The precise nature of the letter of patronage has been the
object of much debate in Italian legal writing. The debate has
ranged from considering letters of patronage mere declarations of
courtesy to looking at them, on the one hand, as binding guarantees
("fidejussioni") or, on the other hand, as an undertaking
to fulfil the obligations of a third party. It would, however, seem
that to-day there is a general consensus that, normally speaking,
the parties to such a letter intend to create legal relations
In addition to the "fidejussione" the kind of legal
relations which can be created by means of a letter of patronage
can be summarized as follows:
(i) Information, i.e. where the party issuing the letter informs
the bank that it holds a majority in the lender company, that it
approves the loan and that it will communicate variations in its
holding. It is generally considered that the failure to conform at
the terms of such letter exposes the issuer to the risk of extra
(ii) An undertaking in relation to the obligations of a third
party. This is taken to apply to those letters of patronage where
an undertaking is given to do everything possible to ensure that
the subsidiary will fulfill its obligations to the bank concerned.
This has been considered from time to time by the Courts either to
be an undertaking by the patronant to fulfil its own obligations
(i.e. to use its best efforts to the above purposes and not to
reach the result that the subsidiary pay its debt) and to be an
undertaking to fulfil the obligations of a third party (i.e. the
subsidiary). For this purpose Article 1381 of the Italian Civil
"A person which has warranted the obligations or action of
a third party is required to indemnify the other contracting party
if the third party refuses to be bound or does nor perform the
In the event of breach there is an obligation to pay
(iii) Atypical guarantee. This refers to a letter which contains
an explicit obligation to provide the means for the subsidiary to
satisfy its debts. It is considered that such letter gives rise to
a kind of guarantee and, although not a "fidejussione"
from the technical point of view, implies an obligation "to
give performance" rather than "to do something"
which is different from actual performance. Thus, in the event of
breach by the party guaranteed, the bank has a right to request
performance from the guarantor.
The above classification is certainly not defini¬tive and
various Court decisions have modified and commented upon the
various kind of letter of patronage. Thus, the information
obligations have to some extent been given, especially by
commentators, more of a contractual nature.
There is, however, a general view that, normally speaking, a
letter of patronage would not amount to a "fidejussione",
the only pure guarantee existing under Italian law. The contract of
"fidejussione" is a contract whereby the party giving the
"fidejussione" is obligated to give performance of the
obligations guaranteed if the beneficiary does not perform.
However, a "fidejussione" must satisfy certain
requirements of law which, generally speaking, are excluded in the
case of a letter of patronage. This is because:
"The intention to give a "fidejussione" must be
express and, although no particular formulas are required, such
intention must show itself in an unequivocable manner, in a way
which shows clearly the guarantee agreement."
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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