Court of Cassation, Commercial, Economic and Financial Division, 13 March 2024, No. 22-19.900
Although there is no legislation governing it, the information sheet is a commonly used tool in the banking industry. It enables the bank to obtain information on the income, annual expenses and assets of its customers in order to assess their financial situation, particularly with a view to taking out a guarantee to determine whether it is proportionate. Because of its evidential value, this document has been the subject of considerable litigation.
In a ruling handed down on 13 March 2024, the Commercial, Economic and Financial Division of the French Supreme Court (Cour de cassation) ruled on whether an information sheet completed after the guarantee had been entered into should be taken into account when assessing whether the guarantee was disproportionate.
In July 2008, a bank granted a company a cash credit facility for an indefinite period, by debiting the current account, for an amount of €80,000, guaranteed by the joint and several guarantee of an individual up to a limit of €40,000.
The company subsequently went into liquidation and the bank sued the guarantor for payment. The guarantor argued that his commitment was manifestly disproportionate to his assets and income, pursuant to the former article L.343-4 of the French Consumer Code.
In a ruling dated 8 March 2022, the Rennes Court of Appeal rejected the bank's request, refusing to take into account the information sheet provided by the guarantor on the grounds that it had been completed after the guarantee had been entered into.
The bank appealed to the Court of Cassation, arguing that while 'the information sheet must be drawn up at a time contemporaneous with the conclusion of the surety agreement, it does not necessarily have to precede or coincide with it, and may therefore be subsequent to it, unless the guarantor demonstrates that his situation has changed between the conclusion of the surety agreement and the drawing up of the information sheet'.
The Court of Cassation began by recalling the principle of the proportionality of guarantees, set out in article L. 341-4 of the Consumer Code, applicable to the dispute, which provided that 'a professional creditor may not rely on a surety agreement entered into by a natural person whose commitment was, at the time it was entered into, manifestly disproportionate to his assets and income, unless the assets of that surety, at the time it is called upon, enable him to meet his obligation', before upholding the judgment of the Rennes Court of Appeal.
It states that it is the creditor's duty to enquire into the guarantor's financial situation before committing himself. The High Court therefore prohibits the use of an information sheet signed after the guarantee was taken out to assess whether it is disproportionate.
Published in the Bulletin, this decision, which is certainly of interest, sheds light on the appropriate time to draw up the information sheet.
The Court of Cassation's unprecedented solution answers this question for the first time and is in line with positive law.
Since the facts of the case date back to July 2008, the High Court refers to the former article L. 341-4 of the Consumer Code. This article was repealed by article 34 of the Order of 14 March 2016 before becoming article L. 332-1 of the same Code, which was in turn repealed by article 32 of the Order of 15 September 2021.
However, the Cour de cassation's response remains in line with positive law, as the aforementioned provisions have been transposed to the new article 2300 of the Civil Code, which provides that: 'if the guarantee taken out by a natural person in favour of a professional creditor was, at the time it was taken out, manifestly disproportionate to the income and assets of the guarantor, it shall be reduced to the amount to which he or she could have committed himself or herself at that date.'
As a result, the ruling of 13 March 2024 appears to apply to guarantees entered into after 1 January 2022.
The Court of Cassation is urging the banker to check the guarantor's financial situation beforehand to avoid any disproportion between the commitment and the guarantor's assets.
Indeed, if the bank were to check the guarantor's assets after he had given his undertaking, how could it justify that the guarantee was not disproportionate on the date it was given?
We must therefore deduce from this ruling that the banker must :
- Ensure that the information sheet is signed at the same time as the guarantee is entered into, either a few days before or on the same day;
- Each time the guarantor enters into a new commitment, ensure that the information sheet is updated;
- Be vigilant and go beyond the information provided by the guarantor, seeking all useful and additional information to verify that the guarantor has sufficient assets to meet his or her commitment.
In this case, the guarantor had submitted the information sheet more than a month after entering into the commitment, so the bank could no longer rely on his statements.
The most prudent course is to sign the information sheet on the same day as the guarantor's undertaking, as the disproportion between the guarantor's assets and his undertaking is assessed on the day the contract is signed.
It should be remembered, however, as the Court of Cassation has done, that 'the onus is on the guarantor to prove that his commitment is manifestly disproportionate to his assets and income'. The bank is entitled to rely on the information sheets completed by the guarantor, as the former texts of the Consumer Code 'do not require the creditor to check the statements provided by the guarantor, except in the case of apparent anomalies'.
Originally published 29 May 2024
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.