The Contract of Suretyship in the Light of the Egyptian Civil Code and the Civil Transactions Law

Suretyship is among the nominate civil contracts whose provisions the civil codes govern, the Egyptian Civil Code and the Civil Transactions Law among them. Islamic law has likewise governed its provisions. Al-Bahuti defined it as an undertaking by a person of full capacity to produce one who owes a pecuniary right to the person entitled to it. It is reported of the Prophet, peace be upon him, that he said: the surety is liable.

The word suretyship is used in two different senses. It may mean what certain persons deposit by way of money or securities, under the law or by agreement, as security against errors arising from their work — such as the security deposited by bankers and by a successful bidder at auction. All of this is in the nature of a possessory pledge, and is not what is meant here.

What is meant by the term suretyship is that a person undertakes to one of two contracting parties to perform what the other has undertaken. This is the contract of suretyship provided for in Article 772 of the Egyptian Civil Code and Article 578 of the Civil Transactions Law, and the rulings of the courts run to the same effect. The Administrative Appellate Circuit of the Board of Grievances, in case 14187 of 1440 within case 9224 of 1440, defined it as "a contract by which the surety undertakes to discharge a debt owed to the creditor by the debtor should the latter fail to discharge it". The explanatory memorandum to the Civil Code gives a definition of the contract which it considers preferable to that of the Egyptian and other codes, that of Professor Baudry, who describes suretyship as a contract by which a person guarantees to another the performance of an obligation, undertaking to perform it should the debtor not do so himself, while preserving a right of recourse against that debtor.

What a contract of suretyship is

It is a contract by which a person guarantees the performance of an obligation, undertaking to the creditor that he will discharge it should the debtor not discharge it himself. It may validly be immediate, conditional, for a fixed period, or subject to a term, as Article 582 of the Civil Transactions Law provides.

It is a consensual contract binding upon one party only, the surety, and requires nothing beyond that the surety's consent be express. In principle it is a gratuitous contract. What distinguishes it from others is the element of accessoriness: the contract of suretyship is accessory to the principal guaranteed obligation. It follows that suretyship is affected by whatever affects the principal contract, and that its terms may not be more onerous than those of the principal contract. Article 780 of the Egyptian Civil Code and Article 584 of the Civil Transactions Law provide that "suretyship is not permitted for a sum greater than what is owed by the debtor, nor on terms more onerous than those of the guaranteed debt". There is thus a connection between the validity of the suretyship and that of the principal obligation.

The validity of suretyship as bound to the validity of the guaranteed obligation

Article 776 of the Egyptian Civil Code and Article 581 of the Civil Transactions Law provide that "suretyship is valid only where the guaranteed obligation is valid". An obligation must therefore exist for suretyship to arise, and the suretyship is valid only where that obligation is valid. Where the obligation is void for lack of form or cause, or for conflicting with public order or morals, its suretyship is void. Where the obligation is voidable, its suretyship is voidable and the surety may raise that defence.

The object of suretyship

Suretyship bears upon the surety's guarantee of performance of the guaranteed obligation, whether that obligation is to do something, to refrain from doing something, or to pay a sum of money. The civil codes have not confined the object of suretyship to one obligation rather than another. Under the contract of suretyship the surety therefore guarantees to the creditor that the debtor will perform the obligation contained in the contract concluded between creditor and debtor, whatever its nature; so that should the debtor breach it, the surety is bound to render the performance the debtor was to render. Where discharge concerns a sum of money, the surety must pay it, and the creditor may accordingly enforce that obligation against the surety by obtaining an enforceable instrument and taking attachment proceedings against his property, as would have been permissible against the debtor.

What is required of a surety

The surety must be of full capacity, under Article 580 of the Civil Transactions Law. A surety may be personal or real. The personal surety is one who guarantees performance of the debtor's obligation; by this a personal obligation arises in the surety's patrimony, so that should he breach it the creditor may obtain judgment against him and enforce it against the surety's immovable and movable property alike. On this the Egyptian Court of Cassation has said: the provision in Article 772 of the Civil Code, that suretyship is a contract by which a person guarantees performance of an obligation by undertaking to the creditor to discharge it should the debtor not discharge it himself, indicates that suretyship creates a personal obligation in the surety's patrimony; from which it follows that the surety's obligation is not extinguished by his death but remains in his estate and passes to his heirs.

The same rule does not run as to heirs under the Civil Transactions Law. Article 850 provides particularly for suretyship given by a person suffering a final illness, that it does not take effect as against the heirs beyond one third save with their ratification; and where the suretyship is for or on behalf of an heir, it does not take effect as against the remaining heirs even within one third save with their ratification.

The real surety is one who furnishes a specified thing as security for performance of the obligation should the debtor fail to perform. The security does not extend beyond that thing, even where the creditor is unable to obtain his right in full after enforcing against it, which bars him from enforcing against the surety's remaining property.

The conclusion of suretyship without the debtor's knowledge and despite his objection

Article 775 of the Egyptian Civil Code and Article 579 of the Civil Transactions Law provide that "a debtor may be guaranteed without his knowledge, so that the conclusion of the suretyship does not depend on his acceptance; and it is permissible despite his objection".

The contract of suretyship is concluded between creditor and surety, the debtor not being a party to it. His consent is therefore unnecessary, and his objection produces no effect. Most commonly the suretyship is effected by the surety signing the instrument of indebtedness in that character; and where he discharges the debt he then has recourse against the debtor by the action on mandate, the debtor being taken to have given him a tacit mandate to pay, drawn from that signature. Where the suretyship is effected without the debtor's knowledge or despite his objection, the surety has recourse against him by the action of subrogation.

The foregoing texts indicate that the debtor's ignorance or objection has no affecting the effects or the nature of the suretyship, which remains accessory to the debtor's obligation, following it in existence and in cessation alike. Where the debtor's obligation is extinguished on any ground of extinction, the surety's obligation follows it. The surety may accordingly raise against the creditor every defence affecting the guaranteed debt — its extinction by payment, release, novation or prescription. Nor does it prevent the surety relying on the prescription of the debtor's obligation that prescription has been interrupted as against him; for the surety is not a debtor but a guarantor of the discharge of a debt to which the debtor may be compelled. Where the surety does not rely on prescription and pays, he will have discharged a natural obligation to which the debtor could not have been compelled had he been sued and pleaded prescription.

Suretyship requires the consent of both creditor and surety: the surety's consent alone does not suffice, even where he acts gratuitously, since a gift is not perfected save by the donee's consent. The surety's consent must also be clear and unambiguous, as by signing the instrument of indebtedness, or sending the creditor a letter stating his suretyship for the debtor's debt and identifying it.