First demand guarantee: when the limitation period starts

The limitation period (prescription) for a claim for payment based on a first demand guarantee (garantie à première demande) runs from the day on which that guarantee falls due. Unless otherwise stipulated, it falls due as soon as the instrument is concluded, and not on the day the beneficiary calls on the guarantor. A beneficiary who waits for the debtor's default before demanding payment therefore risks being met with a limitation defence.

Key points

• Unless otherwise stipulated, the limitation period for a claim for payment based on a first demand guarantee runs from the day on which the guarantee falls due.
• A first demand guarantee given irrevocably and unconditionally falls due as soon as the instrument is concluded, without waiting for the default of the guaranteed debtor.
• A beneficiary who demands payment more than five years after signing such a guarantee comes up against the limitation period.
• The parties may postpone that starting point by stipulating in the instrument a term, a condition or a triggering event.
• The autonomy of the first demand guarantee, which deprives the guarantor of defences arising from the underlying contract, works here against the beneficiary.

Why was the claim for payment held to be time-barred?

The commercial chamber dismisses the beneficiary's appeal to the Cour de cassation (France's highest civil court): unless otherwise stipulated, a first demand guarantee falls due as soon as the contract is concluded, and the limitation period runs from that day (Com., 11 February 2026, No. 24-18.252). The ruling settles the fate of a guarantee signed at the end of 2005 and called upon only in 2021, after the compulsory liquidation (liquidation judiciaire) of the guaranteed debtor.

Under an agreement of 16 November 2005, a beer supplier granted various economic and financial advantages to the operator of licensed premises. On 5 December 2005, a distribution company executed a first demand guarantee in favour of that supplier. It undertook, irrevocably and unconditionally, to pay a fixed sum on the operator's behalf. On 9 November 2012, the operator was placed in compulsory liquidation, the supplier remaining a creditor for an unpaid balance.

The supplier brought a claim for payment against the guarantor company on 12 July 2021. The guarantor raised limitation as a defence. The decision under appeal (CA Colmar, 5 June 2024, No. 23/01747) held the supplier's claims inadmissible. The appeal to the Cour de cassation argued that a first demand guarantee of indefinite duration falls due only on the day the guarantor is called upon, relying on Articles L. 110-4 of the French Commercial Code and 2224 and 2321 of the French Civil Code.

The commercial chamber first states the rule, in a single statement of principle, before applying it to the findings of the lower court judges (free translation):

Unless otherwise stipulated, the limitation period for a claim for payment based on a first demand guarantee runs from the day on which that guarantee falls due.

The instrument at issue contained no stipulation to the contrary. The undertaking was irrevocable, payable on the creditor's first demand, with no possibility of raising a defence or reservation arising from the beer supply contract. No term and no condition therefore postponed the date on which it fell due. The court of appeal correctly inferred that the guarantee fell due as soon as the contract was concluded, and that the claim brought more than five years later was time-barred.

What consequences for the beneficiary of an autonomous guarantee?

A first demand guarantee with no term lapses silently: the countdown starts when the instrument is signed, not when payment is missed. A first demand guarantee is an undertaking to pay an agreed sum on the beneficiary's mere call, without the guarantor being able to dispute the guaranteed contract. That autonomy is its strength: it secures rapid payment, shielded from challenges. Here it produces a less expected effect.

Since nothing conditions the call, the guarantor's obligation may be claimed from the outset. The beneficiary cannot therefore reason as with a personal guarantee (cautionnement), waiting for the debtor's default before turning to the guarantor. In the case decided, that default occurred years after the guarantee was signed, at a time when the period had long been running.

The risk is all the more real because the autonomous guarantee (garantie autonome) often accompanies undertakings performed over a long period: exclusive supply, a loan backed by a supply contract, a purchase obligation spread over several years. The security looks solid on the day of signature. It may have become unusable by the time the need arises, without any event having alerted the beneficiary.

What scope for limitation of first demand guarantees?

The rule laid down is a default rule: it applies only in the absence of a stipulation to the contrary in the guarantee instrument. The commercial chamber does not hold that every autonomous guarantee falls due upon signature. It holds that the limitation period runs from the day the guarantee falls due, and that it falls due when the contract is concluded where the instrument provides for no term, no condition and no triggering event.

The theory advanced in the appeal to the Cour de cassation is rejected: the starting point does not move to the day the guarantor is called upon merely because the guarantee is stipulated without a fixed duration. As the case law stands at 11 February 2026, it is therefore the drafting of the instrument that governs the useful life of the security.

Which clauses secure the starting point of the limitation period?

The drafting of the instrument is the only lever genuinely available to control the starting point of the period. A beneficiary who wishes to keep the guarantee alive for the whole term of the guaranteed contract would be well advised to have the instrument state when the guarantee falls due. Silence in the instrument works against the beneficiary, since it causes the limitation period to run from signature.

• Name in the instrument the event that makes the guarantee fall due, while preserving the autonomy of the guarantee.
• Provide for a period of validity of the guarantee and, where appropriate, a deadline for calling on it, consistent with the term of the guaranteed contract.
• Check the consistency between the autonomous guarantee and the other securities backing the same transaction.
• List the guarantees in force and track, for each of them, the date of signature and the date on which the claim expires.

Checks to carry out on a current autonomous guarantee

Reading the instrument comes first: check whether it sets a term, a condition or a deadline for calling on the guarantee, or whether it confines itself to an irrevocable and unconditional undertaking. In the absence of any stipulation of that nature, the date of signature becomes the decisive fact in the file. A beneficiary faced with an unpaid balance would be well advised to assess the age of the guarantee without delay before incurring costs. For contracts under negotiation, the clause governing when the guarantee falls due deserves as much attention as the amount guaranteed.