Guarantees

Last modified:

Thursday 31 October 2019

At the time when a supplier concludes a contract, provides a service, or delivers a product, they can never be sure that their invoice will be paid by the customer.

In principle, all creditors are treated the same in terms of the collection of a debt. If the debtor's capital is insufficient to satisfy all creditors, the assets are distributed between the latter equally. Only some guarantees set out by law differ from this principle of equity by allowing one creditor to be paid before the others.

Firstly, the law provides guarantees which are automatically applicable to certain types of debts.

Secondly, certain measures increase the chances of the invoice being paid by asking the debtor for additional contractual guarantees concerning payment of the debt. This is the case for the conclusion of a contract of guarantee, a pledge, or a mortgage.

These privileges allow creditors, under certain conditions, to be paid as a priority over other creditors in case of competition between creditors, such as in the case of the customer's bankruptcy or liquidation for example.

It may also be useful to conclude a credit-insurance contract, or to use a factoring company.

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