Autonomous Guarantee Without a Term

Introduction: a powerful security, but not an immortal one

The autonomous guarantee (garantie autonome), which practice still commonly calls an "on-demand guarantee" (garantie à première demande), is often presented as one of the most effective personal securities in business law. Its strength lies in its independence: unlike suretyship (cautionnement), it does not follow the fate of the principal obligation and, as a rule, prevents the guarantor from raising defences drawn from the underlying contract. In other words, the beneficiary is paid quickly, without having to prove that its debtor is in default or to bear the uncertainties of the main litigation. For an illustration of the rules specific to suretyship, see our analysis of the limit on judgments given against co-sureties who are not jointly liable.

Yet a judgment of the Commercial Chamber of the Cour de cassation of 11 February 2026 (No. 24-18.252, published in the Bulletin) forcefully reminds us that this security, however robust, remains subject to the passage of time. The lesson is a harsh one: an autonomous guarantee given without a fixed term may be extinguished by limitation long before the beneficiary thinks of calling it, and this from the very day it was entered into.

For business law practitioners, credit institutions and companies that structure their commercial transactions with this type of security, this judgment is a warning that it would be dangerous to ignore.

The applicable legal framework: autonomous guarantee, limitation and due date

The autonomous guarantee in current law

Introduced into the French Civil Code by Ordinance No. 2006-346 of 23 March 2006 reforming the law of security, the autonomous guarantee is now governed by Article 2321 of the French Civil Code. It is defined there as "an undertaking by which the guarantor binds itself, in consideration of an obligation entered into by a third party, to pay a sum either on first demand or on agreed terms". This provision enshrines the principle of independence: unless otherwise stipulated, the guarantor cannot raise defences arising from the underlying relationship between the beneficiary and the instructing party.

This autonomy is precisely what distinguishes the on-demand guarantee from suretyship: where a surety may invoke the nullity or non-performance of the principal contract to refuse payment, the autonomous guarantor is in principle deprived of that right. The Cour de cassation laid down this principle as early as the 1980s, in its founding judgments on international guarantees. The criteria for choosing between these two securities are compared in our article on the autonomous on-demand guarantee and suretyship in property and B2B transactions.

The limitation regime applicable to commercial acts

The limitation period applicable to commercial obligations is governed by Article L. 110-4 of the French Commercial Code. In the version resulting from Act No. 2008-561 of 17 June 2008 reforming limitation in civil matters, this provision sets a five-year limitation period for obligations arising between traders or between traders and non-traders. Before that reform, the period was ten years.

The reform of 17 June 2008 was not applied retroactively in a blunt way. Its Article 26 provided for a transitional mechanism: for limitation periods running on the date of entry into force, the new five-year period applies from that date, without the total duration being able to exceed the former ten-year period.

The starting point of the period: the due-date rule

Under the general law of obligations, the starting point of extinctive limitation is fixed at the day on which the holder of a right knew, or should have known, the facts enabling it to bring its action (Article 2224 of the French Civil Code). For contractual obligations, the Cour de cassation has long recalled that "contractual obligations arise, unless otherwise agreed, on the day the contract is entered into and not on the day of their performance" (1st Civil Chamber, 16 July 1986, No. 84-12.990). In other words, a claim is in principle due from the moment it arises, unless a modality, whether a term or a condition, defers its due date.

The contribution of the judgment of 11 February 2026: limitation runs from the date the contract is entered into

The facts: a guarantee forgotten for nine years

The case before the Commercial Chamber perfectly illustrates the dangers of contractual negligence. In 2005, a brewing company had granted financial advantages to the operator of a drinks outlet in return for an exclusive supply undertaking, which practice calls a "beer supply tie" (contrat de bière). To secure the operator's obligations, the brewing company had obtained, by a deed of 5 December 2005, an autonomous guarantee of €26,202.70 given by a third-party company, with no term provided for in the deed.

Several years later, the operator was placed in compulsory liquidation (liquidation judiciaire) on 9 November 2012. The brewing creditor then had an unpaid claim of €19,557.50. But instead of calling its guarantee immediately, it waited. And waited again. It was only on 12 July 2021, nearly nine years after the liquidation, that it finally sent its payment demand to the guarantor. The guarantor immediately pleaded that the action was time-barred.

The solution adopted: immediate due date, five-year limitation from the date of conclusion

The Colmar court of appeal, then the Cour de cassation, upheld this limitation defence. The reasoning is rigorous. The Commercial Chamber states that "unless otherwise stipulated, the limitation period for an action for payment based on an on-demand guarantee runs from the day on which that guarantee becomes due". In the absence of any contractual term deferring the due date, the guarantee was due from the date the contract was entered into, 5 December 2005.

Given the transitional mechanism of the 2008 reform, limitation was calculated as follows: the ten-year period ran from 5 December 2005 until 19 June 2008 (the date of entry into force of the Act), then the five-year period took over, leading to final extinction of the action on 18 June 2013. The call on the guarantee of 12 July 2021 was therefore out of time by several years.

What this judgment confirms and what it clarifies

The solution is not new in principle: the Cour de cassation had already applied similar reasoning to on-demand counter-guarantees (Commercial Chamber, 13 September 2011, No. 10-19.384). But publication of the judgment in the Bulletin gives it clear normative weight. The Commercial Chamber evidently intends to send a message to practitioners: an autonomous guarantee with no term is not a security of indefinite duration. Like any contractual undertaking, it is subject to limitation, and the period starts to run from the day it is entered into if no deferred due date has been stipulated.

Practical consequences: what the parties must know

For the beneficiary of the guarantee

The first consequence is psychological as much as legal: the beneficiary must not regard the autonomous guarantee as a reserve without time limit. From the signature of the deed, the limitation clock is running. In practice, this means that the beneficiary must actively monitor the instructing party's situation and not wait for insolvency proceedings (procédure collective) to begin before reacting.

More fundamentally, if the guarantee was stipulated without a term, the beneficiary has in theory five years from the date the contract was entered into to call the guarantor. That window may prove very short in relation to the duration of the underlying economic transaction, particularly in long-term arrangements (distribution contracts, property financing, concession contracts). The use of this type of security for the benefit of a landlord is dealt with separately in our article on bank guarantees and the on-demand guarantee in commercial leases.

For the guarantor

Limitation operates in the guarantor's favour: if the beneficiary has not acted within the statutory period, the guarantor's obligation is extinguished. But note that this extinction by limitation is not automatic. It must be expressly raised, failing which it is deemed waived. The guarantor therefore has an interest in keeping precise track of the guarantees given and the periods that may apply.

For the instructing party

Extinction of the guarantee by limitation is good news for the instructing party, which will no longer be exposed to a recourse claim by the guarantor after payment. But this extinction does not remove the principal debt: limitation of the autonomous guarantee is independent of limitation of the guaranteed obligation.

The litigation risks identified

Several lines of litigation may emerge in the wake of this judgment.

The risk of unforeseen limitation is the main risk. Companies that rely on an autonomous guarantee with no term to secure a long-term commercial transaction risk finding it time-barred at the very moment they would need to enforce it, that is, when the counterparty defaults. This situation may engage the liability of the legal adviser who drafted or approved the deed without drawing the client's attention to this time constraint.

The risk of recharacterisation as an indefinite-term contract is a second danger. Article 1210 of the French Civil Code, resulting from Ordinance No. 2016-131 of 10 February 2016, prohibits perpetual undertakings. A contract with no term may therefore be treated as an indefinite-term contract, giving the guarantor a right of unilateral termination on reasonable notice (Article 1211 of the French Civil Code). The Cour de cassation has moreover applied this regime in advance to contracts predating the reform (Commercial Chamber, 21 September 2022, No. 20-16.994; 1st Civil Chamber, 25 September 2024, No. 23-14.777). An autonomous guarantee with no term could therefore be terminated unilaterally by the guarantor, weakening the beneficiary's protection still further.

The risk of professional liability for lawyers and notaries who draft these deeds without providing for an express term is real. A failure to advise may be alleged if the beneficiary shows that appropriate drafting would have avoided limitation.

Concrete legal strategies and recommendations

Upstream: draft the guarantee deed precisely

The first recommendation concerns drafting. Every autonomous guarantee must contain an expressly stipulated term. That term must be suited to the foreseeable duration of the guaranteed transaction, with a sufficient safety margin to allow the beneficiary to exercise its rights in the event of a dispute or insolvency proceedings affecting the instructing party.

It is also recommended to include an automatic or optional extension clause, the mechanism known as "extend or pay", which will allow the beneficiary, if the instructing party is late in performing the guaranteed transaction, to require either an extension of the term of the guarantee or immediate payment.

Finally, if a clause deferring the due date of the guarantee is wanted (for example, by making the call on the guarantee subject to a specific event occurring), it must be drafted unambiguously. The possibility of fixing a starting point (dies a quo) different from the date the contract was entered into rests on this.

During the life of the contract: monitor time limits and act in time

The beneficiary should set up a calendar-based follow-up of the autonomous guarantees granted in its favour. In particular, it should identify the deadlines for calling the guarantee and ensure that acts interrupting limitation are carried out where necessary. In this respect, it should be recalled that limitation may be interrupted by a claim brought before the courts, by a protective measure or by the guarantor's acknowledgement of the debt (Article 2240 et seq. of the French Civil Code).

Where the instructing party's financial situation deteriorates, the golden rule is to act without waiting: the opening of insolvency proceedings does not suspend the limitation period of the autonomous guarantee, which remains subject to the general rules.

In litigation: raise or challenge limitation methodically

When limitation is raised, the contractual chronology should be reconstructed precisely to determine the starting point of the period, identify any acts interrupting or suspending limitation, and check the transitional regime applicable if the contract predates the 2008 reform. A court-appointed expert report may sometimes be useful to establish the relevant facts.

On the side of the beneficiary wishing to challenge limitation, the argument will have to rest on the existence of a contractual stipulation deferring the due date, which the Cour de cassation expressly accepts, or on the occurrence of uncontested acts interrupting limitation.

Conclusion: do not let time work against you

The judgment of 11 February 2026 recalls a fundamental truth of the law of obligations: silence is never a protection. Failing to stipulate a term in an autonomous guarantee means risking that the action for payment is extinguished at the very moment it would have been most useful.

The on-demand guarantee is a powerful tool, provided it is correctly configured. Its independence from the underlying contract does not shield it from the mandatory rules of limitation. On the contrary, it calls for heightened vigilance, both when the deed is drafted and throughout the life of the contract.

Are you structuring a commercial transaction and considering securing your claims with an autonomous guarantee? Are you the beneficiary of such a guarantee and wondering about your rights if a partner defaults? Are you a guarantor and wish to check whether a late payment demand can be challenged on the ground of limitation?

In all these cases, the involvement of a lawyer practising in security law and business law is essential. Anticipating is always better than suffering the consequences, and with an autonomous guarantee, lost time cannot be made up.

This article has been written for general information purposes. It does not constitute personalised legal advice. For any question about your specific situation, we invite you to consult one of our lawyers.

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