The Fairness of the Contract of Suretyship in accordance with the Civil and Commercial Code Amendment Act (No.20) 2014

Abstract

According to the former Civil and Commercial Code, it did not protect and provide sufficient fairness to the third party surety who was not the principal debtor and had to repay to the creditor on behalf of the debtor. In practice, the creditor often relied on higher negotiating power to set the advantageous suretyship agreement which caused more burdens to the surety. Therefore, the provisions of the surety had been initiated to amend since B.E. 2554. Later, the Civil and Commercial Code (No.20) B.E.2557 and (No.21) B.E.2558 were promulgated. Section 681 of the Civil and Commercial Code (No.20) B.E.2557 was repealed and replaced by the new provisions (No.21) B.E.2558. Except for the continuing business, the purpose, the  type of maximum amount, and the duration of the obligation must be specified for valid obligation, future or conditional obligation to ensure that the surety is clearly informed about the liability under the suretyship contract which is different from the original law, that is: boundless and no authority to defend. A joint-liability agreement with the debtor, including terms that are different from any law or agreement increasing the burden on the surety shall be voided. Also the consents to the delay the payment in advance are not bound. Although the Civil and Commercial Code (No.20) B.E.2557 ensured fairness for the surety, it caused problems and barriers in doing business. Therefore, the Civil and Commercial Code Amendment Act (No.21) B.E.2558 was promulgated to decrease the strictness of the law (No.20) B.E.2557, to balance the protection of the surety's rights, to reduce barriers to do business and to facilitate the macro level economy. For example, the juristic surety can be held liable for the joint debtor or as a joint debtor. Also, the surety may require no rights to demand the debtor to be first called upon to perform or make the obligation against the property of the debtor. In the case that the surety who is financial institution or the person regularly doing business as the surety is allowed to make consent to the payment delay in advance. In the writer’s opinion, the principles and rationales of the amended law of B.E.2557 and B.E.2558 can sufficiently be a guarantee for protection and fairness of the surety and eliminate a barrier to conduct business as well.