Commentary on Article 333. Rights and Obligations of the Guarantor Where a Creditor Makes a Claim Against the Guarantor
1. Before satisfying the creditor’s claims, the guarantor is obliged to notify the debtor thereof and, if the creditor brings a lawsuit against the guarantor, to involve the debtor in the proceedings. Since the guarantor and the debtor are not co-debtors of the creditor under the same obligation, the guarantor is not always aware of the nature of the relationship between the creditor and the debtor under the principal obligation. Without notifying the debtor of the creditor’s claims and involving the debtor in the proceedings, it would be impossible or difficult to establish and take into account all the objections the debtor may have to the creditor’s claims.
2. The guarantor’s obligation to notify the debtor before satisfying the creditor’s claims is also intended to prevent the creditor from receiving double (repeated) performance from both the guarantor and the debtor. A similar obligation requiring the debtor to notify the surety and the guarantor of performance of the principal obligation is provided for in Article 335 of the Civil Code.
Notifying the debtor that the guarantor has satisfied the creditor’s claims is also necessary because, in such circumstances, the creditor’s rights are transferred to the guarantor in accordance with Articles 334 and 344 of the Civil Code. Failure to notify the debtor places the risk of adverse consequences arising therefrom on the guarantor as the new creditor. For example, such consequences may include the debtor performing the obligation in favour of the creditor under the principal obligation.
3. The guarantor’s obligation to involve the debtor in the proceedings is substantive in nature and must be fulfilled by sending the debtor a notice that the creditor has brought a claim against the surety. The notice must contain the necessary information concerning the claim, including the name of the court to which the statement of claim was submitted, the number and date of the application, and other relevant details.
The guarantor’s obligation cannot be considered fulfilled if the guarantor merely files a motion with the court requesting that the debtor be involved in the proceedings.
4. The existence of the guarantor’s obligation to involve the debtor in the proceedings does not depend on whether the guarantor bears full or partial liability, whether the creditor previously brought a claim against the debtor, or what decision was made in that case. Nor does the existence of this obligation depend on whether the debtor has performed, partially performed, or failed to perform the obligation.
The debtor is involved in the proceedings as a third party without independent claims on the defendant’s side. The procedural grounds for this are established in Article 31 of the Law of the Republic of Kazakhstan on the Procedure for Resolving Economic Disputes and Article 28 of the Civil Procedure Code.
5. Failure by the guarantor to fulfil the obligations imposed on them to notify the debtor of the satisfaction of the creditor’s claims and to involve the debtor in the proceedings entails adverse consequences for the guarantor.
In such circumstances, the debtor is entitled to raise against the guarantor’s recourse claims all objections that the debtor could have raised against the creditor. These may include objections concerning the amount of the claim, its validity, and other relevant matters.
If the court finds these objections to be well-founded, the guarantor’s recourse claims against the debtor will be dismissed in whole or in part.
However, if the guarantor has duly notified the debtor that the creditor has brought a claim against the guarantor, but the debtor refuses to participate in the proceedings, the debtor loses the right to raise against the guarantor’s recourse claims objections that could have been raised against the creditor. In that case, the debtor may rely only on circumstances arising from the relationship between the debtor and the guarantor.
6. The legislator has granted the guarantor the right to raise objections against the creditor’s claims that the debtor could have raised, even if the debtor has waived those objections or acknowledged the debt, unless otherwise provided by the guarantee agreement.
The guarantor’s right to raise objections does not depend on the procedural status of either the guarantor or the debtor. It is irrelevant whether the debtor is involved in the proceedings as a third party without independent claims or as a co-defendant.
This provision constitutes an exception to the general rule governing the performance of joint and several obligations. Under that rule, a debtor is generally not entitled to raise against the creditor’s claims objections based on the relationships between the creditor and other debtors in which that debtor does not participate (see the commentary on paragraph 5 of Article 287 of the Civil Code).
This exception is provided because of the nature of the relationship between the guarantor and the debtor when the guarantor performs the principal obligation, particularly because the guarantor has a right of recourse against the debtor.
The guarantor’s right to raise objections against the creditor’s claims may be restricted only by the terms of the guarantee agreement. For example, such a restriction may arise where the agreement provides for unconditional satisfaction of the creditor’s claims upon the creditor’s first demand.
7. The surety’s obligations, analogous to those of the guarantor, to notify the debtor before satisfying the creditor’s claim and, where a claim is brought against the surety, to involve the debtor in the proceedings follow from the rules on subsidiary liability set out in Article 357 of the Civil Code.
The consequences of the surety’s failure to fulfil these obligations are analogous to those arising from the guarantor’s failure to fulfil the same obligations: the principal debtor is entitled to raise against the surety’s recourse claims any objections that the debtor could have raised against the creditor.
Legal Materials Referenced
- Civil Code of the Republic of Kazakhstan;
- Civil Procedure Code of the Republic of Kazakhstan;
- Legislation of the Republic of Kazakhstan governing the procedure for resolving economic disputes.
Information About the Authors of the Commentary
This commentary was prepared as part of the scientific and practical research programme of the Research Centre for Private Law at Kazakh State Law University.
Head of the Working Group responsible for drafting the Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor — M.K. Suleimenov.
Deputy Head of the Working Group, Professor — Y.G. Basin.
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