The typical form of a personal guarantee in Spain is a guarantee where one person undertakes to pay or perform on behalf of another, if the latter should fail to do so. Due to this, a creditor has additional assets to satisfy his or her credit claims. Its main regulation can be found in the articles 1.822 – 1.856 of the Spanish Civil Code.
The characteristics of the personal guarantee
The notable characteristic of this guarantee is that it is an ancillary obligation, and, in principle, subsidiary. The ancillary character means that the security closely depends on the main obligation, which ensures that the non-existence, nullity or extinction of the main obligation has the same implication on the security. On the other hand, subsidiarity means that the creditor must go against the main debtor in the first instance, and only if the latter breaches the obligation, can the creditor go against the guarantor. However, it can be agreed that the security be a joint and several obligation (which is common in the course of trade) in which case the creditor can go against the main debtor or the guarantor.
To set up the personal guarantee in Spain it is enough to draft a written agreement between the guarantor and the creditor, so that the process of constituting the security is faster, easier and does not involve high costs. It is advisable that the security be stated in a public document rather than a private one, to provide proof of the date and its content.
The main effect of the personal guarantee is that in the event of default of the obligation by the main debtor, the creditor can also go against the personal guarantor and demand the payment of the amount due. To do so, the creditor must prove the breach of the contract.
The guarantor can only refuse payment under exceptional circumstances which are connected with the main debtor and which are related to the nature of the debt (for instance the nullity or extinction of the obligation in case the main debtor has already paid).
Disadvantages of the personal guarantee
- It is necessary that the creditor proves the breach of contract by the main debtor so that the guarantor is obligated to pay the debt, which in some situations can be complicated or burdensome in terms of time and effort
- Possible insolvency of the guarantor
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