Independent guarantee: when may a guarantor refuse to pay

The guarantor under an independent guarantee (garantie autonome) may refuse to pay in only two situations. Either the call concerns something other than the object in consideration of which the guarantee was given. Or the call arises from manifest abuse or fraud by the beneficiary, within the meaning of Article 2321 of the French Civil Code. And where the termination (résiliation) of the underlying contract is challenged before another court, that court alone has the power to find the breach manifest.

The essentials

• The independent guarantee requires the guarantor to pay without being able to raise any defence based on the guaranteed obligation.
• The guarantor escapes payment only if it establishes manifest abuse or fraud by the beneficiary, or collusion between the beneficiary and the instructing party (donneur d'ordre).
• An independent guarantee cannot be called outside the object in consideration of which it was given; the court may refer to the underlying contract to identify that object.
• For the court of appeal, the use the beneficiary intends to make of the sums called is irrelevant to the guarantor's duty to pay.
• Where the validity of the termination of the underlying contract is brought before another court, that court alone has the power to find the beneficiary's breach manifest.

The call on the guarantee after the concession holder's forfeiture

The commercial chamber dismisses the main appeal (Com., 1 April 2026, No. 24-13.364): the guarantor remains bound to pay where it establishes neither a call falling outside the contractual stipulations nor manifest abuse or fraud by the beneficiary. The Court also declares the cross-appeal (pourvoi incident) inadmissible, and rejects the other complaints in the main appeal without specific reasoning.

A single-operation semi-public company (société d'économie mixte à opération unique) had been formed between the granting authority, holding 34%, and the subsidiary of a holding company, holding 66%. Its corporate purpose was to enter into and operate a development concession contract for a major railway station. The concession contract required the holding company to provide a completion guarantee (garantie de bonne fin) in favour of the granting authority, in order to secure the proper completion of the works. This independent guarantee, granted on an annual basis, was renewed by a contract of 29 March 2021. The granting authority then notified the forfeiture of the concession holder, relying on serious breaches, and called the guarantee after the concession company had challenged that forfeiture before the administrative court.

Before the lower court judges, the guarantor company and the concession company argued that the call fell outside the object of the guarantee and was abusive and fraudulent. The decision under appeal (CA Paris, 27 March 2024, No. 23/17298) rejected that argument and upheld the order requiring the guarantor company to pay. The commercial chamber first restates the regime of the independent guarantee (free translation):

Under Article 2321 of the French Civil Code, an independent guarantee is the undertaking by which the guarantor binds itself, in consideration of an obligation entered into by a third party, to pay a sum either on first demand or in accordance with agreed terms. The guarantor, which may not raise any defence based on the guaranteed obligation, is nevertheless not bound in the event of manifest abuse or fraud by the beneficiary or collusion between the beneficiary and the instructing party.

What the guarantor may still raise against the beneficiary

The guarantor under an independent guarantee pays first and argues afterwards: only two objections remain open to it. The first concerns the object of the guarantee. The guarantor may argue that the sum called does not correspond to the obligation in consideration of which it gave its undertaking. To verify this point, the court refers to the guarantee instrument and, if necessary, to the underlying contract, without undermining the autonomy of the undertaking.

The second objection concerns the beneficiary's conduct. The guarantor escapes payment if it establishes manifest abuse or fraud, or collusion between the beneficiary and the instructing party. The manifest character governs everything: a serious dispute as to the beneficiary's breach is not enough. So long as the validity of the termination of the underlying contract is being argued before the court having jurisdiction, the court dealing with the guarantee cannot find such manifest abuse.

The use of the funds does not change matters. The court of appeal held that the use envisaged by the beneficiary for the sums called remains irrelevant to the guarantor's duty to pay. A guarantor company therefore cannot require that the funds finance the works initially planned, nor refuse to pay on the ground that the beneficiary has redirected its works programme.

Independent guarantee: what scope for challenge remains?

The decision confirms the autonomy of the guarantee without turning it into an unlimited obligation. The commercial chamber approves the statement that "an independent guarantee cannot be called outside the object in consideration of which it was given". The guarantor therefore retains a review of scope. That review is carried out on the guarantee instrument and, where the guarantor disputes whether the call complies with that object, on the contract in consideration of which the undertaking was given.

The solution then shifts the assessment of abuse. The court dealing with the guarantee does not rule on the validity of the forfeiture of the underlying contract where that question falls to another court – here the administrative court. The court of appeal noted that the parties were exchanging a great many written submissions before the tribunal administratif (first-instance administrative court), a circumstance which ruled out any obviousness of the breach alleged against the granting authority.

One question remains open. The order to pay had been made on account of any award that the tribunal administratif might make against the concession company. The decision under discussion does not rule on the fate of the sums paid if the administrative court were subsequently to set aside the forfeiture. As the case law stands at 1 April 2026, a guarantor relying on abuse must establish something obvious, not a mere dispute.

Points to watch for the guarantor and the beneficiary

The fate of an independent guarantee is decided when it is drafted, well before it is called. The object of the undertaking deserves a precise clause: maximum amount, events triggering a call, form of the demand. According to the court of appeal, the instrument in dispute stipulated that references to the concession contract were made for information purposes and did not amount to a waiver of autonomy. Such a clause locks in the guarantor's obligation.

A guarantor company contemplating a refusal to pay must measure its exposure. It must gather, before the due date, the evidence establishing something obvious: a call concerning an object unrelated to the guarantee, a manoeuvre by the beneficiary, an arrangement between the beneficiary and the instructing party. A documented disagreement over the liabilities arising from the underlying contract does not satisfy that condition.

The beneficiary, for its part, is well advised to comply to the letter with the form of call provided for in the guarantee instrument. The forfeiture of the underlying contract does not dispense with that rigour. According to the court of appeal, a cap set by reference to the estimated amount of the works does not thereby limit the guarantee to the actual financing of those works: the guarantor's obligation arises from the guarantee instrument.

Checks to carry out before granting an independent guarantee

• Verify that the guarantee instrument itself sets out its object, its cap and the events triggering a call, without implicit reference to the guaranteed contract.
• Identify the court having jurisdiction over disputes under the underlying contract: its role conditions any later challenge to the call.
• Document on an ongoing basis the causes of delays and of changes to the timetable, amendment by amendment.
• Gather, before any refusal to pay, evidence of manifest abuse or fraud, or of collusion between the beneficiary and the instructing party.
• Do not rely on the use to which the funds are put: it does not affect the guarantor's duty to pay.