Cour de cassation, Commercial Chamber, 21 May 2025, 24-11.783, Unpublished
A recent decision by the Cour de cassation highlights the obligations of banks and the thorny issue of disproportionate suretyships. The case involves a Groupement Agricole d’Exploitation en Commun (GAEC — a French agricultural cooperative) and a Caisse Regionale de Credit Agricole Mutuel (CRCAM). It serves as a genuine roadmap illustrating the various issues that arise in this type of case.
The origins of the dispute
The case originates between 2013 and 2015, during which period the Caisse Regionale de Credit Agricole Mutuel des Cotes-d’Armor granted nineteen professional or property loans to the GAEC de [Address 7]. In parallel, Ms. [W] [I] and Mr. [D] [J], partners in the GAEC, provided personal guarantees (joint and several suretyships) for six of these loans through private deeds.
Following financial difficulties encountered by the GAEC in 2017, and after the bank terminated a payment suspension agreement, the GAEC, Ms. [I], and Mr. [J] brought proceedings against Credit Agricole before the Judicial Court of Saint-Brieuc. They sought damages for breaches by the bank of its duties to advise, monitor, and inform, and requested the annulment of their suretyships on grounds of manifest disproportionality. In return, the bank demanded payment of the outstanding loan balances from the GAEC and enforcement of the surety commitments by Ms. [I] and Mr. [J].
The First Instance Judgment (Judicial Court of Saint-Brieuc – 17 December 2020)
The court initially dismissed the GAEC’s claim for damages. It ordered the GAEC to pay various sums in respect of the loans. Regarding the guarantors, the court held that the CRCAM could not rely on the surety commitments entered into on 5 April and 7 September 2013, finding them to be disproportionate. However, the surety commitment of 15 January 2015, entered into by Ms. [I] and Mr. [J], was not found to be manifestly disproportionate, and the court ordered them jointly and severally to pay 34,392.32 euros in respect of this loan.
The Court of Appeal Ruling (Rennes, 22 December 2023)
The GAEC, Ms. [I] and Mr. [J], as well as Credit Agricole, all appealed this decision. The Rennes Court of Appeal examined the parties’ grievances on several key points.
On Excessive Credit and the Bank’s Obligations:
The GAEC argued that Credit Agricole had breached its duties to advise, inform, and warn by granting excessive credit, with some contracts not even being signed and no forecast study having been requested to assess the GAEC’s repayment capacity.
The bank, for its part, contended that the GAEC should be considered a sophisticated borrower given the experience of its representatives in the agricultural sector (17 years). It argued that the number and proximity of the loans did not imply a risk of excessive indebtedness, as the financing was tailored to the farm’s situation, aimed at its expansion and modernization. The bank attributed the GAEC’s difficulties to the dairy crisis and the GAEC’s own failings (failure to apply for subsidies).
- Duty to Inform: The Court of Appeal recalled that the bank, although a credit provider, is not required to interfere in its client’s affairs to assess the advisability of their transactions. For loans signed by the GAEC’s representatives, the Court considered that the borrower was presumed to have been informed beforehand about the characteristics of each contract. However, for loan No. 00385311459 dated 11 July 2013 (150,000 euros), for which the copy produced by the bank bore no signature from the borrower, the Court of Appeal noted that the GAEC had not disputed having received the funds or having made payments until June 2017. It therefore reversed the first instance judgment on this point and ordered the GAEC to pay the outstanding balance of this loan, plus interest.
- Duty to Warn: This duty is owed by the banker only where the credit is excessive and poses a risk of over-indebtedness to a non-sophisticated borrower. The Court found that the GAEC had not demonstrated the existence of excessive indebtedness at the time the loans were granted in 2013, 2014, and 2015. The 2013 loans (889,995 euros in total) were intended to support an expansion and modernization project, and the GAEC had sufficient financial capacity at that date (debt ratio of 17% as of 1 July 2013). The documents produced by the GAEC to prove excessive indebtedness post-dated the granting of the loans, and were therefore unsuitable for assessing the situation at the time of conclusion. The Court classified the GAEC as an unsophisticated borrower (its expertise could not be inferred solely from its agricultural experience), but this was not sufficient to establish a breach by the bank, absent proof of a risk of excessive indebtedness at the time the loans were granted.
On the Disproportionate Nature of the Surety Commitments:
Article L. 341-4 (now L. 332-1) of the French Consumer Code provides that a professional creditor may not rely on a suretyship entered into by a natural person whose commitment was manifestly disproportionate to their assets and income at the time it was entered into, unless the guarantor’s assets enable them to meet their obligations at the time they are called upon. The disproportionality is assessed against the guarantor’s assets and income, including community property and shares held in the guaranteed company.
- The Court of Appeal recalled that the surety commitments of Mr. [J] and Ms. [I] dated from 5 April 2013, 7 September 2013, and 15 January 2015. Based on the 2013 financial information forms, it found that the suretyships entered into on 5 April 2013 (totaling 377,000 euros) were disproportionate to the income and assets of Mr. [J] (118,400 euros) and Ms. [I] (329,400 euros). The same applied to the suretyships of 7 September 2013 (an additional 270,000 euros).
- The Court of Appeal reversed the first instance judgment regarding the suretyship of 15 January 2015, finding that it was also disproportionate to the income and assets of the guarantors, who were still partners in the GAEC in January 2015.
- Return to better fortune: The Court of Appeal held that the bank had not proven that the guarantors were in a position to meet their obligations at the time of the formal demand (March 2019). It emphasized that the bank had merely relied on the asset values declared in 2013 without demonstrating that the value of Mr. [J]’s house was still 290,000 euros or that Ms. [I] still held her 61,000 euros in savings in 2019.
Consequently, the Court of Appeal concluded that the bank could not rely on any of the surety commitments entered into by Ms. [I] and Mr. [J].
The Partial Reversal by the Cour de cassation (21 May 2025)
The matter did not end there. The Cour de cassation, hearing appeals from both parties, issued a partial reversal on 21 May 2025.
- On the Duty to Inform (Loan No. 00385311459): The Cour de cassation censured the Court of Appeal on the unsigned loan (No. 00385311459). It held that the fact that the GAEC had received the funds and made payments until a certain date was not sufficient to establish that the bank had fulfilled its duty to inform regarding the characteristics of the loan. The Cour de cassation recalled that it is incumbent upon the lending institution to inform the borrower so that they enter into the commitment with full knowledge of the facts. The Court of Appeal’s reasoning was “inadequate” to prove the performance of this obligation.
- On the Disproportionality of the Surety Commitments (Value of Shares): The Cour de cassation also reversed the appellate ruling concerning the assessment of disproportionality of the suretyships. It noted that the Court of Appeal had taken into account the nominal value of the shares in the GAEC (60,800 euros) held by Mr. [J] and Ms. [I] to evaluate their assets. However, the Cour de cassation recalled that it is the real or economic value of the shares that must be taken into consideration when assessing the guarantor’s assets and income (this principle is regularly reiterated by the Cour de cassation; see notably: Cass. com., 12 February 2025, No. 23-12.599). The bank had, moreover, argued that the GAEC’s assets were valued at 406,588 euros as of 1 July 2013. By relying on the nominal value, the Court of Appeal did not provide a proper legal basis for its decision.
The Cour de cassation therefore referred the case back to the Rennes Court of Appeal, differently constituted, for re-examination of these points.
Key Takeaways for Practitioners
This decision is rich in lessons for all banking law practitioners:
- The Bank’s Duty to Inform: An Exacting Standard of Proof: Even if a borrower has received the funds and made payments, this does not relieve the bank of the obligation to prove that it actually provided all necessary information prior to the conclusion of the loan. Unsigned contracts or incomplete information can weaken the bank’s position. It is essential for credit institutions to maintain impeccable traceability of all pre-contractual information.
- Assessing the Disproportionality of a Suretyship: Economic Value Prevails: This is a crucial point: when evaluating the assets of a guarantor who holds shares in the guaranteed company, the real, economic, or market value of those shares must be taken into account, not merely their nominal value. For guarantors, this means that the value of their shares may be a significant asset to consider. For banks, this requires a more in-depth financial analysis of the guaranteed company at the time the suretyship is entered into, in order to properly assess the guarantor’s solvency.
- Proving the Guarantor’s “Return to Better Fortune”: Even if a suretyship is initially disproportionate, the bank may rely on it if it proves that the guarantor’s assets enabled them to meet their obligation at the time they were called upon. This case reaffirms that the burden of this proof lies with the bank, and that it cannot rely on outdated or approximate data. Up-to-date and concrete evidence is essential.
This decision serves as a reminder for banks to rigorously structure their financing, to ensure completeness of pre-contractual information, and to comprehensively document the credit and suretyship granting process. For borrowers and guarantors, it is an invitation to the greatest vigilance and to the need to consult a lawyer to defend their rights in the face of complex financial commitments.
