New Developments in the Law of Guarantees

The use of guarantees to support debt obligations is reasonably widespread in the Sultanate of Oman. A legal framework regulating guarantees is set out in the Law of Commerce, promulgated by Sultani Decree 55/1990, as amended (the Law of Commerce). An amendment was recently made to one of the provisions of the Law of Commerce relating to guarantees.

Sultani Decree 75/2010, which was issued on 12 June 2010 and came into effect on 16 June 2010, amends Article 238 of the Law of Commerce. Pursuant to Article 238 of the Law of Commerce (which replicates Article 77 of the Law of Commerce), guarantors are jointly and severally liable for the guaranteed debt, amongst themselves and with the debtor. Upon default by the debtor, the creditor has a right to claim payment from the guarantors or any one or more of them or from the debtor, as the creditor may determine. A guarantor cannot raise a defence that the debtor should have been pursued first, or that the debtor should be