The scope of the guarantor's liability for continuous guarantee agreement

The essence of the so-called continuing guarantee contract is no different from that of the guarantee contract. Therefore, in principle, the guarantor shall be liable for the full amount of the principal obligation at the time of payment. However, if the guarantor has anticipated or could have anticipated the amount of the principal obligation at the time of payment, the liability for the guarantee can be limited to the expected scope. However, if the cause of the occurrence of the principal obligation at the time of payment is clearly aggravated (the same shall apply to the case where the creditor is unaware of the financial status of the principal obligor due to gross negligence) by being aware of the fact that the financial status of the principal obligor substantially aggravated (the same shall apply to the case where he is not aware of the gross negligence) of the principal obligor, he can only be limited to a reasonable

Article 429 of the Civil Act

[Defendant-Appellee] Plaintiff 1 and 2 others

Defendant 1 and one other

Seoul High Court Decision 83Na2968 delivered on January 26, 1984

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal by the Plaintiff’s attorney are examined.

1. The so-called continuing guarantee agreement, which imposes an obligation to guarantee the present and future obligations due to the continuous transaction between the obligee and the principal obligor, is a principle that the surety bears the responsibility to guarantee the entire principal obligation at the time of payment, even if there is no stipulation on the limit of the liability for guarantee or the guarantee period.

However, if the amount of the principal obligation to be returned to the guarantor’s expense, and if the guarantor has anticipated or could have anticipated at the time of the guarantee, the liability for the guarantee can be limited to the estimated scope. However, the obligee’s liability may be limited to the extent of reasonable scope, only in cases where it is acknowledged that the circumstances are contrary to the good faith principle, such as where the obligee knew (or was unaware of gross negligence) that the assets of the principal obligor significantly aggravated (the same shall also apply to the obligee who did not know of gross negligence) with knowledge of the fact that the assets of the principal obligor have substantially deteriorated, and where the obligee intentionally expands the transaction size without any notification or intention,

2. According to the reasoning of the judgment below, the court below rejected the plaintiff 2's debt ratio of 50,000 won on August 2 and 8.18, 1985 as follows: 200,000 won on the day when the non-party 2 entered into a guarantee agreement with the non-party 3 company for the non-party 2's loan transaction between the non-party 1 and the non-party 2 company (the non-party 2) and the non-party 3 company's loan interest rate of 0,000 won on June 30, 197; 30,000 won on June 28, 197, the above company borrowed 90,000 won on the non-party 2's debt rate of 90,000 won on the non-party 3 company's loan for the above non-party 1 and the non-party 2 company's debt guarantee liability of 90,000 won on the non-party 2 company's loan 9.

3. However, according to the court below's findings, if the defendants had already obtained a loan of KRW 50,00,000 from the plaintiff bank at the time of the conclusion of the continuous guarantee contract of this case, and if the non-party company had already obtained a loan of KRW 50,000,00 for the period of less than 2 months since a series of concurrent loans, the defendants were to have obtained an additional loan of KRW 50,000 for the period of less than 2 months, and therefore, the defendants ( even if the defendant 1 retired within 1 month after the above guarantee of this case), at least KRW 100,000,000 or KRW 50,000 for the above total amount (in the case of the defendant 1), it is reasonable to view that they had already known or could have sufficiently known that they had been liable for the guarantee of the above amount. However, as the amount of the defendants' guarantee liability of KRW 41,410,874 and interest incidental thereto, this cannot be concluded as abuse of rights.

However, the judgment of the court below, which rejected part of the plaintiff's claim of this case on the grounds as stated in its holding, is a misunderstanding of the nature of the continuous guarantee contract or the legal principles as to the application of the good faith principle, and it is clear that this affected the judgment, and therefore, the judgment of the court below which rejected the plaintiff's claim of this case cannot be reversed

4. Therefore, the judgment of the court below is reversed and the case is remanded to the Seoul High Court. It is so decided as per Disposition by the assent of all participating judges.

Justices Jeong Jong-tae (Presiding Justice)