Legal Definitions - bénéfice de discussion

The term bénéfice de discussion, originating from French law, refers to a legal right available to a guarantor. It allows the guarantor to insist that a creditor first attempt to recover a debt or fulfill an obligation from the principal debtor's assets before pursuing the guarantor for payment or performance.

Essentially, it's a protection for the guarantor, ensuring they are not immediately liable if the primary party defaults, and that the creditor must first exhaust all reasonable avenues against the principal debtor.

• Example 1: Small Business Loan

  Imagine Sarah owns a small bakery and takes out a business loan from a bank. Her friend, Mark, agrees to be a guarantor for the loan. If Sarah's bakery business faces financial difficulties and defaults on the loan payments, the bank would typically turn to Mark, the guarantor. However, if Mark invokes the bénéfice de discussion, he can demand that the bank first try to recover the outstanding debt from Sarah's business assets, such as the bakery equipment, inventory, or accounts receivable, before requiring him to pay.

  This illustrates bénéfice de discussion because Mark, as the guarantor, is exercising his right to compel the creditor (the bank) to pursue the principal debtor (Sarah's bakery) and its assets first, rather than immediately holding him responsible for the debt.

• Example 2: Apartment Lease Guarantee

  Consider a situation where a young adult, Alex, rents an apartment, and his parents act as guarantors for the lease agreement. If Alex fails to pay rent for several months, the landlord could potentially seek payment from the parents. However, if Alex's parents invoke the bénéfice de discussion, they can require the landlord to first attempt to recover the unpaid rent from Alex directly. This might involve using Alex's security deposit, pursuing wage garnishment against Alex, or taking other legal steps to collect from Alex's personal funds, before demanding payment from the parents.

  Here, the parents are using the bénéfice de discussion to ensure the landlord exhausts efforts to collect from the primary tenant (Alex) before turning to them, the guarantors.

• Example 3: Commercial Supply Contract

  A large manufacturing company, "Global Corp," enters into a contract with a smaller supplier, "Parts Pro," for specialized components. To secure the deal, Global Corp provides a guarantee that Parts Pro will fulfill its obligations to its own raw material provider, "Metals Inc." If Parts Pro fails to pay Metals Inc. for the raw materials it received, Metals Inc. might look to Global Corp for payment based on the guarantee. However, Global Corp could invoke the bénéfice de discussion, requiring Metals Inc. to first attempt to recover the payment directly from Parts Pro's assets, such as its bank accounts, machinery, or inventory, before Global Corp's guarantee becomes active.

  This example demonstrates bénéfice de discussion by showing Global Corp, as the guarantor, compelling Metals Inc. (the creditor) to first seek recovery from the principal debtor (Parts Pro) before activating the guarantee.