The Concept of the Guarantee in the Civil Code
A claim on a surety bond used in construction unfolds in Georgia at the intersection of two legal institutions: the general concept of the guarantee and the special norms on the bank guarantee. Under Article 424 of the Civil Code of Georgia, an obligation of the debtor is deemed a guarantee where the debtor undertakes to perform some unconditional act or an act that goes beyond the object of the contract. This definition explains the nature of the guarantee: it is not a mere repetition of the obligation imposed by the contract, but an independent, additional promise that exceeds the debtor’s original undertaking.
In construction contracts it is precisely this feature that is decisive: for the client (the beneficiary), the guarantee means that where the builder incompletely performs or breaches its principal obligations, the client relies not only on the main contract but on a separate source of the guarantee. A claim on the guarantee is therefore never a mere repetition of the principal dispute — it rests on a separate legal vehicle whose conditions are defined by the guarantee document.
The Conditions of Validity of the Guarantee
Article 425 defines the limit of the guarantee’s operation: the guarantee is considered valid if it does not contravene the rules provided by law and does not excessively burden the debtor. In practice these two criteria analyse two different risks: the legality criterion examines whether the content of the guarantee conforms to the imperative norms, while the excessive burden criterion examines whether the guarantor’s obligation exceeds the threshold that keeps the guarantee legally sustainable.
When preparing a claim on a surety bond this norm matters to both sides. The beneficiary must ensure that the claim rests on a valid, operative guarantee — otherwise the action fails at an early stage; the guarantor and the principal may, for their part, raise the validity of the guarantee as a line of defence where its conditions contravene the law or excessively burden the debtor.
The Independent Force of the Bank Guarantee
Article 879 defines the bank guarantee as an obligation with a force of its own: by the force of a bank guarantee, a bank, another credit institution or an insurance organisation (the guarantor), at the request of another person (the principal), undertakes a written obligation to pay the creditor of the principal (the beneficiary) a sum of money in accordance with the obligation assumed, on the basis of the beneficiary’s written demand for payment.
Three practical consequences follow from this norm. First: the guarantor may be not only a bank but also another credit institution or an insurance organisation — when filing the claim, the guarantor’s respective authority must be verified. Second: the obligation is in writing, so the existence and content of the guarantee document are a decisive part of the claim. Third: payment is made on the basis of the beneficiary’s written demand — the written form and timeliness of the demand are the procedural condition whose breach may deprive the claim of its foundation.
The Procedure of Presenting the Claim and Judicial Protection
In practice a claim on a guarantee obligation unfolds in two stages. The first stage lies in civil circulation: the beneficiary sends the guarantor a written demand for payment and awaits performance. The second stage is judicial: where the guarantor does not satisfy the demand, the beneficiary applies to the court for the performance of the assumed obligation by the guarantor or for the compensation of damage.
In preparing the case, attention is devoted to the documentary foundations: the guarantee document, the principal contract with the principal, the beneficiary’s written demand and the correspondence with the guarantor. Moreover, the limits of the guarantor’s liability are defined by the guarantee document itself — by the amount, the term and the conditions of payment — and it is against these conditions that the court measures the claim presented. The independent character of the bank guarantee means that the guarantor answers for its performance to the beneficiary independently, in relation to the principal’s underlying obligation.
Frequently Asked Questions
When is an obligation deemed a guarantee?
Under Article 424, an obligation of the debtor is deemed a guarantee where the debtor undertakes an unconditional act or an act going beyond the object of the contract.
Who may be the guarantor in a bank guarantee?
Under Article 879, the guarantor is a bank, another credit institution or an insurance organisation which, at the principal’s request, assumes a written obligation towards the beneficiary.
Under what condition is a guarantee valid?
Under Article 425, the guarantee is considered valid if it does not contravene the rules provided by law and does not excessively burden the debtor.
How is a claim made against the guarantor?
The beneficiary addresses the guarantor with a written demand for payment; the guarantor pays the sum of money in accordance with the obligation assumed, and if the demand is not satisfied the matter goes to court.
How We Help on Legal.ge
On Legal.ge we will prepare a claim on a surety bond at every stage: we will examine the guarantee document and its validity, draft the beneficiary’s written demand, assess the limits of the guarantor’s liability and defend your interests in court — both on the side of the beneficiary and of the principal. Contact our team before presenting the demand.