Since the beginning of 2008, a significant number of Ukrainian banks have entered into loan agreements with the participation of a natural or legal person whose status was as a guarantor. The main purpose of the surety agreement is the possibility of recovery from the guarantor of property or non-property goods if the debtor has not fulfilled its obligation to the creditor (in this case to the bank).
Quite a number of credit agreements and surety agreements were concluded, but due to the imperfection of the legal system of Ukraine at that time and the settlement of the above agreements was not in the first place, debtors and guarantors fell into so-called “traps” from banks, which usually ended in litigation. .
The problem of the surety agreement remains open, so the Law Firm “Neofelis Law Group” draws your attention to the main errors that may be in the surety agreement, so that you as a guarantor or debtor do not encounter unforeseen problems that you may have with bank for many years.
First of all, the basic legal act that regulates the status of the guarantor and the conclusion of surety agreements is the Civil Code of Ukraine (§ 3, Chapter 49, Section I, Book 5 of the Civil Code of Ukraine) and the Law of Ukraine “On Mortgage” (applies only property guarantee).
The above agreement is usually concluded and arises from a loan agreement or credit agreement, as all other obligations (guarantee, pledge or retention) are limited to the number of persons who can act as a guarantor, and the pledge itself can not be used in the absence of the mortgagor . The legislator has established that a guarantor can be any or several natural or legal persons who have a stable property position and do not have debts to national banks or other financial institutions. The surety agreement must be concluded only in writing, otherwise it can be considered null and void.
The jurisprudence to declare a surety agreement invalid, void or unconcluded is quite common, due to the fact that there are many cases when the loan agreement or surety agreement banks make significant errors that make it impossible to fulfill its basic conditions, or the agreement could be concluded under the influence of deception, error or other serious circumstances.
We draw your attention that if the guarantor is not aware of the current legislation at the time of concluding the surety agreement, it does not release the latter from liability or from fulfilling the terms of the agreement. Applying to the court with explanations and justifications that the bank’s employees have not interpreted this or that norm, which is specified in the contract, is not a circumstance under which the guarantor will be released from the terms of the contract. There are many cases when guarantors go to court with the problem that they either misunderstood the surety agreement or believe that they were forced to enter into a contract under the influence of fraud, but it should be remembered that the error is due to their own negligence, ignorance of the law or incorrect interpretation by one of the parties is not a ground for invalidating the transaction.
If you compare the concepts of “deception” and “error”, you should not equate these concepts to each other. First of all, a sign of deception is intent in the actions of one of the persons with whom the contract is concluded. However, it is the person who acted under the influence of deception that must prove the existence of intent, what the illegal actions were and the materiality of the circumstances.
What is also worth paying attention to is the liability that may arise if the terms of the contract are not complied with in full or in part. There are two types of liability: joint and several and subsidiary. Joint and several liability is that the creditor has the opportunity to choose who to contact to recover the debt under the contract. Subsidiary liability is that the creditor must first apply to the principal debtor, setting in advance in the contract a deadline for the fulfillment of the loan obligation. If the debtor does not fulfill the obligation within the prescribed period, in which case the creditor has the full right to apply to the guarantor.
Unfortunately, civil law, namely the Civil Code of Ukraine or other regulations, does not establish and interpret the concept of reasonable time. The parties must agree on the term of fulfillment of all obligations by the parties in order to avoid further misunderstandings and problems, which could almost completely end in litigation.
Also, what else should you pay attention to when concluding a surety agreement and not only, so it is on its very content. First of all, the contract must contain information on the subject of the contract, its term, liability of the parties and the scope of the guarantee. Sometimes, the contract states the amount of money that the debtor undertakes to pay to the guarantor for the so-called “services”.
Individuals who have never entered into agreements may not be aware of the legal field of credit agreements or loan agreements. Loan agreements can make a mistake in spelling your initials, place of residence / registration, or hide a few tricky sentences that can completely change the terms of the agreement.
In order to avoid such situations, namely to involve yourself in a dispute between you and the bank due to an error in the contract, which you simply did not notice, Law Firm “Neofelis Lo Group” provides services for rapid and complete analysis of the document (agreement, application), to avoid negative consequences for you and to save your precious time.
Therefore, if you intend to enter into an agreement with a bank or any natural or legal person, first of all turn to specialists who will help you analyze the document and identify its main shortcomings, if any.