This article is intended to draft the main features of guarantees in Italian law in comparison with other European systems. As regard to the implication of dealing with a legal system by using the terminology of a foreign one, we subscribe to the remarks made by Dr. Hök in his article Comparison between the Guarantee in English Law and the "Bürgschaft" in German Law, to which we refer. 

A preliminary distinction need to be drawn between guarantees undertaken by a contract of fideiussione as ruled in the Civil Code, those undertaken in a bill of exchange or in a promissory note (the so called “avallo cambiario”), and those arising from other kinds of agreement known in the international business practice as Garantievertrag or performance bond (in Italy as contratto autonomo di garanzia). 

We’re going to analyse the fideiussione at first and to draft later a quick overview on the other forms of liability for another person’s obligation recognised in Italian law system with some final remarks about the questions of law applicable and jurisdiction which are necessarily involved in a international context. 

II) The "fideiussione" under the Art. 1936 Codice Civile and the following provisions

a) The nature of fideiussione 

The fideiussione is a typical instrument, well known in most law systems (Bürgschaft, § 765 BGB, fianza Art. 1822 Código Civil, cautionnement Art. 2011 Code Civil, guarantee in Common Law) to provide personal securities for the fulfilment of an obligation by a third person’s promise to carry out the obligation of the principal debtor in the event he does not and virtually offering the creditor the possibility of enforcement on the guarantor’s goods if also the guarantor’s obligation is not fulfilled.  

According to the Art. 1936 Codice Civile, fideiussore (from the latin fideiubeo = to make oneself guarantor) is one who personally binds himself before the creditor, guaranteeing the fulfilment of another person’s obligation (not necessarily a monetary debt) and so making himself liable with all his goods according to the general rule of Art. 2740 Codice Civile. 

The fideiussione is a contract that usually involves the agreement of two parties, the guarantor (fideiussore) and the creditor. Nevertheless it can be undertaken through a unilateral act, e.g. a will, i.e. through the solely promise of the guarantor (Cass. 1974/2502; 1984/2356; A. Giusti, La fideiussione,1998, 110-113).

The fideiussione is traditionally grouped among those contracts, which produce obligations for only one party (so called unilateral contracts).

It commonly implies also an agreement between the principal debtor and the guarantor, however the fideiussione produces its effects even if the principal debtor ignores its existence (Art. 1936 II, Codice Civile. See Art. 1823 Código Civil, Art. 2014 Code Civil). 

b) Requirement of express form 

The parties’ will to stipulate a guarantee for the fulfilment of the main debt has to be expressed (Art. 1937 Civil Code, see also 1827 Código Civil), whereas no written form is necessarily required, unlike in German law (§766 BGB). Consequently the existence of a guarantee by fideiussione can be inferred from the objective and unequivocal behaviour of the parties and it can be proved also through testimony (Cass. 2002/3429; 1998/8922; 1992/11413). A fideiussione by oral agreement is binding and enforceable for the parties. No limitations are there to its enforcement in Italy, even if concluded abroad, as long as it is valid under the law applicable according to the Rome Convention 1980 on contractual obligation to which Art. 57 L. 1998/218 (our private international law) refers. 

The written form is however generally used, for it offers above all a proof of the guarantee which can be of enormous importance when the contract need to be enforced, affecting the choice of enforcement procedures (and consequently the amount of time and money required for the debt recovery). If one has a written document to prove the debt, one can more easily obtain e.g. an injunction decree ex art. 633 c.p.c.* (for an overview over the means of enforcement in Italy, see Basic Civil Court Procedures in Italy by Pietro Bembo) 

[*The injunction decree, under art. 633 Civil Procedure Code can be now notified also in a foreign country. According to the reform introduced by D.lgs. 231/2002, which enacts some of the rules provided by the directive 35/2000 on payments in commercial transactions, the judge must decide on the application within 30 days. The decree, which is notified together with the petition, contains an order to pay (or to deliver goods) within 40 days (reducible to 20 days) if the debtor lives in Italy, 50 days if he lives in another European country, 60 days in the remaining countries. Within the same period the debtor can oppose the decree starting a new incidental proceeding.] 

c) Co-guarantors

Two or more guarantors may become jointly liable for the same obligation, with the consequence that each one of them is liable for the whole debt (Art. 1946 Codice Civile and Art. 2025 Code Civil, see on the contrary Art. 1837 Código Civil). The parties may however agree to limit the liability of each fideiussore to a proportional part of the debt (the so called beneficium divisionis). In this case if the creditor sues one of them, this one can request the creditor to reduce his claim to the portion owed by each one.

Whereas the beneficium divisionis seems to be acknowledged as a (disposable) right of the guarantors by Spanish Code (Art. 1837 Código Civil) and an implied exception by the French Code (Art. 2026 Code Civil), under art. 1947 Codice Civile it must be (expressly) agreed by the parties to operate. 

Thus under the Italian law, unless the contrary has been agreed by the parties, each fideiussore has to pay the whole, if requested. Each guarantor can claim a proportional contribution from the others only after performing. If one of them becomes insolvent his portion is divided among all the others (Art. 1954 Codice Civile, see also 1844 II Código Civil). If they had not undertaken the obligation together, jointly, each one has only a right to be reimbursed by the debtor but no claim against the others (Cass. 1979/1991). 

d) Capability to stipulate the fideiussione – fideiussione issued by companies 

The fideiussione is construed as a contract that exceeds the ordinary administration, because it involves a liability, which may seriously affect the patrimony of the guarantor.  

That character of extraordinariness had led many authors and Courts to consider the fideiussione as not included among to the acts pertaining the company’s ordinary sphere of activity. Thus it was stated that, unless the power to bind the company with fideiussione was not provided by the Statute, the undertaking of a fideiussione needs to be approved through a decision of the extraordinary assembly that consequently changes the company act (Cass. 1958/3471, Messineo, Fideiussione prestata da società nei confronti una banca in Operazioni di borsa e di banca. Studi giuridici, 1954, 479). This theory had been criticised because of its extreme rigidity, which could not be accepted by the business practice. 

This debate lost a great part of its importance after Art. 2384-bis was introduced by D.P.R. 1969/1127, according to which every act concluded by the administrators of a company in its name cannot be opposed to a third person who ignored they were not connected to the company’s activity.

As a result of this latest construction, if the administrator is not entitled before the company to undertake a fideiussione and this limitation has not been published in the register of companies, this fact may have relevance in the relationship between the administrator and the company (e.g. giving rise to his responsibility before the assembly) but not necessarily outside. Only if the obligation is, or should be considered objectively not connected the activity of the company and the third person that contracts with the administrator can or has to realise that, this lack of power of the administrator affects the existence of the fideiussione (see A. Giusti, La fideiussione e il mandato di credito, in Trattato Cicu-Messineo, Giuffrè, 1998, 99) . 

e) The fideiussione as accessory guarantee 

The fideiussione is traditionally construed as a contract, which creates an accessory obligation to the main debt. This characteristic, which can be also inferred from the Introductory Report of the Code, can be summed up in the following rules:

- the obligation cannot arise nor stand without a valid obligation of the principal debtor, except when the principal debtor was incapable (Art. 1939 Codice Civile, see also 2012 Code Civil and 1824 Código Civil);

- its extent cannot exceed the limits of the guaranteed obligation and it cannot be concluded with more onerous terms (art. 1941 Codice Civile, see § 767 BGB). Even in the case of a contrary agreement the obligation is limited to the terms of the guaranteed obligation (1942 III Codice Civile, 1826 Código Civil, 2013 Code Civil);

- its discharge depends on the discharge of the main obligation and the fideiussore can use all the counterclaims arising from the main contract, to defend himself against the creditor, except those concerning the incapability of the principal debtor (Art. 1945 Codice Civile)

- the fideiussione, like all other accessory securities, is automatically transferred with the assignment of the main debt (art. 1263 Codice Civile, see also §§ 412, 401 BGB). 

The accessory character of the fideiussione should not lead to construct the obligation undertaken by the guarantor as a subsidiary one in general (Cass. 75/3853). According to the Art. 1944 I Codice Civile the fideiussore undertakes a joint and several liability to the creditor. That means that the creditor, once the principal debtor has not performed his obligation, can request the fideiussore to perform even if he had not requested the principal debtor before. 

That seems to be one the most important differences between the Italian fideiussione and the corresponding guarantees in other European law systems, in which the “guarantee” gives generally rise to a subsidiary obligation, unless the beneficium excussionis has been excluded (see § 771, 773 BGB, 2021 Code Civil, 1830-31 Código Civil).  

Also under the Italian law the parties (fideiussore and creditor) may agree that the guarantor can refuse to perform until the creditor has sued the principal debtor without being satisfied on his goods (art. 1944 II Codice Civile, see also § 771 BGB). In this case the fideiussore has to indicate the goods of the principal debtor on which the creditor can distrain (Similar Art. 1832 Código Civil).  This last one is anyway a disposable provision, which can be excluded by the parties  (Commentario Al Codice Civile dir. by Cendon P., 1991, Art. 1944). The beneficium excussionis creates an exception the guarantor can use against the creditor once he is sued in a court proceeding (Ravazzoni A., La fideiussione, 1957, 185; Fragali M., Fideiussione in Enc. Dir., XVIII, 1968, 368). The clause that provides the subsidiary liability of the guarantor needs to be expressed and unequivocal while no special form is required (App. Trieste 28 April 1962, App. Firenze 5 January 1963) like for the contract to which it is attached.

The guarantor has an interest in informing the principal debtor that he was requested to perform because, if he does not and performs, the principal debtor can use against him all the counterclaims arising from the main obligation, e.g. discharge by fulfilment or by prescription (Art. 1952 Codice Civile, see below). 

According to Art. 1948 Codice Civile, the obligation undertaken by a fideiussio fideiussionis is, on the contrary, normally a subsidiary one. If one guarantees  the guarantor’s (fideiussore) obligation one can be required to the fulfil  only if the principal debtor and the fideiussore have not fulfilled or have been discharged because of their incapability.

f) Extent, time of arising and duration of the guarantor’s liability 

Generally the fideiussione is confined to a specific obligation. A guarantee for a future or conditional obligation is nevertheless allowed under Art. 1938 Codice Civile (see 1825 Código Civil, § 765 II BGB). 

It was common in bank practice to obtain a fideiussione omnibus, through which the guarantor became liable for an indefinite number of obligations arising, e.g. from a bank account of the principal debtor. This practice has changed because of the reform of Art. 1938 Codice Civile by L. 1992/154. According to the new provision, the fideiussione can be undertaken, as before, also for conditional or future obligations but only if the guarantor’s liability is limited to a specific amount.

The fideiussione stipulated before that Reform remains valid but does not produce any further effect for the obligations undertaken after the L. 1992/154 has come into force (Cass. 2002/13823; 2002/12140; 2000/15024; Const. Court 1997/204). 

The guarantor’s liability arises when the principal debtor has made default and it continues after the day on which the main obligation is due. The fideiussore is however released if the creditor does not sue the principal debtor within six months from that date or has not pursued his claim with due diligence (Art. 1957 Codice Civile).

The guarantee is discharged also when the guarantor cannot be subrogated, because of the creditor, in the rights, pledge, mortgage, liens of creditor (Art. 1955) 

g) The guarantor’s right to be reimbursed and to be released
 

The guarantor who has paid is entitled to be reimbursed by the principal debtor and he is subrogated in the debtor’s position (Art. 1949) even if the debtor had ignored the guarantee. The right to indemnification includes the reimbursement of the sum he has actually paid for the principal debtor, interest and the expenses the guarantor has incurred after he has informed the principal debtor that the creditor has pursued his claim against him (Art. 1950).

The guarantor loses his right to be reimbursed by the debtor if he does not inform him of his payment and the debtor performs. If the guarantor has not informed the debtor, this one can use the counterclaims he could have raised against the creditor at moment of the payment. 

The fideiussore, even before performing, can sue the debtor to get released or guaranteed in his right of reimbursement when (Art. 1953 Cod. Civ., see also Art. 1843 Código Civil, Art. 2032 Code Civil):

- he has been sued for the performance in a court proceeding;
- the debtor has become insolvent;
- the debtor had promised to release him within a fixed period;
- the debt has fallen due;
- after five years if the principal debt had not a due date and unless it cannot be extinguished before a   
     fixed date. 

III) Guarantee by “avallo” under Art. 37 Royal Decree 1933 n° 1669

If is commonly accepted by the jurisprudence that the fideiussione constitutes an accessory obligation, it must be said that in Italian system there are other forms of guarantee in which the accessoriness seems to fade to a merely formal meaning. 

In particular, Art. 37 Royal Decree 1933 n° 1669 (which was issued while Italy was still governed by Monarchy and found its principles in the Uniform Rules drafted by the International Convention on conflict law in matter of bill of exchange and promissory note signed in Geneva, 1930) provides that the obligation of the avallante (who grants a guarantee by underwriting a bill of exchange or a promissory note) remains valid despite the guaranteed obligation is void for any reason except its lack of form. 

The avallo itself does not imply a fideiussione, because the will to guarantee the creditor for the specific obligation cannot be presumed from the solely underwriting of the bill of exchange or promissory note. To infer a fideiussione further concrete and objective elements are required since it must be proved that the avallante guarantor had the unequivocal will to bind himself also as a fideiussore (Cass. 1997/8990; 1989/2649; Pellizzi – Partesotti, Commentario breve alla legislazione sullal cambiale e sugli assegni, 1995, 94).

The construction of the whole relation between the guarantor, the principal debtor and the creditor, becomes of a great importance, in particular because the right of the payee to pursue the guarantor that has underwritten the bill of exchange or a promissory note expires in three years instead of ten years as usual (art. 95 R.D. 1933/1669). 

IV) Special types of guarantee developed by business practice 

Another form of guarantee not provided by the Code and which has been developed by the commercial practice is the “contratto autonomo di garanzia” also called “polizza fideiussoria”(when granted by an insurance company), corresponding to the Garantievertrag and performance bond, whose most relevant element of distinction from the fideiussione is that it does not produce an accessory obligation, that means the guarantor cannot use counterclaims of the principal debtor, arising from the main contract, to defend himself against the creditor.  

It has been discussed about the admissibility in Italian system of contracts like the Garantievertrag (performance bond), but it was eventually concluded, even by the Corte di Cassazione (the Italian High Court), that they should be admitted according to Art. 1322 II Codice Civile, which entitled the parties to create atypical contracts, i.e. not provided by the Code, as long as they pursue interests, which deserve to receive protection by the law system (Cass. 2001/6757; 1998/8248; 1994/1933; 1992/12341). 

The distinction between performance bond and fideiussione has to be drawn with regard to the terms and conditions used in the agreement rather than to the name given by the parties to the contract. Thus the construction of the contract, in particular of the its text, is of great importance, as it has been underlined in its latest judgements by the Cassazione (Cass. 10637/2002; 4637/2002; 3326/2002; 2742/2002) 

By a contratto autonomo di garanzia, which usually involves three or more parties (the debtor, the creditor, a guarantor and often a further guarantor’s guarantor), the creditor is entitled to request the guarantor to pay “on demand” in the event of non-performance or non-conforming performance.  

The provision of the clause à première demande is yet not sufficient to distinguish a fideiussione from a performance bond. Also a fideiussione may contain such a clause, but even in this case the guarantee remains accessory to the main contract with the consequence that the guarantor’s counterclaims against the creditor are suspended, but not cancelled, until he has paid the creditor (Cass. 1994/6604; see A. Giusti, La fideiussione, 338, also with references to foreign law systems).  

By a contratto autonomo di garanzia, on the contrary, the parties create an obligation independent from the events of the contract for which it was granted, so that the question whether the guaranteed obligation is valid or whether the creditor has performed in an unsatisfactory manner, becomes irrelevant in the lawsuit between the guarantor (usually a bank) and the creditor. Our judges have however established that the guarantor can oppose the creditor’s claim when his request is openly (prima facie) abusive or even fraudulent (exceptio doli, see Cass. 2001/6757; 1994/1933; 1992/12341).  

It must be finally recalled that notions as “contratto autonomo di garanzia”or “polizza fideiussoria”(like Garantievertrag and performance bond), for the very fact they do not correspond to a contractual pattern crystallized by the Code, have an indefinite meaning, which need to be determined by considering and construing the terms and conditions actually agreed by the contractors.  

The same remarks need to be made about other improper forms of guarantee often used by the business practice as the lettre de patronage or comfort letter. These kinds of declarations, usually issued by a parent company towards the possible creditor of a controlled company, may have a variety of form and contents. It has been distinguished between “weak” and “strong” letters, depending on which level of involvement the parent company undertakes. Such statements are usually not qualified by the jurisprudence as juridical bonds, so that they can be valued only with regard to the general duty of fairness and eventually give rise to a pre- or extra-contractual liability of the patronnant, according to Art. 1337-1338 Codice Civile. Yet it may happen that the patronnant promises to maintain the solvability of the controlled company and even more to reimburse the creditor if the debtor does not. In this case the declaration may assume the character of an actual guarantee, and may be construed for example (if that is the case), as a fideiussione (A. Giusti, La fideiussione,1998, footnotes with many references at p. 17-20).

As regards the construction of a lettre de patronage or comfort letter it has to be considered that by such declaration we deal with a unilateral act (ruled by Art. 1333 Codice Civile), whose contents, according to Art. 1362 and 1366 cannot be determined but with reference to the will expressed by its author, here the patronnant (Cass. 1995/10235; see also Trib. Milan 22 June 1995; Trib. Firenze 30 Nov 1993). 

V) Jurisdiction and law applicable to the guarantee 

A preliminary and fundamental question in the analysis of the law and jurisdiction governing these forms of guarantee is whether such “guarantees” (fideiussione, Garantievertrag, lettre de patronage) have to be considered, to the purpose of determining the applicable law and the jurisdiction, independently from the contract for which they were granted or if the choice (or decision) about the law and about the jurisdiction applicable to the guaranteed obligation would also inevitably affect  the guarantor’s obligation. 

According to the Convention on the law applicable to contractual obligations signed in Rome in 1980, which provisions came into force in Italy by L. 1984/975 and are recalled by the Art. 57 of the Italian private international law (L. 1995/218), a contract that involves the laws or different countries shall be governed, if the parties have not regulated that aspect, by the law of the country with which the contract is most closely connected (Art. 4.1), and that shall be presumed to be the one where the party bound to the characteristic performance has, at the time of conclusion of the contract, its habitual residence, or, in the case of a body corporate or unincorporate, its central administration (Art. 4.2), unless it appears from the circumstances as a whole that the contract is more closely connected with another country (Art. 4. 5).  

Most of the arguments on which the process of determining the applicable law and jurisdiction is based, depend on the construction of the presumption provided by Art. 4.2, in particular of its strictness and of its relationship with the clause échappatoire of par. 5. 

As regard to the guarantees, most authors affirm that the law applicable both to a fideiussione and performance bond, and even to a lettre de patronage, should be the one of the country in which the guarantor has its residence or its central administration. That because all these kinds of guarantee involve the obligation of only one party (the guarantor), whose performance has to be identified, accordingly to this theory, as the characteristic performance mentioned by Art. 4.2 Rome Convention 1980 (Radicati di Brozolo, Giurisdizione e legge regolatrice del Garantievertrag, in Banca Borsa e Titoli di Credito, 2000, II, 75; Ballarino, Diritto internazionale privato, Padova, CEDAM, 1996, 608-9, also with reference to Bonomi, Le garanzie bancarie nel d.i.pr, in Banca borsa e titoli di credito, 1992, 677-681). Contra Giardina/Villani, Garanzie bancarie, commercio internazionale e d.i.pr., Padova, CEDAM, 1984.

These authors agree, directly or indirectly, to a construction of the presumption of Art. 4.2 Rome Convention as a “strong” presumption. 

This construction has been  (though only in part) supported by a relatively recent decision on this matter, which was issued by the Tribunal of Milan that nevertheless bases its reasoning on a principle that may lead to questionable results if raised to general rule for applying the conflict rules. 

Deciding on a “contratto autonomo di garanzia” (performance bond, Garantievertrag) the Court has established that, by such agreement, given the lack of accessoriness of the guaranteed obligation to the main contract, the characteristic performance according to Art. 4.2 Rome Convention 1980 shall be considered the guarantor’s obligation rather than the principal debtor’s obligation for which the guarantee was granted, and this presumption cannot be overcome by the mere circumstance that the guaranteed obligation is more closely connected to a country other than that in which the guarantor has its habitual residence, or, in the case of a body corporate or unincorporate, its central administration (Trib. Milano, 4 Dec 1997 Banca Agr. Milanese v Commerzbank AG).

The reasoning can be summed up as follows:

performance bond ---> not accessory ---> Art. 4.2 Rome Conv.: law applicable to the guarantor’s obligation;

fideiussione ---> accessory ---> Art 4.5: law applicable to the guaranteed obligation.  

This analysis has been criticised since it involves indeed a decision about the accessoriness, decision that may be affected by the law on which the construction of the guarantee is based, that is by a law that we have not yet determined and that we are still trying to determine by applying the above mentioned criteria of the Rome Convention (see Radicati di Brozolo, Giurisdizione e legge regolatrice del Garantievertrag, 79). 

The choice of the law applicable to the guarantor’s obligation may also affect the decision about the jurisdiction, as occurred in the above quoted judgement. 

If the guarantor’s residence or centre of administration is located abroad, it could be arise the question whether an action concerning the guarantor’s obligation can be brought before the italian courts, as courts of the country in which the obligation has to be performed, as provided by Art. 5.1 of the Convention (now see also EC Council Regulation 44/2001).

Since the place of performance shall be determined, accordingly to the doctrine started by European Court with the decision Tessili (C-1976/12), through the conflict rules of the Country in which the lawsuit has been filed (see also Cass. Un. Sect. 2002/8224; 1999/828; 1982/2499), the Italian judge shall apply the Rome Convention 1980 (recalled by Art. 57 L. 1995/218), that established the criterion of  the most closely connection of the contract to a country. 

By the contract of fideiussione the Cassazione seems to consider decisive for determining the jurisdiction according to Art. 5.1 Bruxelles Convention (Art. 5 EC Reg. 44/2001), the place where the guarantor’s obligation has to be performed rather than that in which the guarantor is located (Cass. Un. Sect. 1999/7; 1987/7341; 1986/4036). 

According to these judgements (that nevertheless have not expressly dealt with the applicable law but only with the jurisdiction), the nature of the relation between the guarantor’s obligation and the guaranteed one, also affects the choice of the jurisdiction to which they are subject that could be the same if they are accessory one to another (as by a fideiussione generally is), or a different one if they cannot be considered accessory (e.g. by a Garantievertrag). 

Summing up:

 fideiussione ---> accessory ---> jurisdiction of the guaranteed obligation;

Garantievertrag ---> not accessory ---> jurisdiction of the guarantor’s obligation. 

If we compare these conclusions about the jurisdiction with those drawn by the Tribunal of Milan on the applicable law, we come to affirm that, according to the that trend, both the questions of applicable law and jurisdiction, should be solved with regard to the accessoriness of the contract (or declaration) by which the guarantee is given. 

This solution is not supported, as we said, by great part of the authors, who also notice that it is not consistent with either the (tough not mandatory) rules issued by the ICC (Publ. 458) and those established by the Unicitral Convention 11 Dec 1995 on independent guarantees and stand by letter of credit that consider independently the guaranteed obligation and the guarantor’s one (Art. 27-28 ICC Publ. N° 458. On this subject Radicati di Brozolo, Giurisdizione e legge regolatrice del Garantievertrag, 79; Pontiroli, Prime considerazioni sulle Uniform Rules for Demand Guarantees della C.C.I., in Banca Borsa e Titoli di credito, 1995, I, 395).  

All that considered it can be concluded that, because of the complex functioning of conflict rules on applicable law and jurisdiction and the unforeseeability of the results to which, as above described, the application of such conflict rules may lead, it is advisable to pre-determine these aspects by express clauses. To this aim the rules developed by ICC and Unicitral Convention could be a useful guideline.