The guarantor-creditor relationship arises through an agreement between the guarantor and the creditor via a guarantee contract. Based on legal provisions regarding guarantees, guarantee fulfilment follows the principles of i) conditional guarantees, where the guarantor must fulfil the obligation when the guaranteed party fails to do so or improperly fulfils it, and ii) unconditional guarantees, where the guarantor must fulfil the obligation when the guaranteed party is incapable and no other agreement is in place. In this article, TNTP will provide more detailed information on performing guaranteed obligations by legal regulations.
1. Basis for performing guaranteed obligations
Based on Article 44, Clause 1 of Decree No. 21/2021/ND-CP, the guarantor must fulfil the guarantee obligation when the guaranteed obligation is violated on one of the following grounds:
• The guaranteed party fails to fulfil the obligation within the agreed-upon timeframe, performs it prematurely, or fails to fulfil or improperly fulfil the obligation’s content;
• The guaranteed party is incapable of fulfilling the guarantee obligation;
• Other grounds as agreed upon or stipulated by the Civil Code or other relevant laws.
2. Content of performing guaranteed obligations
• In cases with grounds, the creditor notifies the guarantor to fulfil the guarantee obligation. The guarantor has the right to refuse if the grounds presented by the creditor are not within the scope of the guarantee commitment.
• The guarantor must fulfil the guarantee obligation within the agreed-upon timeframe. In the absence of an agreement, the guarantor must fulfil it within a reasonable timeframe from the receipt of the creditor’s notice.
• Once the guarantor has fulfilled the guarantee obligation, the creditor must inform the guaranteed party. If the guaranteed party continues to fulfil the guaranteed obligation, the guarantor has the right to request the creditor to return the received assets or the equivalent value of the fulfilled guarantee obligation.
• When more than one person guarantees an obligation, those persons must perform jointly the guarantee, except where it is agreed or provided by law that the guarantee comprises separate portions. The obligee may require any of the joint guarantors to perform the obligation in its entirety. Where one of the joint guarantors has performed the entire obligation on behalf of the principal debtor, the guarantor may require the other guarantors to perform their respective portions of the obligation concerning that guarantor.
3. Discharge from guaranteed obligations
• Where the guarantor must perform the guaranteed obligation but the creditor discharges the guarantor from an obligation, the principal debtor is discharged from the performance of the obligation concerning the creditor, except where it is agreed or provided by law.
• Where one person from amongst the joint guarantors is discharged from the performance of its portion of the guaranteed obligation, the other joint guarantors must, nevertheless, perform their portion of the guaranteed obligation.
• Where one person from amongst the joint creditors discharge the guarantor from the performance of its portion of the guaranteed obligation, the guarantor must, nevertheless, perform their portion of the guaranteed obligation with respect to remaining joint creditors.
4. Termination of guarantees
A guarantee shall terminate in any of the following cases:
• The obligation secured by the guarantee terminates.
• The guarantee is cancelled or is substituted by another security.
• The guarantor has satisfied the guaranteed obligation.
• As agreed by the parties.
The above is the article “Performing guaranteed obligations according to legal regulations” that TNTP is sending to its readers. In case of any issues requiring discussion, please contact TNTP for timely assistance.