Independent Guarantee under Article 2321 of the Civil Code: Manifest Abuse, Object and Administrative Jurisdiction (Cass. com., 1 April 2026, No. 24-13.364, Published in the Bulletin)

Cour de cassation, Commercial, Financial and Economic Chamber, 1 April 2026, Appeal No. 24-13.364, Published in the Bulletin

What Is the Background to This Judgment?

What Was the Contractual Arrangement at Issue?

To understand the scope of this decision, one must first grasp the complexity of the arrangement that gave rise to it. In February 2019, two major players joined forces to create a single-purpose mixed-economy company (société d’économie mixte à opération unique, SÉMOU) dedicated to the renovation of a major Paris railway station. On one side, SNCF Gares & Connexions (SNCF G&C), which holds 34% of the capital. On the other, Ceetrus Paganor, a subsidiary of New immo holding (NIH), which holds 66%.

On 22 February 2019, SNCF G&C granted this joint company (let us call it GdN 2024) a concession to carry out the redevelopment project, in return for the right to operate the station’s commercial spaces not strictly devoted to rail use. This is a classic public-private partnership model in the rail sector: the rail operator brings its infrastructure, the private partner brings its capital and its commercial real estate expertise, and the two share the operating revenues.

In this type of arrangement, the question of financial security is central. This is where the independent guarantee comes in: Article 17.3 of the concession contract requires NIH to give a performance guarantee (garantie de bonne fin) in favour of SNCF G&C, intended to secure the actual completion of the works. This guarantee, which is annual, was renewed by a contract of 29 March 2021 and amounts to €47 million.

How Was the Guarantee Triggered?

The project initially proceeded normally, then difficulties arose. On 21 September 2021, SNCF G&C declared the forfeiture of the concession holder (déchéance du concessionnaire), that is, unilateral termination of the contract at GdN 2024’s fault, citing “serious faults” on its part, and in particular a “culpable and irremediable delay” in carrying out the works, in accordance with Article 52.1 of the concession contract.

GdN 2024 did not accept this and immediately challenged the forfeiture before the administrative court, which alone has jurisdiction to rule on the lawfulness of a decision taken under a concession contract. NIH, for its part, argued that the alleged delays were not established, in particular because the timetable had been modified by successive amendments, and that the project had been unilaterally abandoned by SNCF G&C.

Despite this pending dispute, SNCF G&C did not wait for the administrative court’s decision: by registered letter of 18 January 2022, it called the independent guarantee for the full €47 million and summoned NIH for payment before the Paris Commercial Court (tribunal de commerce de Paris).

Both the Paris Commercial Court (22 September 2023) and the Paris Court of Appeal (27 March 2024) ordered NIH to pay. The Court of Appeal added that this award is to be set against any award the administrative court might eventually make against GdN 2024. NIH appealed on points of law, and it is this judgment of 1 April 2026 that we are going to dissect.

What Is the Independent Guarantee and Why Is It So Formidable?

Why Can the Guarantor Not Raise the Principal Debtor’s Defences?

The independent guarantee, sometimes called a “first demand guarantee” when it is payable unconditionally, is the most powerful security instrument that exists in French contract law. It differs fundamentally from the surety (cautionnement), with which it is often confused in practice.

In a classic surety, the surety can raise against the creditor all the defences the principal debtor could have raised: if the underlying contract is void, if the creditor itself has failed in its obligations, if the debt is time-barred, the surety can in principle rely on this to refuse to pay. The independent guarantee works the other way round: it is disconnected (“independent”) from the underlying relationship. Whether there is a dispute, whether the principal debtor contests its fault, whether the beneficiary has itself breached its commitments, none of this concerns the guarantor. It must pay.

This strictness is no accident. The independent guarantee was designed for commercial transactions in which speed and certainty of payment are essential: construction contracts, international contracts, public tenders. A beneficiary who has obtained an independent guarantee must be able to be paid without being drawn into a lawsuit that can last for years.

How Important Is the Object of the Guarantee?

Even though the independent guarantee is independent of the underlying contract, it is not for that reason disconnected from all contractual reality. Article 2321 of the Civil Code specifies that it is given “in consideration of an obligation entered into by a third party”. This means it was given to secure a precise objective, a specific object.

And this is a point that the judgment of 1 April 2026 consolidates clearly: to assess whether the call on the guarantee complies with its object, the judge must refer not only to the guarantee contract itself, but also to the underlying contract in consideration of which the guarantee was given. In other words, if the call relates to something that exceeds or distorts the object for which the guarantee was given, it may be illegitimate.

In the case before us, NIH argued that the performance guarantee could only be used to secure completion of the works of the initial project, and not to cover other losses linked to the alleged abandonment of that same project by SNCF G&C. This is a serious argument in theory, but it did not convince the successive courts, for reasons we are going to examine.

What Are the Only Two Exceptions to the Principle of Independence?

What Is a Call Outside the Object of the Guarantee?

The first exception to the guarantor’s obligation to pay is the call outside the object of the guarantee. If the beneficiary triggers the guarantee to obtain payment of a sum that does not correspond to what the guarantee was meant to cover, the call is illegitimate.

Take a concrete example: a guarantee of performance of the construction works on building A cannot be called to cover defects in a separate building B, even if the two projects are contractually linked. The object of the guarantee delimits the scope of the guarantor’s obligation.

In the case under comment, NIH argued that SNCF G&C had “abandoned the project” and opted for “works radically different in nature, purpose and scale”, which would make the call foreign to the object of the guarantee. The Court of Appeal, approved by the French Supreme Court, dismissed this argument, finding that the guarantee had indeed been called in consideration of the concession contract, without distorting it or diverting it from its function. The fact that the future use of the sums called by the beneficiary is uncertain or different from the initial plans is held to be “immaterial to the guarantor’s obligation to pay”.

How Is Manifest Abuse or Fraud Established?

This is the heart of the judgment of 1 April 2026, and the French Supreme Court’s most important contribution to the subject. The question was this: is the fact that a contractual breach is contested before the competent court enough to establish manifest abuse or fraud? The answer is no, and the Court states it as a general principle worth quoting in full:

“A call on a guarantee based on a contractual breach whose reality is contested before the competent court and whose attribution to the guaranteed debtor is not devoid of any foundation does not constitute manifest abuse or fraud within the meaning of that provision.”

This wording is remarkably rigorous. It sets two cumulative conditions for a call to be considered non-abusive: first, the breach relied on is genuinely contested before the competent court (a procedural condition); second, that breach is not devoid of any foundation as regards its attribution to the debtor (a substantive condition). If both conditions are met, the call on the guarantee cannot be characterised as manifest abuse or fraud, and the guarantor must pay.

What Exactly Does the Judgment of 1 April 2026 Contribute?

Why Is the Administrative Court Decisive in This Case?

One of NIH’s most original arguments deserved particular attention: it argued that the forfeiture declared by SNCF G&C was itself unlawful, that the delays relied on were not established, and that it was SNCF G&C that had artificially brought about the conditions of its own forfeiture, which would amount to manifest fraud.

The difficulty lies in the nature of the contract in question. The development concession contract that bound SNCF G&C to GdN 2024 falls under administrative law. A challenge to the forfeiture of the concession holder is therefore brought before the administrative court. The civil courts, the Commercial Court and the Court of Appeal, have no jurisdiction to decide that question. They therefore cannot themselves rule on the lawfulness of the forfeiture.

The French Supreme Court validates this reasoning clearly: as long as the administrative court has not ruled on the lawfulness of the forfeiture, it is impossible for the civil judge to hold that the manifestly culpable nature of the reliance on the delay is established. In other words, the absence of a final decision from the competent court is precisely what prevents the call from being characterised as fraudulent or abusive. The apparent paradox, that the civil judge must order payment before the administrative judge has ruled, is in fact the direct and accepted consequence of the principle of independence of the guarantee.

This point is fundamental for practitioners. In any arrangement involving a public-law or mixed contract backed by a private-law independent guarantee, the guarantor cannot suspend its obligation to pay while awaiting the administrative court’s decision. It must pay, then turn against the instructing party if the administrative court ultimately finds the beneficiary at fault. This is precisely why NIH’s award is made “to be set against any award that the administrative court may make” against GdN 2024: the civil judge acknowledges that the administrative dispute has not been decided, and that the civil award is not definitively to NIH’s detriment if the administrative court finds SNCF at fault.

What Standard of Proof Must the Guarantor Meet?

NIH had developed a detailed argument on the amendments modifying the timetable, arguing in particular that Amendment No. 2 of 4 January 2021 envisaged “discussions on a new timetable to be defined by 31 December 2021 at the latest”, which meant that the deadlines had not yet expired when the forfeiture was declared in September 2021. It also argued that the modifications imposed by the municipal authorities had extended the deadlines without this being attributable to it.

The French Supreme Court approves the lower courts for having dismissed these arguments, not because they are unfounded in themselves, but because they do not make it possible to establish the manifestly culpable nature of SNCF G&C’s reliance on the delay. There is doubt, discussions are under way before the administrative court, and amendments took certain delays into account as “legitimate grounds for extending deadlines”, but all of this generates factual and legal uncertainty that is incompatible with the standard of manifest fraud or abuse.

This shows that the word “manifest” in Article 2321 of the Civil Code has a very strong technical meaning: it is not merely what is “obvious” in everyday language, but what is indisputable, immediately perceptible without in-depth investigation, leaving no room for assessment. As soon as any doubt remains, and here an entire administrative trial remains, the call on the guarantee cannot be characterised as abusive or fraudulent.

What Are the Practical Consequences for Guarantors and Their Advisers?

How Should an Independent Guarantee Be Properly Drafted or Negotiated?

The New immo holding case is first and foremost a lesson in contract drafting. It shows that a guarantor giving an independent guarantee must be extremely vigilant about the definition of its object, because that is the only ground on which it can, even before raising fraud or abuse, challenge the legitimacy of a call.

Several precautions are worth building into the drafting or negotiation of any independent guarantee. The definition of the object must be precise and detailed: instead of a general formula such as “completion of the project”, the works concerned, their timetable, their amount, and the objective conditions under which the guarantee may be called should be set out in detail. The more precisely the object is defined, the easier it will be to show that a call is outside its scope.

It is also advisable to include in the guarantee a clause requiring prior notification of a call, allowing the guarantor to react before being forced to pay. Likewise, providing for a clause automatically reducing the guaranteed amount as the works progress helps limit the guarantor’s exposure.

Finally, where the underlying contract is governed by public law or is likely to generate disputes before the administrative court, it is imperative to state this expressly in the guarantee and to anticipate the consequences of a challenge before that court for the guarantor’s obligation to pay.

What Remedies Are Available After Paying Under an Independent Guarantee?

Payment under an independent guarantee is not necessarily the last word. Even after paying, the guarantor has several avenues of recourse, the value of which obviously depends on the circumstances.

First, a guarantor who has paid has a subrogation or personal claim against the instructing party, that is, against the principal debtor whose obligations it guaranteed. This is the very logic of the guarantee: the guarantor pays in place of the debtor, but keeps its recourse against it. In the case under comment, this means that NIH, once it has paid the €47 million to SNCF G&C, will be able to turn against GdN 2024 to be reimbursed, subject, of course, to the latter’s solvency.

Second, if the beneficiary committed a fault in calling the guarantee, even if that fault does not reach the threshold of manifest abuse or fraud required to block payment, it may be ordered to pay damages after the event. The threshold required to obtain compensation in civil liability is lower than that required to block payment urgently.

Third, and this is precisely what the New immo holding case illustrates, the civil award can be structured as being “set against” a future award by the administrative court. If that court rules in GdN 2024’s favour and orders SNCF G&C to pay it sums, those sums may offset or absorb the €47 million already paid under the guarantee.

On the procedural side, it should also be noted that summary proceedings (référé) can be a powerful tool before payment, but only if the abuse or fraud is so manifest that no investigation is needed. The summary judge may order the lifting of an abusive or fraudulent call on a guarantee, but as this judgment shows, the threshold is very high and difficult to reach in practice. In case of doubt, the guarantor should not count on summary proceedings to protect itself.

Conclusion

The judgment of 1 April 2026, published in the Bulletin, is an important stone in the case-law edifice of the independent guarantee. By refusing to find manifest abuse or fraud in a nonetheless complex context (abandoned project, contested forfeiture, amendments modifying the timetable, potentially shared fault), the French Supreme Court forcefully recalls that the independent guarantee is an instrument of certainty, not of debate.

The central lesson is twofold. For guarantors, first: the word “manifest” in Article 2321 of the Civil Code is a very high barrier. If a dispute is under way, if a competent court has not yet ruled, if the breach relied on is not devoid of any foundation, the call on the guarantee will be considered regular and the guarantor will have to pay. For beneficiaries, next: the independent guarantee is a powerful tool that allows them to obtain liquidity quickly, but this power is bounded by the object of the guarantee and by the prohibition of abuse or fraud, whose definition is admittedly narrow but real.

For anyone who may have to give, call or challenge an independent guarantee, this judgment is essential reading. If you are facing a similar situation (a call on an independent guarantee in a disputed context, a contractual arrangement mixing public and private law, or a question about remedies after payment), the lawyers at lebot-avocat.com, who specialise in banking and financial law, can help you analyse your situation and defend your interests.

FAQ: Frequently Asked Questions