учебный год 2023 / Drobnig, Principles of European Law of Personal Security

Chapter 1: Common Rules

Comments

1.Scope. Article 1:104 deals only with one small aspect of the creation of a personal security. Special and broad rules for the protection of consumer security providers are contained in Articles 4:103-4:105. Apart from these special rules, formation of contract is governed by the general rules laid down in PECL Chapter 2 (cf. Introduction nos. 13 ss.). However, attention must be drawn to the fact that this Chapter no longer reflects the status which European law has achieved. In particular, the Chapter does not contain or reflect the rules of the EC Directive on unfair terms in consumer contracts of 5 April 1993. Since these are rules of a general nature, it is not appropriate to take them up in a Chapter dealing with one specific type of contract.

2.Creation of security by contract. Article 1:104 proceeds from the assumption that a personal security is usually created by contract although exceptionally a mere promise by the security provider may suffice (infra no. 11). Deviating from the general rule that a contract is concluded by offer and acceptance, as laid down in PECL Articles 2:201 to 2:210, Article 1:104 presumes acceptance “as soon as the offer reaches the creditor”. The term “reaches” is defined in PECL Article 1:303 (3); cf. also paras (5) and (6).

3.Creditor’s presumed acceptance. An express rule appears to be desirable since the general rules on contracting do not provide sufficient certainty: According to PECL Article 2:204 (2), silence or inactivity does not in itself amount to acceptance; nor suffices affirmative conduct by the creditor, unless it is known to the security provider (cf. PECL Article 2:205). Therefore an express rule is desirable and necessary in order to preclude the security provider from asserting later that it is not bound by the security since its offer had not been accepted. The main rule of Article 1:104 implies that the contract of security is concluded as soon as the security provider’s offer reaches the creditor.

4.This departure from the general rules on contracting is justified since the contract on personal security usually creates an obligation only for the security provider in favour of the creditor. Therefore many legal systems do not insist upon an express acceptance by the creditor. This widely accepted rule is, however, expressed by Article 1:104 only as a rebuttable presumption. The presumption is rebutted if one of the events specified in the second part of Article 1:104 occurs.

5.Exceptions. According to the second part of Article 1:104, the presumption of acceptance established by the first part of Article 1:104 is rebutted if the offer requires express acceptance or if the creditor without unreasonable delay rejects it or reserves time for consideration. The presumption of acceptance by the creditor can be rebutted only by unambiguous declarations of the creditor.

6.If an express agreement is required, it cannot be implied or derived from an unclear reply by the creditor. In the latter case, no contract has been concluded.

7.The same is true for a rejection of the offer. Such rejection is subject to the general rules on rejection of an offer in PECL Articles 2:203 and 2:208. It must be unambiguous

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and must be declared within a reasonable time. The criterion of reasonableness is defined by PECL Article 1:302.

8.If the creditor without unreasonable delay after receipt of the offer of security reserves time for consideration, the creditor must be enabled to examine carefully a complicated security instrument; depending upon the circumstances, it must be allowed the time to consult an advisor. On reasonableness, cf. supra no. 7.

9.Express acceptance. The ordinary rules on acceptance apply if the offer of security requires an acceptance or if the creditor has effectively reserved time for consideration. Apart from the preceding two cases, the ordinary rules also apply if the creditor, without being “invited” by the security provider to do so, expressly declares its acceptance within a time limit fixed by the offeror or else within a reasonable time limit. The same is true in case of a late acceptance (PECL Article 2:207). See especially PECL Article 2:208 on modified acceptance.

10.Security by virtue of debtor’s contract with security provider. The preceding rules also apply if the debtor contracts with the security provider and the security is expressed as a term of that contract in favour of the creditor (cf. PECL Article 6:110).

11.Creation of security by promise. The fact that a security provider’s offer of personal security often is not regarded as calling for an express acceptance (supra no. 3) invites drawing the consequence that not even any acceptance of the offer is necessary; rather, a mere promise suffices. This corresponds to the general rule established in PECL Article 2:107, according to which “A promise which is intended to be legally binding without acceptance is binding.” A practical example is a binding comfort letter sent by the sole or majority shareholder of a company to all creditors of the latter which is presumed to be a binding dependent security (Article 2:101 (2)). Such “unilateral promises” are subject to the general rules on contracts “with appropriate modifications” (PECL Article 1:107).

12.Commencement of security provider’s obligation. Article 1:104 implicitly fixes the time at which the security becomes binding if the creditor does not declare its acceptance. The fixing of this point in time is relevant for securities that may fix their duration by indicating a period only (e.g. two years) without indicating a precise date of expiration. Also for the application of Article 1:108 (2) (a) and (d) and Article 2:103 (3) a precise date must be determined.

National Notes

I. Personal Security as Contract
A. Declaration of Creditor’s
Acceptance Necessary . . . . . . .	nos. 1, 2
B. Declaration of Creditor’s
Acceptance Necessary in
Specific Cases . . . . . . . . . . . . . . . .	no. 3

C. Acceptance by Creditor’s Act
or Behaviour . . . . . . . . . . . . . . . . .	nos. 4-7
D. Security Provider’s Promise
as Acceptance . . . . . . . . . . . . . . . .	no. 8
E. Additional Requirements . . . .	no. 9

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II. Beginning of Security		III. Personal Security as Unilateral
Provider’s Obligation . . . . . . . . . .	nos. 10-12	Contract or Promise . . . . . . . . . . .	no. 13

I. Personal Security as Contract

A.Declaration of Creditor’s Acceptance Necessary

1.In the BENELUX-countries and in PORTUGAL, the general rules on the formation of contracts apply, in particular the “offer and acceptance” method of the general law of contracts as set out in the respective civil codes. All these countries demand that both the security provider and the creditor expressly agree on the contract of dependent personal security (BELGIUM: Van Quickenborne nos. 104-105; NETHERLANDS: Blomkwist no. 13 at p. 24; PORTUGAL: STJ 6 June 1990, no.78761 unpublished; Mesquita 29; Costa Gomes 343). Reference can be made to the notes to PECL Chap. 2 on the formation of contract (section 2: offer and acceptance). In FINLAND, according to Ekstro¨m 39 s. the creditor must expressly accept the offer of the security provider. Also in GREECE, an essential condition for contracting the security is that the creditor has expressly or tacitly accepted it, hence the mere receipt of the offer by the creditor and subsequent silence or inactivity of the creditor do not make the contract binding (Georgiades-Stathopoulos AK/Vrellis art. 847 no. 15; A.P. 682/1995, EEN 1996, 586; A.P. 1197/1992, ETrAksXrD 1993, 385). Not only must the creditor accept, but his

declaration of acceptance must also reach the offeror/security provider (cf. GREEK CC art. 192). An exception is made for independent personal securities (cf. infra C).

2.In ENGLISH law, as a rule, acceptance must be communicated to the security provider; but a detrimental act of the creditor relying on the security provider’s promise to the knowledge of the latter can be sufficient (Jays v. Sala (1898) 14 TLR 461 (CFI)); similarly, in appropriate circumstances communication can even be inferred from silence and inactivity on the part of the creditor (Pope v. Andrews (1840) 9 C&P 564 = 173 ER 957 (CFI)). Acceptance must be expressly communicated if stipulated for in the offer (Gaunt v. Hill (1815) 1 Stark 10 = 171 ER 386 (CFI); Newport v. Spivey (1862) 7 LT 328 (CFI)); further, if a time limit is stipulated in the offer, acceptance has to be communicated within that period of time, otherwise within reasonable time (Payne v. Ives (1823) 3 Dow & RyKB 664 (CFI)). If the offer is a bilateral one, i.e. it is given in consideration of an express promise by the creditor to enter into a transaction with the debtor, thus establishing a binding and enforceable bilateral agreement between creditor and security provider, it is irrevocable even before the creditor has acted upon it (Greenham Ready Mixed Concrete v. CAS (Industrial Developments) Ltd (1965) 109 SJ 209 (CFI)).

B.Declaration of Creditor’s Acceptance Necessary in Specific Cases

3.In ITALY, the general rules on the formation of contracts based on the “offer and acceptance” method apply to the formation of dependent personal security, when the security creates obligations binding not only the security provider, but also the creditor (CC art. 1326 ss.; Sacco, La conclusione dell’accordo 24). In AUSTRIA, the Supreme Court held in one case that an offer of a personal security that had been given by the

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private security provider on a form supplied by the creditor, in which the creditor had stipulated that its express acceptance was necessary, but which had not been given, was void although the creditor had granted the credit to be secured (OGH 7 Feb. 1989, BA 1989, 1021 with approving note Bydlinski; cf. idem, Kreditb4rgschaft 36 s.).

C.Acceptance by Creditor’s Act or Behaviour

4.Pursuant to the principle of DANISH ContrA § 7 a security is binding if the creditor has been informed about it. Consent can also arise from the creditor’s silence and inactivity (Andersen, Clausen, Edlund a.o./Pedersen 435 s.; Pedersen, Kaution 18; Bryde Andersen

425; Højrup 16 s.). According to the BELGIAN, FRENCH and LUXEMBOURGIAN CC art. 2015 (since 2006: FRENCH CC art. 2292) as well as ITALIAN CC art. 1937, PORTUGUESE CC art. 628 and SPANISH CC art. 1827 para 1, the existence of a dependent personal security cannot be presumed, it must expressly be established. But in fact this rule concerns only the offer made by the security provider, which is (usually) the only person binding itself (Simler no. 125). In ITALY, the offer made by the security provider can also be expressed by conclusive acts, provided it is possible to infer from them a clear intention (Giusti 90). Nevertheless it must be noticed that special rules on the form of the security provider’s declaration are given by the ITALIAN Banking Law (DLgs 1 Sept. 1993 no. 385): according to art. 117 para 1, the security provider’s offer must be in writing and a copy of it must be handed out to him. This rule applies, whether or not the security provider is a consumer (Lobuono 52 s.). In FRANCE the acceptance of the creditor can be given impliedly by any unequivocal act, particularly by bringing judicial proceedings against the provider of security (Cass.com. 13 Nov. 1972, GazPal 1973 1, 144). The consent of the creditor may also be implied, e.g. by setting up a counter security or by any advance payment in case of a security for an advance payment (Simler no. 933).

5.In AUSTRIA, in the context of the formation of a contract the absence of an express acceptance by the creditor is justified in two ways: First, the security provider’s binding offer may be regarded as setting a prolonged period for acceptance. This interpretation suggests itself, in particular, where a definite time period for calling upon the security provider had been agreed upon. In this case, the creditor’s demand is to be regarded as his acceptance. Second, according to AUSTRIAN CC § 864 para 1, an offer may be accepted by the offeree acting in accordance with the offer. There may be such a conforming act if the creditor concludes the underlying contract with the debtor in accordance with what had been agreed upon from the beginning by the three parties (Avancini/Iro/Koziol 283 no. 3/68; cf. also infra D). A DUTCH court has held that the creditor’s demand based upon an offered personal security signifies its acceptance (CA Amsterdam 17 Oct. 1988, NJ 1990 no.339).

6.In SCOTS law there is no definite rule, whether an express acceptance is required or whether the security provider’s liability is fixed once the creditor performs towards the debtor (Wallace v. Gibson [1895] AC 354 (HL(Sc))). The security provider’s obligation may also arise from an undertaking to secure a person’s debts which is not addressed to any particular creditor: then anyone who has given credit on the faith of the security is entitled to enforce it, unless the contrary is evident from the terms of the undertaking (Fortune v. Young (1918) SC 1 (CA)).

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7.According to GREEK law, the creditor’s acceptance of the offer of a dependent personal security must be made explicitly or tacitly (Georgiades-Stathopoulos AK/Vrellis art. 847 no. 15; A.P. 682/1995, EEN 1996, 586; A.P. 1197/1992, ETrAksXrD 1993, 385; cf. GREEK CC art. 189). Silence, however, constitutes neither acceptance nor rejection, unless this is provided by law or in a Code of Conduct or if the parties have so agreed or it is dictated by good faith and business usages, especially among merchants (Georgiades, General Principles § 32 no. 22; Perakis § 48 no. 22). It has been ruled however, that the mere fact of receipt of the offer neither constitutes a tacit acceptance, nor can such an acceptance be derived from the circumstances concerning the status of the parties or the nature of the contract that binds them (CA Thessaloniki 1197/1992, EpTrapDik 1993, 385). On the other hand, independent personal securities are almost always considered to have been accepted tacitly by the creditor, i.e. by the bank sending the document containing the independent personal security (Georgiades § 6 no. 46). Also in SPAIN, the creditor’s acceptance may be informal and even tacit (Carrasco Perera a.o. 105; TS 20 Jan. 1999, RAJ 1999 no. 3); this is especially important for the creditor in case the security provider had waived its rights (Guilarte Zapatero, Comentarios 56).

D.Security Provider’s Promise as Acceptance

8.Under ENGLISH common law, if the security provider offers the security at the request of the creditor, it is not necessary that the creditor should notify its acceptance to the security provider (on the authority of the Canadian decision in Fraser v. Douglas (1906) 5 WLR 52; cf. Andrews and Millett no. 2-002). A similar view is also taken in AUSTRIA: The creditor’s demand to the debtor to procure a security is transmitted by the debtor to the security provider who accepts the creditor’s offer by issuing the security (Avancini/ Iro/Koziol 284 no. 3/69).

E.Additional Requirements

9.ENGLISH law additionally requires contracts which are not under seal to be supported by consideration; that the creditor promises to grant a credit to the debtor or to forbear from suing the debtor for a debt already in existence can constitute sufficient consideration in contracts of security (Chitty/Whittaker nos. 44-019 – 44-023). The same principles apply in IRISH law (White 537 ss.), where however it has been held that the fact that the creditor does not sue the debtor is not necessarily a consideration for the security but might as well be a consequence of the obvious fruitlessness of any attempt to enforce the claim against the debtor (Commodity Banking Company v. Meehan [1985] IR 12 (CFI)).

II. Beginning of Security Provider’s Obligation

10.In ENGLISH law the commencement of the security provider’s obligation under the contract of security depends on the nature of its offer: if it is a unilateral offer (which is not made under seal), the provider of security can revoke it until it has been accepted by the creditor (as to what constitutes acceptance see supra sub I; Daulia Ltd v. Four Millbank Nominees Ltd [1978] 1 Ch 231, 239 (CA)).

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Article 1:104: Creditor’s Acceptance

11.Pursuant to DANISH ContrA § 7 a security provider’s obligation arises as soon as the creditor has been informed about the offer of security (Karnov/Lynge Andersen 5397 fn. 32 s.). According to the law of the BENELUX-countries, the contract of dependent personal security and therefore the security provider’s obligation becomes effective with the acceptance by the creditor of the offer to grant the security. According to the emission theory the security contract is concluded in FRANCE, as soon as the creditor dispatches its consent (Simler no. 129).

12.Under GERMAN and PORTUGUESE law a contract becomes binding at the moment when the declaration of acceptance of the offeree becomes effective, i.e. – if the parties do not act inter praesentes – when it reaches the offeror, or in PORTUGAL also when it becomes known to him (cf. GERMAN CC § 130; Palandt/Heinrichs § 148 no. 1; PORTUGUESE CC art. 224; Pires de Lima and Antunes Varela 214). In GERMANY in the vast majority of dependent personal securities the creditor does not declare its acceptance. Nevertheless, the contract of security is validly concluded since according to GERMAN CC § 151 first sentence a contract is concluded by the acceptance of the offer, which, however, need not be communicated to the offeror, if such notification is not to be expected according to common usage. GERMAN courts have held that such a usage exists for offers that are only beneficial for the offeree as is the case of personal securities (cf. especially BGH 12 Oct. 1999, NJW 2000, 276 with further references for dependent as well as for independent personal securities and assumptions of debt; for a binding

comfort letter cf. CA Berlin 18 Jan. 2002, WM 2002, 1190, 1191). It has been considered as sufficient that the creditor retains the (written) declaration of the security provider (cf. for dependent personal security BGH 6 May 1997, NJW 1997, 2233; BGH 30 March 1995, WM 1995, 901). The PORTUGUESE CC art. 234 is similar to GERMAN CC § 151. According to that provision, the contract is concluded as soon as the offeree shows an intention to accept the offer, if according to the terms of the offer, the nature or circumstances of the contract or common usage it is not necessary to require a declaration of acceptance by the creditor. CC art. 234 is considered also to apply to dependent personal securities inserted into a complex financial operation (Costa Gomes 365). The acceptance can therefore be inferred from the fact that the bank grants a credit (CA Coimbra 5 July 1989, CJ XIV, IV-50) or retains the declaration of the security provider (STJ 6 June 1990, no.78761 unpublished; STJ 15 Dec. 1998, 747/ 98 www.dgsi.pt). This rule also applies to independent personal securities (Pinheiro 431).

III. Personal Security as Unilateral Contract or Promise

13.In ITALY, the dependent personal security being a contract which usually creates obligations for the security provider only, an offer made by the person obligated is considered a binding contract if the offer has not been rejected by the offeree (CC art. 1333) (Giusti 71; Ravazzoni 255; Chianale 276; Cass. 26 May 1997 no. 4646, Giur.it. 1998, 1135). This particular method of formation of the dependent personal security, however, does not affect its contractual nature (Sacco and De Nova I 267-268; Sacco, La conclusione dell’accordo 23 ss., 28; Sacco, Il contratto 36 ss.; Cass. 27 Sept. 1995 no. 10235, Giur.it. 1996 I 1 738; Cass. 3 April 2001 no. 4888, Giur.it. 2001, 2254; Cass. 25 Sept.

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2001 no. 11987, Stud.Iuris 2002, 393). The perfection of the security takes place at the moment the declaration reaches the creditor if the latter does not reject it within a reasonable time according to the nature of the business or the usage.

(Dr. Poulsen)

Article 1:105: Interpretation

Where there is doubt about the meaning of a term of a security, and this term is supplied by a security provider acting for remuneration, an interpretation of the term against the security provider is to be preferred.

Comments

1.General rules. General rules on interpretation of contracts are laid down in PECL Chapter 5, Articles 5:101 ss. and must be followed in the first line. Among these rules, attention must be drawn to the contra proferentem rule in Article 5:103. Doubts about the meaning of a term not individually negotiated are resolved by construing that term against the party which supplied it. Although this provision applies only to contract terms that have not been negotiated individually, in practice there are very many such cases: Financial institutions as professional providers of credit mostly use form contracts. However, also if financial institutions act as creditors, they may demand that the security provider’s assumption of security be declared on a form supplied by them.

2.Exception. Article 1:105 is intended to supplement PECL Article 5:103 by extending that rule to cases that are not covered by the provisions in PECL. The principle expressed in Article 1:105 is based upon two factors: First, a professional security provider will often draw the document on the security granted by it as much as possible in its own favour, i.e. to the disadvantage of the creditor. Second, if this “natural” advantage is combined with its granting the security for remuneration, the very least that may be expected is that the instrument be drafted in unequivocal terms that are clearly understandable for the creditor. If, however, contrary to this justified expectation doubts remain as to the meaning of a term in the security instrument, then an interpretation of such a term against the security provider is justified.

National Notes

I. The Principle		C. Strict Interpretation of
A. Necessity of Interpretation	no. 1	Contracts on Security . . . . . . .	nos. 3, 4
B. General Rules on		D. Contra Proferentem Rule . . .	nos. 6-9
Interpretation . . . . . . . . . . . . . . .	no. 2
		II. Exception . . . . . . . . . . . . . . . . . . . . . . .	nos. 10-12

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	Article 1:105: Interpretation
I.	The Principle
A.	Necessity of Interpretation
1.	A contract will have to be interpreted only if the terms of the contract are not clear
	enough to reveal the intention of the parties (for more details, see national notes to
	PECL Art. 5:101 – general rules of interpretation).
B.	General Rules on Interpretation

2.Most EUROPEAN countries agree that a contract of personal security is, as any contract, primarily to be interpreted according to the common intention of the parties (BELGIUM: Van Quickenborne no. 290; ENGLAND, IRELAND and SCOTLAND: Andrews

and Millett nos. 4-001 ss. (IRISH law is insofar identical to ENGLISH law); Stair/Eden no. 909; FRANCE: Simler nos. 265 s.; PORTUGUESE CC art. 236 para 2; SPANISH CC art. 1281). Furthermore, according to ITALIAN CC art. 1362 para 1 and SPANISH CC art. 1281 para 2, the interpretation of the parties’ declarations shall be governed by the search for their true intention which may deviate from the literal meaning of the words employed by the parties (ITALY: CFI Roma 9 May 1981, BBTC 1982 II 295; SPAIN: TS 28 Feb. 1991, RAJ 1991 no. 1604). In GERMANY and GREECE the declarations contained in personal securities are interpreted according to GERMAN CC §§ 133, 157, GREEK CC art. 173, 200 (GERMANY: BGH 14 Nov. 1991, WM 1992, 177, 178; BGH 13 Oct. 1994, ZIP 1994, 1860, 1862; GREECE: A.P. 311/1993, NoB 42, 985) in the way in which the recipient of the declaration according to bona fides could understand them (“receiver’s horizon”, Empfa¨ngerhorizont). Since there is normally only an express declaration of the provider of security (cf. national notes on Art. 1:104 nos. 3-7, 13), this declaration and therefore the creditor’s understanding of this declaration are decisive (GERMANY: Staudinger/Horn § 765 no. 21 with further references). The situation is similar in PORTUGAL (CC art. 236 para 1). If the contract is in writing, its construction can only deviate from the wording of the document, if such an interpretation corresponds to the real intentions of the parties and is not contrary to the objects of the relevant form requirements (CC art. 238; STJ 30 Set. 1999, 543/99 www.dgsi.pt).

C.Strict Interpretation of Contracts on Security

3.In ENGLISH, IRISH and SCOTS law, the general approach of the courts is to construe contracts on security rather strictly so that no liability is imposed on the provider of security which is not clearly and distinctively covered by the agreement (ENGLAND:

Blest v. Brown (1862) 4 De G.F. & J. 367 (CFI); SCOTLAND: Tennant & Co v. Bunten

(1859) 21 D 631 (CA)); this approach is even more strictly carried out in case of independent personal securities (Smith v. South Wales Switchgear Ltd [1978] 1 AllER

18 (HL)). BELGIAN, FRENCH and LUXEMBOURGIAN CC art. 2015 (since 2006:

FRENCH CC art. 2292) stipulating that contracts of dependent personal security cannot be extended beyond the limits within which they were contracted, is thought to be an application of the contra proferentem rule of CC art. 1162. This means that the terms of the contracts of demand security have to be interpreted strictly (FRANCE: Cass.civ. 15

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Nov. 1978, GazPal 1979, 1, Somm.Comm. 96; LUXEMBOURG: Ravarani, Jurisprudence r cente 901). The same is true for SPAIN (TS 5 Feb. 1992, RAJ 1992 no. 830).

4.The situation is similar under DANISH, FINNISH and SWEDISH law, where the “minimum interpretation rule” provides that the security provider shall benefit from any doubt arising from the terms of the contract (DENMARK: H 18 Feb. 1980, UfR 1980 A 361; H 10 April 2002, UfR 2002 A 1464; Højrup 30; Pedersen, Kaution 29; SWEDEN: Walin, Borgen 144 s.; HD 30 March 1983, NJA 1983, 332). Moreover, according to the FINNISH government’s proposition for the LDepGuar (RP 189/1998 rd 38 ss.) juncto LDepGuar § 7 the liability of a private, i.e. a consumer provider of security can be reduced if the terms of a security are doubtful (see also HD 18 April 1995, KKO 1995:74). Also according to GREEK literature, the security provider’s declaration must be interpreted restrictively and, in case of doubt, in favour of the security provider, such interpretation being derived from the accessory nature (Kaukas art. 851 § 2, 440) and the altruistic character of the security (Theodoropoulos 152 fn. 13).

5.On the other hand, in GERMANY there is no general rule that contracts of security are to be interpreted in favour of the provider of security (Staudinger/Horn § 765 no. 23; however, there are certain exceptions from this principle, idem no. 24, and infra no. 7).

D.Contra Proferentem Rule

6.In ENGLISH and SCOTS law the application of the contra proferentem rule to contracts of security is generally accepted if the terms of the contract, as it will most often be, have been drafted by the creditor (ENGLAND: Eastern Counties Building Society v. Russell [1947] 2 AllER 734 (CA); SCOTLAND: Aitken’s Trustees v. Bank of Scotland 1944 SC 270 (CA)). The contra proferentem rule was further applied in a case where the provider of security had acted against remuneration and drafted the contract; this agreement was then construed in favour of the creditor (Mercers of City of London v. New Hampshire Insurance Co [1992] 2 Lloyd’s Rep 365 (CA) per Parker L.J. at 368).

7.A contra proferentem-rule is also provided by AUSTRIAN CC § 915, BELGIAN, FRENCH and LUXEMBOURGIAN CC art. 1162, GERMAN CC § 305c para 2 for general conditions, GREEK ConsProtA art. 2 para 5 sent. 2, ITALIAN CC arts. 1370-1371 and SPANISH CC arts. 1288-1289. The terms of a security are interpreted against the party who supplied the contract (BELGIUM: Cass. 5 Feb. 1998, TBH 1998, 754; Van Quickenborne no. 291; RPDB, Cautionnement nos. 66-69; FRANCE: Cass.com. 24 Jan. 1989,

JCP G 1989, IV, no. 111; Simler no. 265; GERMANY: Staudinger/Horn § 765 no. 25; on the rich case law on the control of the contents of printed clauses, cf. Palandt/Heinrichs § 307 nos. 93-94 and, broader, Bu¨low, Kreditsicherheiten nos. 913-931; GREECE: Georgiades § 3 no. 91; LUXEMBOURG: Ravarani, Jurisprudence r cente 900-904). The situation is similar under DANISH, FINNISH and SWEDISH law, where according to the “vagueness interpretation rule” vague conditions are interpreted against the party that has issued the conditions (DENMARK: Højrup 30; Pedersen, Kaution 29; FINLAND: HD 15 Sep. 1992, KKO 1992:115; SWEDEN: Walin, Borgen 144 s.). The AUSTRIAN Supreme Court has held that an independent security which had been assumed against remuneration must be interpreted against the security provider (OGH 22 Nov. 1999,

BA 2000, 701).

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8.In the NETHERLANDS, a contra proferentem rule has not been adopted legislatively, but appeared in case law and is thought to derive from the principle of reasonableness and fairness (Asser/Hartkamp nos. 287, 283).

9.However, according to GREEK ConsProtA art. 2 para 5 sent. 3 (as added by Law 2741/ 1999 art. 10 para 24), if the validity of the general term is examined in the context of a collective action, the courts are obliged to interpret the term against the consumer (cf. Georgiades § 3 no. 91 fn. 73).

II. Exception

10.A few countries expressly provide, as a final clause of their general rules on interpretation, that gratuitously assumed obligations must be construed narrowly in favour of the

obliged party (ITALIAN CC art. 1371; PORTUGUESE CC art. 237; SPANISH CC art. 1289 para 1). This rule will apply to most non-professional securities. By contrast, the interpretation of non-gratuitous transactions should lead to an equilibrium of the mutual performances (same provisions). Accordingly, it is assumed that where a security is assumed against remuneration, the protective interpretation-rule does not apply anymore (BELGIUM: Van Quickenborne no. 291; GREECE: Theodoropoulos 152 fn. 2). A professional provider of security will mostly formulate the terms of the contract and it will no longer be the vulnerable party (DENMARK: Pedersen, Kaution 29 s.; GREECE: Georgiades § 3 no. 78).

11.According to DUTCH law, these exceptions probably also apply to dependent personal securities and can be derived from the above-mentioned (supra no. 8) principle of reasonableness and fairness (Asser/Hartkamp no. 287, 283 (a fortiori)).

12.In ENGLISH law the aforementioned principles of strict and contra proferentem construction have not been applied to performance bonds because of the traditional view that commercial men are well able to look after themselves and could have refused to assume the bond or increase their price for doing so (Esal Commodities Ltd v. Oriental Credit Ltd [1985] 2 Lloyd’s Rep 546 (CA)). The aspect of remuneration is not in general a decisive factor for the construction of the security as can be seen from the cases in which professional providers of security have been granted the favours of strict construction by classifying the agreements purporting to be “performance bonds” as ordinary securities (General Surety & Guarantee Co v. Parker Ltd [1977] 6 Build LR 16 (CFI); Trafalgar House Construction (Regions) Ltd v. General Surety & Guarantee Co Ltd [1996] 1

AC 199 (HL)). In SCOTS law securities arising under mercantile transactions are generally construed more liberally, ascertaining “the fair bona fides of the transaction” (Watt v. National Bank of Scotland (1839) 1 D 827 (CA)).

(Lebon; Dr. Poulsen)

Article 1:106: Co-Debtorship for Security Purposes

A co-debtorship for security purposes (Article 1:101 lit. (e)) is subject to the rules of Chapters 1 and 4 and, subsidiarily, to the rules on plurality of debtors (PECL Chapter 10 Section 1).

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