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

Chapter 4: Special Rules for Personal Security of Consumers

conditions and terms of contracts. However, the original of the signed document has to be handed to the creditor since a telefax is not considered as sufficient (GERMANY: BGH 28 Jan. 1993, BGHZ 121, 224; GREECE: Georgiades § 3 no. 59, contra Simantiras 14 and 20). Furthermore in GERMANY an electronic signature is not accepted for dependent securities (cf. CC § 766 sent. 2, as of 13 July 2001). If these requirements are not met, the declaration is void (expressly GREEK CC art. 849; in the result also AUSTRIA and GERMANY since the provisions cited above declare the required form to be a condition of validity). However, in all three countries the formal defect can be validated by the security provider’s performance of the security (AUSTRIA: Schwimann/Mader and Faber § 1346 no. 11; GERMAN CC § 766 sent. 3; GREEK CC art. 849 sent. 2).

2.Similarly, the ENGLISH Statute of Frauds 1677 sec. 4 requires that dependent securities, but not independent securities, generally are in writing and signed by the security provider or by another person that is authorised to do so. The fact that the creditor relied upon an oral security in extending credit to the debtor does not prevent the security provider from invoking the lack of form (Actionstrength Ltd v. International Glass Engineering [2003] 2 WLR 1060 (HL)). It is sufficient, however, that the offer of a dependent security by the security provider containing the essential terms of the security is made in written form; the acceptance might then be made orally (J Pereira Fernandes SA v. Mehta [2006] 1 WLR 1543 (CFI)). Moreover, for the purposes of the Statute of Frauds, an e-mail can suffice as written form; the automatic insertion of the sender’s e-mail address in the e-mail by the internet service provider can, however, not be regarded as a signature (cf. J Pereira Fernandes SA v. Mehta, supra). In ENGLAND and SCOTLAND, additional formal requirements follow from the ConsCredA 1974: according to sec. 105 para 1 “any security provided in relation to a regulated agreement shall be expressed in writing” and sec. 105 para 5 prescribes that a copy of the document has to be handed over to the consumer security provider. The Consumer Credit (Guarantees and Indemnities) Regulations 1983 contain further detailed provisions regarding the prescribed form and content of security instruments. Thus, the consumer’s signature has to be placed in a “signature box” at the end of the document, containing a prescribed warning and clearly distinguishable from the rest of the document (Consumer Credit (Guarantees and Indemnities) Regulations 1983 reg. 3 para 1 lit. d juncto Schedule Part IV). Further, the terms of the security have to be easily legible and of a colour which is readily distinguishable from the colour of the paper (Consumer Credit (Guarantees and Indemnities) Regulations 1983 reg. 4 para 1). By virtue of ConsCredA sec. 105 para 7 lit. b a security granted in contravention of the formal requirements is not enforceable against the security provider except if a court order to enforce it is granted (ConsCredA sec. 127). If such an order is dismissed, ConsCredA sec. 105 para 8 prescribes the application of sec. 106, and thus the security is “treated as never having effect”.

3.The situation is similar in IRELAND: also here the Statute of Frauds (Ireland) 1695 sec. 2 contains the general requirement for dependent securities, but not independent securities, to be in writing and signed (cf. Johnston 9.06 and 9.17); modern consumer protection legislation contains further formal requirements for securities in relation to consumer transactions (ConsCredA 1995 sec. 30).

4.According to the general rule on proof in FRENCH CC art. 1326 the secured amount must be indicated both in letters and in figures by the security provider as well as the type of liability – whether subsidiary or solidary. For unlimited securities, a maximum amount must be mentioned by the security provider (cf. Cass.civ. 22 Feb. 1984,

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JCP 1985, II no. 20442). These requirements were first considered by the Civil Chambers of the French Supreme Court as a condition of validity of the security by combining the general rule on proof in CC art. 1326 with art. 2015 (since 2006: CC art. 2292) which stipulates that a security cannot be presumed (Cass.civ. 30 June 1987, D. 1987, Somm.Comm. 442, note Ayne`s). But since 1989 (Cass.civ. 15 Nov. 1989, D. 1990, 177; Cass.civ. 25 May 2005, Bull.civ. 2005 I no. 228 p.193), the courts regard these writing requirements as a mere condition of proof; if it is not met, the security contract is considered as a mere beginning of proof (Cass.civ. 15 Oct. 1991, JCP G 1992 II 21923, note Simler) and other means of evidence such as witnesses are then admitted (Ferid and Sonnenberger 512). After adoption of rules on electronic communications and signatures of 13 March 2000, these indications are to be made in electronic form (cf. new version of CC art. 1326).

5.In addition to these general rules, there is specific legislation in FRANCE for securities assumed by consumers. According to the FRENCH ConsC (for all credit types: ConsC arts. L 341-2 to L 341-3, for consumer credit and home owner credit: ConsC arts. L 313-7 to L 313-8), the consumer security provider must write by hand an obligatory formula about the nature and the extent of its obligation, the name of the debtor as well as the type of liability – subsidiary or solidary. The validity of consumer securities depends upon the observance of this qualified written form. No confirmation of the irregular contract seems to be possible (CA Limoges 20 May 1997, CCC 1998 no. 12; contra Cass.civ. 28 Nov. 1995, JCP G 1997, I no. 3991, JCP G 1997 I no. 3991, note Simler and Delebecque). The admission of electronic signatures by the amended version of CC art. 1326 in 2000 has not changed the situation. Of course, these formal requirements do not apply where a more qualified form, especially a notarial instrument is used (expressly in case of subsidiary liability: ConsC arts. L 313-7 and L 341-2, a fortiori in case of solidary liability: cf. Cass.civ. 24 Feb. 2004, Bull.civ. 2004 I no. 60 p. 47). The Grimaldi Commission had proposed that protective rules on the form of the consumer security contract were not to be considered as conditions of validity but as mere conditions of proof (CC proposed new art. 2300). In fact, this is based upon the general rules on proof of the amended version of CC art. 1326 (cf. supra no. 4) and denies any special protection with respect to form; however, this proposal was not adopted by the legislator of 2006.

6.Under BELGIAN and LUXEMBOURGIAN law contracts of security may only be proved if the requirements of CC art. 1326 are met. Otherwise the security contract may serve as a beginning of proof, as now in FRANCE (cf. supra no. 4; BELGIUM: Van Quickenborne nos. 292-311; LUXEMBOURG: Cass. Luxembourg 23 March 1989, Pas luxemb XXVII (1987-1989) Jur. 323). In addition, in BELGIUM specific protective legislation exists for providers of personal security securing a consumer credit – without distinguishing between consumer and other security providers: BELGIAN ConsCredA art. 34 para 1 requires to indicate in the security contract the secured amount, which may, however, be increased to cover default interest, but does not cover any penalty or damages caused by non-performance (ConsCredA art. 34 para 1, as amended in 2003). In order to facilitate this, the creditor must hand gratuitously a copy of the credit contract to the potential security provider.

7.Similarly according to DUTCH CC art. 7:859 the dependent security of a consumer can in general only be proved against the security provider by a writing signed by the latter. But the dependent security can be proved by all means of evidence if it has been

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established that the security provider has performed it at least in part. In addition, DUTCH CC art. 7:859 (3) extends the preceding two rules to the form of a consumer’s agreement to assume a dependent personal security.

8.According to PORTUGUESE CC art. 628 para 1 the dependent security must be assumed in the form required for the secured obligation. If there is no formal requirement for the latter, the same is true for the security, the principle of the freedom from form applying. Even if the parties decide to adopt a stricter form than is legally prescribed, the security provider is not obliged to do the same (STJ 14 June 1972, BolMinJus no. 218, 222; Vaz Serra, note STJ 14. 6. 1972).

b.Exceptions

9.In some exceptional cases the security provider may be precluded from invoking a lack of form if that would infringe the principle of good faith (AUSTRIA: Schwimann/Mader and Faber § 1346 no. 11; GERMANY: BGH 28 Jan. 1993, BGHZ 121, 224; GREECE:

Georgiades § 3 no. 66).

10.AUSTRIAN and GERMAN Ccom § 350 state that dependent securities assumed by merchants are valid without observing the form of AUSTRIAN CC § 1346 para 2 or GERMAN CC § 766, respectively; however, as of 2007, the AUSTRIAN exception for merchants will be abrogated (Law amending commercial law of 27 Oct. 2005 art. I no. 133; however, by a subsequent amendment of the Banking Law the exceptional freedom from form in CC § 1346 (2) has been reintroduced for “liabilities assumed by banks in their course of business” cf. Banking Law § 1 para 6). The GREEK Draft of a Commercial Code contains a similar provision in art. 274. It has to be noticed that GERMAN courts do not apply Ccom § 350 to dependent securities assumed by managers, managing directors or shareholders for obligations of their company (BGH 29 Feb. 1996, BGHZ 132, 119, 122; BGH 16 Dec. 1999, NJW 1999, 1179, 1180; critical M4nchKomm/K. Schmidt HGB § 1 no. 66 with further references).

11.Similarly in LUXEMBOURG the general rule on proof of CC art. 1326 (cf. supra no. 6) does not apply to dependent securities granted by merchants (LUXEMBOURG: CA Luxembourg 6 Oct. 1993, Pas luxemb XXIX (1993-1995) Jur. 279). The dependent security has a commercial character if the security provider has its own personal interest in the assumption of the security, even if the security provider is not a merchant (CA Luxembourg 26 June 1985, Pas luxemb XXVI (1984-86) Jur. 352). Such personal interest exists when the manager or the shareholder may by virtue of their shareholding exercise major influence upon the debtor company (CA Luxembourg 20 June 2002, BankFin 2003, 297). A direct or indirect participation in the management of the debtor’s affairs is not necessary if any other patrimonial interest of the security provider can be found (CA Luxembourg 22 April 1992 no. 13246 unpublished).

12.In FRANCE, formerly special provisions (Ccom art. L 110-3) and the courts (Cass.com. 2 Oct. 1985, Bull.civ. 1985 IV no. 227 p. 190 for managers and CA Paris 20 Jan. 1999, JCP E 1999 Pan. no. 394 for major shareholders) had carved out exceptions from the general rule of CC art. 1326 (cf. supra no. 4). However, a Law of 1 Aug. 2003 has narrowed these exceptions by subjecting small and family enterprises which assume a dependent security to the rules for consumer security providers (cf. ConsC arts. L 341-2 and L 341-3, cf. supra no. 5; Tricot-Chamard JCP G 2004 I, no. 112, p. 334). The Grimaldi Commission had proposed to return to the solution prevailing before that Law (CC

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proposed new art. 2300), i.e. no form requirement and freedom of proof for security with a commercial character; however, this proposal was not adopted by the legislator of 2006.

B.No Form Required

13.In DENMARK, FINLAND and SWEDEN no particular form is required under the general rule for contracts of dependent securities. According to DANISH and SWEDISH literature a security can even arise by silence and inactivity (DENMARK: Ekstro¨m 32; Andersen, Clausen, Edlund a.o./Pedersen 435 s.; Pedersen, Kaution 18; Bryde Andersen 425; Højrup 16 s.; Jespersen 21; SWEDEN: Walin, Borgen 36 ss.). According to the SWEDISH Supreme Court case HD 6 May 1961, NJA 1961, 315 silence can create an obligation of a security provider only where the inactivity shows a clear indication of the intention to be bound as security provider. However, in DENMARK and FINLAND contracts on dependent securities are normally made in writing (DENMARK: Pedersen, Kaution 18; Andersen, Clausen, Edlund a.o./Pedersen 435; FINLAND: Ekstro¨m 32). The DANISH Law on Financial Business § 48 para 5 requires the written form for a contract on dependent security when the security provider assumes a dependent security in favour of a financial institution as creditor (Pedersen, Kaution 19).

14.The general provision of ITALIAN CC art. 1937 requires only the express will of the security provider for the valid creation of a personal security. No form is required, but the will of the security provider must be clearly established. The meaning of “express” will is not always certain. Gestures and other kinds of traditional communication have been understood as ways of express manifestation. Since CC art. 1937 does not require a specific means of proof for the contract of security, any legal means of proof are admitted (Cass. 26 June 1979 no. 4961, Giur.it. 1980 I 1545; Giusti 93) and even the presumption (Cass. 14 July 1936 no. 2485, Foro it. 1937 I 38; Cass. 17 Oct. 1992 no. 11413, Giur.it. 1994 I 1649 ss.; Giusti 93). However, the general provision of the Civil Code must be read in connection with the special rules on banking contracts, which do apply to personal security and require a written document as well as the handing out of a copy to the client (DLgs no. 385/1993, art. 117) for the valid formation of a contract (art. 117 para 3). Moreover, specific contract terms favouring the party who supplied them require a specific approval in writing by the other party, according to CC arts. 1341-1342. Besides that, whenever consumer protection law applies (cf. national notes to Art. 4:101 no. 10) provisions on abusive clauses apply (ConsC arts. 33-38) requiring that some clauses listed in the law and producing a disadvantageous effect for the consumer are valid only if individually negotiated; of course, this rule may in the end result in a requirement of written form for that clause or even in an individual approval of them in writing by the consumer.

15.SPANISH CC art. 1827 para 1 only requires the express constitution of the contract of security, it does not require a special form. The contract does not have to be in writing or in any other prescribed form, only the will of the dependent security provider must be clearly established (Guilarte Zapatero, Comentarios 123 ss.). Nevertheless, business practice requires a writing for reasons of proof and security. Since SPANISH CC art. 1827 does not establish a specific way of proof for the contract of security, any legal means of proof are admitted.

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16.Exceptionally and amazingly, in SPAIN a written form is required for commercial securities (Ccom art. 440). A simple letter of the security provider is enough to fulfil this requirement. This provision has been considered as unjustified (Carrasco Perera a.o. 77). However, the provision lacks practical importance, since securities use to be created in writing. Only one decision of the SPANISH Supreme Court (TS 17 Dec. 1996, RAJ 1996 no. 9002) has declared void a commercial security because of lack of form. However, no writing is required for extensions of the time limit of a security (TS 8 Oct. 1986, RAJ 1986 no. 5333) and this might be extended to any declaration of the security provider except the creation of the security (Carrasco Perera a.o. 77).

II. Independent Securities

17.In AUSTRIA for independent securities of non-merchants the same form as for dependent guarantees (cf. supra no. 1) is required. In 1992, the Supreme Court extended that statutory rule to independent securities since these are even more risky for the security provider than a dependent security (OGH 14 July 1992, SZ 65 no. 109 p. 69-73); this is now standing practice of the courts (OGH 14 July 1994, SZ 67 no. 128 p. 56).

18.In FRANCE, no special form is required for independent securities but the rules on proof (CC art. 1326 ss., cf. supra no. 4) apply if the security provider is not a merchant but a consumer (Simler nos. 931 ss.). Therefore in FRENCH banking practice the contract of independent security is in writing. The same applies to BELGIUM and LUXEMBOURG (cf. supra no. 6). It has to be noticed though that what was said about the BELGIAN ConsCredA (cf. supra no. 6) also applies to independent securities (ConsCredA art. 34 para 1). Also in the NETHERLANDS, the general rules on dependent securities of consumers apply to independent securities assumed by consumers (CC art. 7:863 juncto art. 7:859).

19.The GERMAN and GREEK Civil Codes do not contain any formal requirement for independent securities and, although the matter is disputed, courts do not apply the above mentioned rules of GERMAN CC § 766, GREEK art. 849, respectively, by analogy (Staudinger/Horn no. 223 preceding §§ 765 ss.; Georgiades § 6 no. 48). Under ENGLISH law the general rule under the Statute of Frauds 1677 sec. 4 that a security is only enforceable if it is in writing is not applicable to indemnities because they are primary undertakings by the security provider (Andrews and Millett no. 1-013). However, the formal requirements under modern consumer protection legislation as described above (supra no. 2) also apply to independent securities. Also in DENMARK independent securities are mostly drawn up as written documents. However, it is also possible to hand over an independent security by telex or electronic data transfer (Pedersen, Bankgarantier 77).

III. Co-Debtorship for Security Purposes

20.The AUSTRIAN, GERMAN and GREEK Civil Codes do not contain any formal requirement for assuming a co-debtorship in general or a co-debtorship for security purposes in particular and the courts do not apply the above mentioned rules of AUSTRIAN, GERMAN and GREEK law (supra no. 1) by analogy (AUSTRIA: OGH 4 Feb. 1992, JBl 1993, 657, 658; OGH 4 Oct. 1989, SZ 62 II no. 160 p. 159; OGH 19 July 1988, SZ 61 II no. 174 p. 42; GERMANY: Palandt/Heinrichs no. 3 preceding § 414 with further

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references; GREECE: A.P. 934/1992, EEN 60, 656; Georgiades § 7 no. 13). However, among writers the latter issue is quite controversial (cf. especially in AUSTRIA Bydlinski 27, 29, 30 with references; for GERMANY: M4nchKomm/Mo¨schel no. 13 preceding

§ 414; Harke, ZBB 2004, 147 ss.).

21.In FRANCE, BELGIUM and LUXEMBOURG, if the debtor is a consumer the assumption of debt is an obligation to pay and the general rules on proof (CC art. 1326) apply (cf. supra nos. 4 and 6). Since it is a primary undertaking, an assumption of debt for security purposes under ENGLISH law does not require written form (cf. O’Donovan and Phillips no. 3-16). For the purposes of the ConsCredA, however, the above mentioned formalities (supra no. 2) have to be observed.

IV. Binding Comfort Letters

22.Binding comfort letters are not subject to any formal requirement. However, insofar as the binding comfort letter contains an obligation to pay and the issuer of the letter is a consumer, in FRANCE, BELGIUM and LUXEMBOURG the general rules on proof (CC art. 1326) apply (cf. supra nos. 4 and 6; FRANCE: Simler no. 1019).

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Article 4:106: Nature of Security Provider’s Liability

Where this Chapter applies:

(a)an agreement purporting to create a security without a maximum amount, whether a global security (Article 1:101 lit. (f)) or not, is considered as creating a dependent security with a fixed amount to be determined according to Article 2:102 paragraph (3);

(b)the liability of a provider of dependent security is subsidiary within the meaning of Article 2:106, unless expressly agreed otherwise; and

(c)an agreement purporting to create an independent security is considered as creating a dependent security, provided the requirements of the latter are met.

Comments

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A.General Remarks

1.Article 4:106 specifically addresses three clauses often utilised in personal securities and adapts these in the interest of protecting the consumer security provider. The remedy of adaptation is being used in order to balance the opposite interests of the parties: that of the creditor in maintaining a security agreed upon and the security provider’s interest in being protected against harsh contract clauses.

2.Article 4:106 is mandatory in favour of the consumer with the exception indicated in lit. (b).

B.Security without a Maximum Amount

3.Letter (a) affects a security which does not contain a maximum amount. It is obvious that such a security is particularly risky for the security provider since it does not definitely know the upper limit of its future obligation.

4.Article 4:106 does not nullify such agreements but maintains them, although with a limitation. The unlimited security is converted into a limited security with a fixed amount. This amount is to be determined according to Article 2:102 (3). This rule provides, in essence, that, unless a maximum amount can be determined from the agreement of the parties, the amount of the security is limited to the amount of the secured obligation at the time the security became effective. For details, cf. Article 2:102 (3) and Comments on Article 2:102 nos. 8 s.

C.Subsidiary Liability

5.Letter (b) reverts the general rule on which Articles 2:105 and 2:106 are based: A provider of dependent security is solidarily liable with the debtor of the secured claim, unless subsidiary liability had been agreed upon. The consumer security provider is better protected by the contrary rule: its liability is subsidiary, unless solidary liability has been agreed. The consequences and limits of this subsidiary liability are laid down in Article 2:107 and need not be repeated here.

6.A higher degree of protection for the consumer security provider could, of course, be achieved if any contractual derogation from the basic subsidiary liability would be prohibited. That, however, would go clearly beyond the state of the law in most member states. Nor do there seem to exist practical needs or demands for change. Also in practice, creditors usually turn first against the debtor before considering steps against a security provider.

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D.No Independent Security

7.According to lit. (c), an agreement for an independent personal security is converted to a dependent security. The reason for this automatic conversion is the increased risk which an independent security implies: Independence means that the accessority of the dependent security is excluded so that the security provider’s obligation may exceed the amount and other terms of the secured obligation, if any, and it may not invoke defences of the debtor (cf. Articles 1:101 (b), 3:102 (3) and 3:103 (3)).

8.In order to avoid complete nullity of a consumer’s independent security, lit. (c) provides for the conversion of the independent into a dependent security, provided the conditions of the latter are met. This last clause refers, in particular, to the substantive and formal conditions laid down in Chapters 1, 2 and 4. For instance, since according to the definition of a dependent security in Article 1:101 (a), a dependent security must purport to serve as security for an obligation of the debtor owed to the creditor, a pure payment guarantee without any underlying obligation to be secured could not be converted to a dependent security. This is confirmed by the contents of Chapter 2 on dependent personal security: the application of this Chapter presupposes that there is an obligation to be secured since this is the basis upon which the security “depends”.

9.It goes without saying, that, once the conditions of Chapter 4 are met, also the effects of the converted independent security are subject to Chapters 2 and 4.

E.Application to Co-Debtorship for Security Purposes

10.Only litt. (a) and (b) of Article 4:106 may be applicable to co-debtorships for security purpose. By contrast, lit. (c) deals specifically with independent personal security and therefore does not apply to co-debtorship for security purposes.

11.Article 4:106 (a) deals with a case which will rarely occur with a co-debtorship for security purposes, namely one without a maximum amount. In this rare case, the policy expressed in Article 2:102 (3) to which Article 4:106 (a) refers, must be adopted and slightly adapted: The security co-debtor’s obligation must be limited to the amount for which the primary full co-debtor was liable at the time when the secondary co-debtorship has been assumed.

12.According to Article 4:106 (b), a consumer security provider’s liability is subsidiary (cf. Article 2:106), unless the parties expressly had agreed otherwise. This provision will affect almost all cases of co-debtorship for security purposes, since normally these result in solidary liability (cf. supra Article 1:106 Comment nos. 2-3). In order to prosecute the policy of Article 4:106 (b), it will be necessary to distinguish: On the one hand, if the codebtors had simply agreed on creating a co-debtorhsip (which merely implies solidary liability), there is no “express” agreement on solidarity, as required by lit. (b); consequently, the co-debtor for security purposes will then only be charged with subsidiary liability. On the other hand, if they had expressly agreed upon solidary liability, this complies with the requirement of lit. (b).

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I. Limitation of Security without Maximum Amount – Lit. (a)

1.See supra national notes on Art. 1:101 nos. 42-46.

2.In BELGIUM generally, in contracts of personal security that secure consumer credits, the extent of the liability of the security provider – whether being a consumer or not – has to be limited to a specific amount, which may, however, be increased to cover default interest, but does not cover any penalty or damages caused by non-performance (ConsCredA art. 34 para 1, as amended in 2003). Also in the NETHERLANDS, a personal security provided by a consumer is only valid if a maximum amount has been fixed (CC art. 7:858 para 1); however, interest for the debtor’s delay in payment and the creditor’s costs of action against the debtor may under certain circumstances (cf. national notes on Art. 2:104 no. 16) be added to that maximum (CC art. 7:858 para 2). These provisions are mandatory in favour of a consumer security provider (CC art. 7:862 lit. (a)). According to the FRENCH ConsC (for all credit types: ConsC arts. L 341-2 to L 341-3, for consumer credit and home owner credit: ConsC arts. L 313-7 to L 313-8), the consumer security provider must write by hand the maximum amount (including interest, penalties and – according to case law (Cass.civ. 30 March 1994, Bull.civ. 1994 I no. 230 p. 163; RTD civ 1994, 903) – the percentage rate of charge); otherwise the security contract is void.

II. Subsidiary Liability of the Consumer Security Provider – Lit. (b)

A.Subsidiary Liability is Mandatory

3.In the NETHERLANDS the general rule that the consumer security provider’s liability is only subsidiary, is mandatory (CC art. 7:855 para 1 juncto art. 7:862 lit. a). The situation is similar in BELGIUM, but there is no distinction between consumer and other security providers. In addition the preconditions for the debtor’s default are increased: the creditor may only sue the security provider for a consumer credit if the debtor has defaulted at least on two payments or twenty percent of the total sum due or on the last due payment and if the debtor has not performed within one month after the creditor’s demand sent by registered letter (ConsCredA art. 36).

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B.Subsidiary Liability as the Non-Mandatory General Rule

4.In all other member states there are no special rules on the character of a consumer security provider’s liability. This means that the ordinary rules on a security provider’s liability apply, but these rules are not mandatory. A non-mandatory subsidiary liability of all providers of dependent security is the rule in almost all member countries (See supra national notes to Art. 2:106.).

5.In ENGLAND, IRELAND and SCOTLAND the security provider’s liability is solidary unless otherwise agreed (cf. national notes to Art. 2:105 no. 1). The situation is the same in ITALY (CC art. 1944 no. 1). Moreover, clauses establishing the beneficum excussionis (see supra national notes on Art. 2:106 nos. 9-10) in favour of the security provider – whether or not a consumer – are hardly ever negotiated in banking practice (Petti 297 ss.).

III. Independent Securities or Co-Debtorship Assumed by Consumers – Lit. (c)

6.Only the NETHERLANDS have a clear solution for the treatment of an independent security assumed by a consumer: All mandatory special provisions for a consumer’s dependent security also apply to a consumer’s independent personal security (CC art. 7: 863). However, in practice such security instruments by consumers do not seem to be used (Ensink 552).

7.In BELGIUM the Consumer Credit Act applies to dependent security and other personal security (ConsCredA arts. 34 ss.), including independent security. However, opinion among BELGIAN writers is split on whether an independent security may be assumed by consumers (pro: Vliegen no. 181; contra: T’ Kint 419 and Geortay 858, 862).

8.In FRANCE the recent Decree-Law no. 2006-346 of 23 March 2006 prohibits the assumption of an independent security for consumer debts (ConsC new art. L 313-10- 1, irrespective of whether the security provider is a consumer or not). It remains open whether professional debts can be secured by an independent security of a consumer. According to writers (Simler no. 920; Malaurie and Ayn7s/Ayne`s and Crocq no. 339) independent securities granted by a consumer are generally valid, based upon the freedom of contract. But the courts are very restrictive in admitting the validity of such a security and on the ground of consumer protection often annul it (mostly for deceit: CA Paris 16 April 1996, JCP G 1997, I no. 3991 (10) or for error: CA Paris 27 June 1990, JCP E 1991, I no. 119, note Hassler). Sometimes the courts convert a consumer’s independent security into a dependent security (CA Paris 26 Jan. 1993, D. 1993, I.R. 93) regardless of the intention of the parties. Similarly in a case of co-debtorship where a house-wife assumed a loan with which her husband as mere co-debtor financed its business, a firstinstance court requalified the loan as a dependent personal security (CFI Lons-le-Saul- nier 18 Nov. 1997, CCC April 1998 no. 64, note Raymond), to prevent the circumvention of the mandatory rules of the Consumer Code (Simler no. 28).

9.In ENGLAND, the question whether a personal security is a dependent or an independent security is to be decided on the basis of the general rules on interpretation (cf. Andrews and Millett no. 1-013); there is no general principle that an independent security can be assumed by non-consumers only (but cf. national notes on Art. 3:101 no. 3). The consumer protection legislation in the ConsCredA covers independent securities

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