Article 2300 of the Civil Code: Reducing a Disproportionate Suretyship to Zero (CA Grenoble, 25 June 2026, No. 25/01507)

Grenoble Court of Appeal, Commercial Chamber, 25 June 2026, No. RG 25/01507

What happened in this suretyship case?

The facts are commonplace and will resonate with many small-business owners. On 11 January 2022, a company operating a bakery took out two business loans from a Crédit Mutuel branch: a first loan of €60,000, repayable in 84 monthly instalments of €778.77 at a rate of 1.80%, intended to finance the acquisition of a business (fonds de commerce), and a second loan of €35,000, repayable in 60 monthly instalments of €617.87 at a rate of 1.60%.

On the same day, the company’s chairman stood as joint and several surety (caution solidaire) for both facilities: up to €12,000 for a term of 108 months for the first loan, and up to €42,000 for a term of 84 months for the second. In total, he therefore committed his personal assets up to €54,000. The principal loan was also secured by a pledge over the business, registered on 24 January 2022 for €72,000.

The entrepreneurial venture was short-lived: by judgment of 3 October 2023, less than two years after the activity began, the Commercial Court (tribunal de commerce) of Romans-sur-Isère opened compulsory liquidation proceedings (liquidation judiciaire) in respect of the company. From 9 October 2023, the bank served formal notice on the guarantor to pay the total sum of €36,860.74, then filed its claim in the collective proceedings for €90,241.04. In December 2023, it summoned the guarantor to pay.

By judgment of 19 March 2025, the Commercial Court of Romans-sur-Isère declared both suretyship undertakings disproportionate, dismissed all of the bank’s claims and ordered it to pay €3,000 under Article 700 of the Code of Civil Procedure (code de procédure civile). The bank appealed: in its view, the judgment lacked a legal basis, wrongly applied the former penalty of unenforceability, and the guarantor’s financial position showed no manifest disproportion. In the alternative, it argued that the “reduction” provided for by Article 2300 of the Civil Code should result in an award of at least €18,041.04. The Grenoble Court of Appeal upheld the judgment in all respects and ordered the bank to pay a further €2,500 in respect of appeal costs.

What does Article 2300 of the Civil Code change for suretyships entered into since 2022?

Order No. 2021-1192 of 15 September 2021 profoundly reformed the law of security interests. Its Article 37 sets the transitional rule: suretyships entered into on or after 1 January 2022 are governed by the new provisions. In this case, since the undertakings were signed on 11 January 2022, the court applies the Civil Code as amended by the Order. The bank had precisely criticised the lower court for appearing to reason under the former penalty of unenforceability.

Before the reform, former Article L. 332-1 of the Consumer Code penalised a manifestly disproportionate suretyship with a radical forfeiture: the professional creditor could not “rely on” the undertaking, which practitioners called unenforceability. It was all or nothing: either the suretyship was disproportionate and the bank lost everything, or it was not and the guarantor owed everything.

The new Article 2300 of the Civil Code follows a different logic: “if a suretyship given by a natural person to a professional creditor was, when entered into, manifestly disproportionate to the guarantor’s income and assets, it is reduced to the amount up to which he could commit on that date”. The penalty is therefore no longer total discharge, but reduction of the undertaking.

It is precisely on the scope of this reduction that the bank built its appeal. In its view, the very notion of reduction “implies an award”, even a symbolic one-euro award: to reduce an undertaking is not to annihilate it. The argument had a certain literal logic, since one does not “reduce” something to nothing, one removes it. The Grenoble Court of Appeal nevertheless rejects it outright, and that is the whole contribution of the judgment.

How is manifest disproportion assessed?

The judgment provides a veritable vade-mecum on the assessment of disproportion under the new provisions, adopting the solutions developed in earlier case law, which remain fully relevant.

Which assets and income are included in the calculation?

The court first recalls the method: assessing manifest disproportion requires taking into account all of the guarantor’s assets and income, that is, all the asset items making up his estate, less the liabilities, as well as all of his resources, less his outgoings. It is a complete snapshot of his finances, taken on the day the undertaking was entered into, and on that day only: later developments, whether favourable or unfavourable, are irrelevant.

Another important methodological point: disproportion is assessed by reference to the guarantor’s ability to meet, with his assets and income, the amount of his own undertaking, and not the instalments of the secured loan. The guarantor’s reasoning, which calculated his repayment capacity by spreading his debt over 24 months, and the bank’s, which reasoned in terms of a “monthly remainder”, both missed the criterion: what matters is the comparison between €54,000 of undertakings and a net estate.

Do the shares of the guaranteed company count?

Yes, and this is a point that director-guarantors sometimes forget: shares held in the guaranteed company form part of the estate to be taken into account. But the court immediately specifies the method of valuation: it is the real value of the shares that counts, and not their par value, that real value being determined by taking into account both the assets and the liabilities of the company.

In this case, the bank argued that €8,000 should be used, being the par value of the share capital. The guarantor replied that the market value of the shares was nil, the company having borrowed 100% of the cost of acquiring the business. The court resolves the point through a set-off analysis: the amount of the loan taken out to acquire the business offsets the value of the business, so that the €8,000 corporate contribution can be retained. But this concession to the bank changes nothing in the result: even adding that €8,000 and the declared annual income, the net value of the guarantor’s estate remained negative, at -€8,572.22.

Should the analysis be undertaking by undertaking or global?

The question was at the heart of the debate, since it could change everything. The bank argued for an assessment “suretyship by suretyship”: €12,000 on one side, €42,000 on the other, each to be compared in isolation with the guarantor’s estate. The guarantor, on the contrary, defended a global assessment of the €54,000 entered into on the same day.

The court’s answer is highly nuanced and reconciles the two approaches: manifest disproportion is indeed assessed undertaking by undertaking, but taking into account the suretyship undertakings entered into previously or on the same day, which swell the guarantor’s liabilities. In practical terms, to assess the proportionality of the €42,000 suretyship, the €12,000 undertaking signed on the same day must be entered as a liability, and vice versa.

Applied to an already negative net estate, this method condemned each of the two undertakings: the €42,000 undertaking was manifestly disproportionate given the negative estate further reduced by the €12,000 undertaking, and the €12,000 undertaking was just as disproportionate given the negative estate further reduced by the €42,000 undertaking. The solution thus neutralises a well-known strategy of splitting the guarantee into several low-value instruments signed simultaneously.

What role does the personal asset statement play?

The judgment recalls two classic rules of evidence, which survive the reform. First, in the absence of apparent anomalies, the declaratory asset statement completed by the guarantor is enforceable against him, without the bank having to verify the accuracy of the financial information declared. Second, it is for the guarantor, in order to be released from his obligation, to prove that his undertaking was manifestly disproportionate to the assets and income he held at the time of signature: the burden of proof lies on him, not on the bank.

In this case, this twofold rule paradoxically worked in the guarantor’s favour: the asset statement he had signed a few weeks before the loans itself revealed the disproportion. In it, he declared that he was single and unemployed, received annual income of around €16,200, and remained the debtor of a consumer loan with €32,772.22 of capital outstanding. No savings, no real estate. In other words, at the very moment it had €54,000 of undertakings signed, the bank held every piece of information showing that the guarantor could bear no personal guarantee. The judges only had to add it up.

Why is the bank’s calculation method rejected?

In the alternative, the bank had devised a method for calculating the “reduced” amount that was as ingenious as it was bold, based on Article 2307 of the Civil Code. That provision states that the creditor’s action may not have the effect of depriving a surety who is a natural person of the minimum level of resources set by Article L. 731-2 of the Consumer Code, that is, in substance, a “living allowance” (reste à vivre) equivalent to the amount of the RSA.

The bank’s reasoning consisted of dividing the guarantor’s annual income by twelve, deducting the monthly RSA amount (€635.71 as of 1 April 2024), then multiplying the resulting “monthly remainder” by 24 months, to arrive at a minimum award of €18,041.04. In short, the bank turned a rule protecting the recovery process into a mathematical formula for a minimum award.

The Court of Appeal dismantles the device in a single sentence: contrary to what the bank claims, Article 2307 of the Civil Code “is not intended to determine the amount up to which the surety may commit, but has the sole purpose of specifying the conditions under which the debt arising from a suretyship given by a natural person is recovered”. The distinction is essential: Article 2300 governs the existence and extent of the surety’s obligation; Article 2307 concerns only the enforcement of an obligation already established. The latter therefore cannot serve as a floor for the former. The distinction between the substance of the right and the arrangements for its recovery is clear, and it can be expected to prevail beyond this case.

Can a suretyship be reduced to zero?

This is the central contribution of the judgment. The court first states the principle: the notion of reduction “does not imply a minimum award of a symbolic euro but requires only that account be taken of the amount up to which the surety could commit on the day he entered into his undertaking”. It then draws the logical consequence: “since the net value of [the surety’s] income and assets was negative, the reduction can only be total”. When the instruments were concluded, the guarantor could not commit to any amount; the bank’s claim for payment can therefore only be dismissed.

The court’s reasoning can be summarised as follows:

This solution neutralises the fear, expressed from the moment the reform came into force, that the shift from forfeiture to reduction would weaken the protection of guarantors. For impecunious guarantors, meaning those whose net estate is nil or negative on the day of signature, reduction produces exactly the same effect as the former unenforceability: the bank recovers nothing. The difference between the two regimes will only appear for guarantors with a positive but insufficient estate: where the former provision released them entirely, the new one keeps them liable up to what they could bear.

What is the significance for director-guarantors and for banks?

For guarantors, and particularly for directors of very small businesses, the judgment is doubly reassuring. First, because Article 2300 of the Civil Code protects any natural person who commits to a professional creditor, without distinguishing between informed and lay guarantors: a director who guarantees the debts of his own company benefits from the provision on the same footing as an ordinary individual. Second, because the decision shows that reduction, applied rigorously, can result in the bank’s claims being dismissed in full, even where the bank puts forward calculation methods intended to secure a minimum award.

The decision invites every guarantor facing proceedings to reconstruct his financial position precisely as at the day of signature: income, outgoings, outstanding debts (including consumer loans), other earlier or concurrent suretyships, and the real value of company shares. Where this snapshot reveals a negative net estate, a defence based on Article 2300 becomes a decisive weapon. It should be remembered, however, that the burden of proof lies on the guarantor: contemporaneous documents (tax assessments, amortisation schedules, asset statement, account statements) are decisive, and the assistance of a banking law lawyer helps to direct this evidentiary work usefully.

For banks, the message is just as clear. The asset statement is not a mere formality: where it itself reveals that the guarantor cannot commit (unemployment, debts exceeding assets, no estate), having the guarantee signed regardless exposes the creditor to losing its personal guarantee altogether. The judgment also underlines, by implication, that the bank here retained other security, including a pledge over the business: it is towards real security, and not towards insolvent guarantors, that a prudent creditor should turn.

One important reservation: this is an unpublished appeal judgment, and the French Supreme Court (Cour de cassation) has not yet expressly endorsed “total reduction” under Article 2300. The reasoning of the Grenoble court nevertheless seems difficult to criticise: reducing an undertaking “to the amount up to which he could commit” requires determining that amount, and nothing in the text prevents it from being nil where the estate was nil, or worse. The solution is moreover fully in line with the majority view of legal commentators, who accepted as early as 2021 that reduction could be total in the case of an impecunious guarantor.

What should be taken from this judgment?

The Grenoble Court of Appeal judgment of 25 June 2026 will stand as one of the first straightforward applications of Article 2300 of the Civil Code in its pure form: reducing a manifestly disproportionate suretyship is not a disguised award, it is a return to the amount the guarantor could genuinely bear, and that amount may be zero. An unemployed director, indebted beyond his assets, could commit to nothing: the €54,000 of suretyships vanish, and the bank, which knew everything about this situation when it had the documents signed, has all of its claims dismissed, at first instance and on appeal alike.

If you are being pursued as a guarantor after your company’s default, do not resign yourself to paying: the manifest disproportion of your undertaking, assessed as at the day you signed, may reduce your debt, sometimes to nothing. Each case deserves a precise analysis of the figures and the contemporaneous documents. The firm, which specialises in banking law, will examine your suretyship undertaking and build your defence against the bank.

FAQ: Disproportionate Suretyship and Article 2300 of the Civil Code