Cancel guarantee

As a guarantor, your relationship with the creditor is governed by the guarantee agreement. This only rarely contains a general right of termination. Under certain circumstances, you as the guarantor can still get out of the guarantee by giving extraordinary notice of termination or early termination.

The most common reason for early "termination" is so-called immorality, where the creditor has exploited the existing emotional bond with you in order to gain you as a guarantor.

A guarantee can also be terminated if the creditor has deceived you as guarantor or if contractual errors render the guarantee null and void.

The most important facts in brief

• A guarantee can only be terminated under certain conditions.
• Extraordinary terminations of guarantees are frequently issued due to immorality.
• A guarantee contract can also be revoked due to deception or formal defects.

What is a surety?

The basis of a surety is a debtor's obligation to a creditor. You enter into this relationship as guarantor. Their legal relationship is mutually directed towards both the debtor and the creditor.

As a guarantor, you assume the obligation to satisfy the creditor's claim if the debtor fails to meet his obligations to the creditor.

In practice, credit and rental guarantees are the most common. In a tenancy, the landlord becomes the creditor if the tenant, as the principal debtor, does not meet his monthly payment.

Termination rights in the guarantee agreement

According to established case law, a guarantee can only be terminated prematurely under strict conditions. This option depends on the type of guarantee. However, the guarantee agreement does not usually grant you as the guarantor a general right of termination. This applies in particular to fixed-term guarantee agreements, such as a fixed-term rental agreement.

Open-ended guarantee agreements are an exception, although they are rarely agreed in practice. Early termination is often possible here, as the duration of the guarantee obligation would otherwise be unreasonably long.

How do you end a guarantee?

When a guarantee is terminated, this does not necessarily mean that you as the guarantor are terminating your obligations prematurely.

In principle, there are many reasons for termination. These are the following situations in particular:

• The principal claim has expired
• Guarantor or principal debtor dies
• Guarantee is revoked
• Change in one of the contracting parties
• Termination due to contractual agreements
• Ordinary or extraordinary termination

Loan guarantee: security for a loan from the bank

The guarantee for a loan is particularly widespread in the private sector. This refers to the assumption of a guarantee for a borrower's debt to their bank. The following groups of people usually assume such a loan guarantee:

• Spouse
• Parents
• Grandparents
• Other close relatives
• Very close friends, acquaintances
• Business partner

As a loan guarantee is usually linked to a fixed-term loan agreement, you as the guarantor usually have no option to terminate the agreement prematurely. To terminate the guarantee prematurely, the guarantee contract must be revoked or contested.

Requirements for the termination of a guarantee

At this point, we would like to explain the reasons already listed for the termination of a guarantee in more detail.

1. principal claim has expired

A legal claim to termination of a guarantee exists if the principal claim has expired. This is based on strict accessoriness, which links the existence of the guarantee to the existence of the claim. The main claim can either be fulfilled (§ 362 Abs. 1 BGB) or a set-off may have taken place(§ 389 BGB). In both cases, the guarantee expires.

2. ordinary termination of open-ended guarantee contracts

Ordinary termination of a guarantee is generally only possible if the guarantee obligation exists for an indefinite period. Section 242 of the German Civil Code (BGB) stipulates that as a guarantor you have the right to demand termination in good faith.

This could be the case, for example, with an open-ended contract between tenant and landlord. According to Section 242 BGB, the parties to a contract are obliged to exercise their rights and obligations under the contract in good faith.

If you as guarantor have good reason to terminate the rental guarantee, you can do so on the basis of good faith. This includes, among other things, a change in the financial situation of the main tenant or the failure of the original circumstances that led to the guarantee.

However, a so-called reasonable period of time must have passed. This means that the guarantee has already existed for at least 36 months. Of course, it is also possible to give ordinary notice of termination if this is provided for as an option in the written agreement.

3. death of a party or change of creditor or debtor

Another reason for the termination of a guarantee is the death of the guarantor or the death of the debtor. In both cases, the guarantee would expire because either the guarantor or the principal debtor is no longer alive.

This also applies if there is a change of creditor or debtor. In this case, a new guarantee agreement would have to be concluded, which would of course require the guarantor's consent.

4. extraordinary termination: Guarantee relationship unreasonable

The termination of a guarantee by extraordinary termination is the most difficult. The BGB provides for this possibility in particular on the basis of Section 314 I if the continuation of the guarantee is unreasonable for the guarantor.

Here, too, the reason given is that a continuing obligation is associated with numerous obligations for the guarantor, which can lead to disadvantages. The following sections discuss when an extraordinary termination or termination of the surety against the will of the creditor or debtor is possible.

5. termination of guarantee due to immorality

One possible reason for the early release of the guarantor from his obligations is immorality. There is a decision on this by the Federal Constitutional Court from 1993, among others.

According to this, a guarantee is immoral if the borrower only exploits the emotional bond between the debtor and guarantor in order to achieve the guarantor's obligation. Such an emotional bond exists in particular between partners, spouses and between parents and children.

Another reason for a guarantee being immoral is that the guarantor is unreasonably disadvantaged by the guarantee. In this context, the guarantor is also referred to as being overburdened. In other words, this means that the guarantee would significantly exceed the guarantor's ability to pay.

In summary, the following are the main reasons why a guarantee is immoral:

• Exploitation of the emotional bond by the borrower
• Excessive use of the guarantor
• Guarantor was neither personally nor economically involved

It is important to note that the existence of immorality must be proven by the guarantor.

6. contestation of the guarantee

In addition to the immorality of a guarantee, another possible option for premature termination is to contest the guarantee declaration as such. It goes without saying that such a challenge Although this is always possible, it is often not crowned with a good chance of success. Whether the rescission can be enforced or not is primarily governed by § 119 ff. BGB (German Civil Code).

In the event of fraudulent misrepresentation, there is a good chance of successfully contesting the surety agreement. This is particularly the case if the lender misleads the guarantor into believing that his risk is lower than it actually is.
Terminate the guarantee contract:

7. revocation of the guarantee

In addition to immorality and the contestation of the guarantee declaration, in particular due to fraudulent misrepresentation, a third possibility should also be mentioned. This concerns the possibility of revoking the guarantee.

If the contract was concluded outside of business premises, there is a right of revocation in accordance with § 255 BGB.

However, this revocation option only applies if the other requirements are met:

• Guarantee contract is a consumer contract according to BGB
• Consumer contract must include paid service

What to look out for before concluding a guarantee contract?

Below we would like to give you some recommendations for terminating a guarantee. We also give you advice that you should consider before concluding a surety agreement.

1. Only enter into a guarantee obligation if you have a high level of trust in the debtor. After all, in the event of a legal dispute, you are obliged to bear the liabilities you incur as a result of the guarantee obligation.
2. Ideally, you should include in the guarantee declaration that you have an ordinary right of termination at least after a certain period of time. Such a clause is particularly promising in the case of indefinite obligations, such as a tenancy agreement between tenant and landlord.
3. If you subsequently discover that you were deliberately deceived with regard to the debtor's creditworthiness, you can contest the guarantee.
4. Did you not receive a declaration of revocation in the context of the declaration of guarantee, was it incorrect or are there other circumstances that did not comply with the legal requirements? You then have the option of revoking the guarantee.
5. If you wish to terminate a guarantee, check whether the guarantee obligation may have been immoral in addition to a possible rescission and revocation.

You should also check whether you are entering into a directly enforceable guarantee. This is because you waive your right to the defense of anticipatory action. This usually allows you to initially reject the claim by the surety creditor if the creditor has not yet attempted to collect payment from the debtor. By waiving, you allow the creditor to access you directly instead.

Free initial assessment for guarantee termination

A surety agreement is usually based on personal or economic reasons. If these circumstances change or risks are to be reduced, a legal review of the guarantee is recommended.

Is my guarantee still binding? It is important to check this first. The reasons that prompted you to submit the guarantee declaration may be decisive. Or whether you have been deceived or unreasonably disadvantaged. Formal errors can also lead to premature termination. The law firm CDR Legal offers you as a guarantor a free and non-binding initial assessment of the termination options in your specific individual case. You can tell us about your situation in confidence by telephone or using the contact form. Without further ado, you will receive competent feedback from us as well as targeted advice on the possible termination of your guarantee.
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