The Binding Precedent No. 788 Rendered by Supreme Court; the Exemption of Guarantors of Bankrupt Merchants from Liability for Delay Damages

Mousavi, Ahmadreza; Mohajeri, Maryam

doi:10.22034/analysis.2025.2074145.1127

The Binding Precedent No. 788 Rendered by Supreme Court; the Exemption of Guarantors of Bankrupt Merchants from Liability for Delay Damages

Document Type : Original Article

Authors

Ahmadreza mousavi ¹

Maryam Mohajeri ²

¹ Department of private law, Faculty law, University of Emam sadegh, Tehran, Iran

² Assistant Professor of Law,Faculty of Social Science, University of Teheran, Tehran, Iran

10.22034/analysis.2025.2074145.1127

Abstract

In previous years, there was disagreement in the judicial authorities regarding the extension of this ruling to the guarantors of a bankrupt merchant.This time, the Supreme Court of Iran, by issuing binding precedent No. dated June 16, 2020, ended this disagreement and exempted the guarantors, like the merchant himself, from compensating for damages due to delayed payment.These two binding precedents have, taken together, provided the basis for abuse by some businessmen and have been criticized by capital providers, especially banks and financial and credit institutions. The present research seeks to answer the question what is the basis for exempting the guarantor from paying damages for late payment, and what criticisms does this exemption face. The research findings, which were conducted using a descriptive-analytical method and library tools, indicate that the basis for such an exemption lies in the accessory (dependent) nature of the contract of guarantee (ʿaqd al-ḍamān).Pursuant to certain provisions of the Commercial Code and the Civil Code, and in conformity with Islamic jurisprudence, guarantee is deemed an accessory contract; accordingly, when the principal obligor (maḍmūn ʿanhu, i.e., the merchant) is discharged from payment of the debt, the liability of the guarantor is likewise extinguished. Nevertheless, the discharge of the guarantor’s obligation is subject to several criticisms. The most significant criticism concerns the incompatibility of such exemption with the purpose and underlying philosophy of the contract of guarantee. The objective of guarantee is that, should the principal debtor intentionally or due to inability fail to discharge his obligations, the creditor (maḍmūn lahu) may readily recover the debt by recourse to the guarantor. However, if the exemption of the principal debtor from liability for delay damages results in the exemption of the guarantor as well, the fundamental purpose and intent of the guarantee contract are undermined.

Keywords

bankrupt merchant

guarantor

contract of guarantee (ʿaqd al-ḍamān)

damages for delay in payment

ancillary

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