The Commercial Division of the Cour de Cassation, in a judgment of 15 November 2017 (Cass. com., 15 Nov. 2017, no. 16-16790), held that the Court of Appeal of Pau had rightly held that the bank was bound by an obligation to inform and warn the guarantor when it committed itself.
In the present case, in order to finance the acquisition of a EUR 60 000 business, a bank granted a loan of this amount to a company, guaranteeing itself by way of a pledge and the joint surety of the manager. Assigned in payment, the said manager sought the bank's liability for breach of its duty to warn. The bank is liable if it fails to warn the unprofessional guarantor that the transaction was doomed to fail from the outset, that the loan was unsuitable for the borrower's or guarantor's financial capacity, or that there is a risk of over-indebtedness as a result of the guaranteed loan being granted.
The Court of Cassation reaffirms the important responsibility of banks in granting loans and in particular when they impose a guarantee through the guarantee mechanism. People who act as guarantors often commit themselves without really knowing the scope of their act, which can plunge them into a very delicate financial situation that can lead to over-indebtedness. Our law firm will assist you in challenging the banks' actions against sureties.