SECURITIES/GUARANTIES : SURETY-BONDS

Securities in Cameroon is governed by the Uniform Act organizing Securities which was adopted in Lomé on the 15^th December 2010.

According to Article 1 of this Uniform Act, a security is an engagement carried upon the benefit of a creditor with a property or assets to guarantee the performance of an obligation or obligations mindful of their legal nature, provided that such obligation or obligations is prospective, ascertained or ascertainable, conditional or unconditional and of fixed or changing amount.

Real securities may be constituted by the debtor himself or by a third

Securities are generally guaranteed by security agents, financial institutions or national foreign credit company acting in its own name may make or register any security or other guarantee to secure the discharge or accomplishment of an obligation.

Surety-bonds fall under the category personal securities, that is, securities assuring the realization of an obligation or obligations of individuals are described only in two forms in this Uniform Act which are surety-bonds and automous guaranties. We are in a main time treat only surety-bonds

 (Surety-bonds) known in French as “le Cotionnement”

In this brief review of the subject matter, we are going to look at the definition and the parties to a sure-bond, the formation of a surety-bond, and the effects of a surety-bond.

Definition and parties to a surety-bond

According to Article 13 of the uniform act organizing securities, it is a contract whereby a surety undertakes, and the creditor discharges an existing or future debt contracted by the debtor in the event of the latter failing to do so.

The whole idea is a surety or guarantor who makes a promise to pay the creditor a certain amount if the debtor fails to meet some obligations.

A surety bond is made up of three parties, the surety, the creditor and the debtor each with a role. Here the surety undertakes to settle the creditor by discharging an existing debt or a future debt which was initially contracted between the debtor and creditor. The surety discharges this debt in case the debtor fails to do so.

How is a shorty bond formed? (Article 14)

A surety-bond is not presumed, it must be proved by a deed signed by the surety and the creditor in which mentions shall be made by the surety in his handwriting and in words and figures of the maximum secured amount. As for a surety who does not know or cannot write, he shall be assisted by two witnesses who attest to his identity and presence in the deed and most importantly, to the fact the nature and the effects of the deed were clearly explained to him.

A debtor who cannot find a surety may in replacement, provide for real security which has to be a value accepted by the creditor.

On this bases, the uniform act organizing securities in its Article 17 paragraph 1 that there shall be no surety-bond unless the secured principal debt is valid. Also, the last paragraph of this article says the principal debtor shall not increase the liability of the surety by any subsequent agreement.

A surety-bond must not necessarily be for the complete debt, it may as well be contracted for part of the debt only.

The effects of a surety-bond (Article 23 to 35)

The brief effects as to the signature of a surety-bond are as follows;

The surety shall only settle the debt due to the creditor only when the principal debtor fails to do so and also the creditor may not commence any action against the surety unless the debtor fails to pay

The creditor shall give notice to the surety in case any extension in time he grants to the principal debtor to pay his debt and of which the surety may object such extension.

Notwithstanding any clause in the surety-bond saying the contrary, any decision to accelerate payment shall not automatically be binding on the surety who shall only be required to pay on the fixed date.

During the month when the notice to pay is served to the principal debtor, of which if he fails to comply, the creditor shall inform the surety of the default of the principal debtor of which he lust state the unpaid amount including all other accessories on the due date of payment.

The liability of the surety shall be the same as that of the principal debtor, notwithstanding the creditor may pursue the surety only by bringing up an action against the principal debtor.

The creditor shall within the end of each semester of the calendar year as from the date of the signature of the surety-bond, account for the debts of the principal debtor and giving details of its origin, the due dates of payment, the various principal amounts and their interests and other accessories still unpaid. If the creditor fails to comply with these prescriptions, he shall lose contractual interest which emanates from the date of the preceding information till the date of the latest information which was communicated to the surety.

Where there are many sureties for the same debtor and the same debt, upon reimbursement  each surety make request that the debt be shared among the sureties and from this, one surety shall not be responsible for the insolvency of another surety.

The surety before paying the debt to the creditor shall notify the principal debtor or implicate him the action instituted if not the surety shall forfeit his rights against the principal debtor but nevertheless the surety shall retain a recovery action of the settled debt against the creditor who received it.

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