Legal Updates

A guarantor shall be exempt if the creditor acted in bad faith or caused the expiration of another guarantee

August 8, 2018

Residents of a condominium established a company to carry out a building refurbishing project under Tama 38 regime. In order to finance the project, several loans were taken and all residents provided personal checks as a guarantee The project ran into difficulties and the lender chose to collect the debt from one of the tenants.


The Court exempted the tenant from the guarantee to the debt and held that a promissory note right is to be applied in good faith and if a creditor causes the expiry of a guarantee given to secure a charge and as a result the guarantor was damaged, the guarantor may be exempted from the guarantee up to the full amount of the damage.


In this case, the lender did not use bank guarantees given to it and by that caused damage to the guarantor.  Also, the collection procedure in the tenant's case was done in bad faith and with the aim to exert unfair pressure on her in order to persuade her to sign a contract with another entrepreneur and that was also grounds for exemption from the guarantee.