Mauritius: 5 Things To Know On Suretyship

Last Updated: 6 September 2016
Article by Iqbal Rajahbalee, Valerie Bisasur and Shane Mungur

In general terms, a suretyship is an agreement by which a person (Guarantor) undertakes to perform an underlying obligation if the principal debtor fails to do so. The principles and legal regime of suretyship in Mauritius are inspired from French law and are to be found under the Mauritian Civil Code.

Below are 5 things you should have in mind when thinking of suretyships under Mauritian laws:

  1. Nature of the obligation
    The suretyship is an accessory obligation and may only guarantee a valid underlying obligation without which the suretyship cannot exist. The suretyship is therefore an obligation to perform the underlying obligation (in full or in part up to a contractually set out limit) upon failure of the principal debtor.
  2. Conditions of the suretyship
    A suretyship may not be contracted for an amount in excess of that owed by the principal debtor or under more onerous conditions. However a suretyship which does not meet these conditions is not void; it is only reducible to the measure of the underlying obligation.
  3. Enforcement and recourse against the initial debtor
    If and when default of the initial debtor arises, the creditor may exercise his right to be paid under the suretyship subject to the rights of the Guarantor to claim back against the principal debtor.
  4. Rights of the Guarantor
    Upon default under the underlying obligation, the beneficiary can call on the Guarantor to perform its obligations under the suretyship after having exhausted its remedies against the principal debtor. The principle is known under Mauritian law as the "bénéfice de discussion". The "bénéfice de discussion" can be expressly waived. Where there are several Guarantors jointly liable for the same underlying obligation, the Guarantor may require the beneficiary to divide its recourse amongst the various Guarantors, this right known as ("bénéfice de division"), can be expressly waived, as well.

    A Guarantor who has performed the underlying obligation is entitled to be subrogated to the beneficiary's right in respect of the debt. The Guarantor can thus step into the shoes of the beneficiary and enforce the beneficiary's rights for its own benefit.
  5. Commercial suretyship
    Suretyships are subject to the Mauritian Civil Code but can, in some specific cases, qualify as commercial agreements and be subject to the certain provisions of the Mauritian Commercial Code. The Privy Council's judgement in Société Alleck & Cie1 perfectly illustrates the commercial qualification of a suretyship with 2 conditions based on French judicial precedent. The first criterion is known as "commercialité par accessoire" which will apply when the surety is granted by any person for the only purposes of his business. Secondly, the agreement may be subject to the Commercial Code if the grantor has a patrimonial interest over the fulfilment of underlying commercial obligation guaranteed by the surety.

    Where the grantor is a "commerçant" (i.e. a trader which under Mauritian law means any person practicing a commercial activity on a regular basis), there is no presumption under Mauritian law resulting in the surety automatically being qualified as a commercial arrangement and being governed by the Commercial Code. The specific criteria mentioned above must be fulfilled for the arrangement to be governed under the Commercial Code.

    If the criteria are met, the Mauritian courts will depart from the general provisions of Mauritian Civil Code and apply the provisions of the Commercial Code. These relate mainly to the proof of the suretyship. The Commercial Code offers more flexibility to parties to prove a commercial contract with for instance the principle of freedom of proof which derogates to the strict requirements of the Civil Code on both form and substance.

Footnote

1. Société Alleck & Co. Ltd v The Indian Ocean International Bank 2007 PRV 87 / 2008 MR 379

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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Authors
Iqbal Rajahbalee
Valerie Bisasur
Shane Mungur
 
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