitigated, if the independent security is qualified beyond a simple demand for performance. This is achieved if the parties agree that the demand as such must be accompanied by additional documents or declarations which would show that the substantive conditions for invoking the demand are present. The creditor as the direct partner of the debtor in the underlying transaction would be best qualified to produce the agreed-upon documents required by the independent security; by contrast, an assignee of the claim for the proceeds usually will be a stranger to the underlying transaction. The optimal way out of this dilemma would be if the assignee of the proceeds would cooperate with the assignor and require the latter to furnish in case of need the required documents which according to the terms of the security must be produced. In other words, this problem cannot be solved by a general rule, but must be left to the provident agreement between the assignee and the assignor.

9.The problem of realising after an assignment a qualified demand for performance will, of course, be avoided if the assignor does not only assign its claim for proceeds but transfers also the claims arising from the underlying transaction.

National Notes

D.Additional Requirements . . . . nos. 8-10

E.Consequences of an Effective Assignment . . . . . . . . . . . . . . . . . . nos. 11-13

1.In most member states the contractual transfer of a security is a very controversial issue. The following national notes deal with its several aspects: first, the assignment of the proceeds (infra I); then, the assignment of the security right (infra II); thereafter, with the assignment of the secured obligation (infra III); and finally, with the combined assignment of the security right and of the secured obligation (infra IV).

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