The Guarantor's Defense Of Release Under Article 862 Of The Civil Code

Summary: In bank guarantee agreements, guarantors customarily waive the benefit of Article 862 of the Greek Civil Code (defense of release). However, the right to invoke the defense of release remains intact when the creditor's satisfaction of the claim becomes impossible due to gross negligence or willful misconduct by the lender. The guarantor must prove that the subsequent insolvency of the principal debtor is causally linked to omissions or harmful actions by the creditor, namely the bank (e.g., delay in pursuing claims, failure to terminate the contract, or failure to secure collateral).

When examining guarantee agreements executed in commercial transactions, it is readily observed that the overwhelming majority serve to secure banking credit contracts. Due to their highly standardized nature, the prevailing practice in such contracts is the simultaneous waiver by the guarantor of defenses they could otherwise raise against the banking institution, notably but