Liability of the guarantor of the credit: Lawyer at “Spenser & Kauffmann” commented on the recent decision of The Supreme Court of Ukraine

After the Supreme Court of Ukraine had considered a case №6-1451цс16, it hold that in case of the court trial between the bank and the guarantor of the credit, the bank has six months to require repayment of the loan by the guarantor through the court action. After that, the guarantor will be exempt from liability for active debt of the borrower.

The document for publication «Деньги» was commented on by the Lawyer at “Spenser & Kauffmann” Anastasiya Nesterenko

 “The position stated by The Supreme Court of Ukraine is no latter-day”, – said Ms. Nesterenko. – Similar conclusions were made in the Order of 16th of October 2013 on the case №6-107цс13, of 23rd of April 2014 on the case №6-29цс14, of 17th of September 2014 on the case делу №6-41цс14, of 7th of October 2014 on the case №6-263цс15, of 24th of February 2016 on the case №6-2239цс15”.

“Considering the recent case, Supreme Court of Ukraine took into account the provision of the guaranty agreement.  According to the latter, the parties have agreed to have the term of 5 years, within which the parties can file a lawsuit in court to protect whether their violated rights or legitimate interest.  The Court found that this provision of the agreement is not an established guaranty period within the meaning of the Article 559 of the Civil Code of Ukraine”, – mentioned A. Nesterenko

Meanwhile, the Court has also made a conclusion, that the provision of the Guarantee Agreement saying that the guaranty is valid until complete performance of liabilities by the debtor is not an established period of validity of the guaranty and in such a case the provision № 559 of the Civil Code of Ukraine on six months term of guaranty validity should be applied.

According to the part 4 of the Article №559 of the CCU, the guaranty terminates upon the expiration of the term, established in the Guarantee Agreement. In case if such term is not established, the guaranty terminates, if the creditor, within 6 months from the date of maturity does not submit a request to the guarantor. If the term of the principal obligation is not established or established as a day of submission of the request, the guaranty terminates if the creditor does not file a suit to the guarantor within one year after the date of the Guarantee Agreement conclusion.

According to Ms. Nesterenko, it is necessary to take in account that established by the part 4 of the Article 559 of CCU, the term is preclusive, which means that the period of validity of obligations of the guarantor with the legal right of the creditor for the protection through the courts.

This means that upon expiration of this period, the creditor cannot undertake any actions on enforcement of his rights under the agreement, including application of judicial measures to protect his rights (by filing a lawsuit).