Good Faith, Suretyship, and the Ius Commune
Posted: 29 Aug 2017
Date Written: 2002
Scholars of the late medieval and early modern Roman law worked out answers to important problems that American courts and commentators are only beginning to consider. The specific questions that this Article considers come from the realm of commercial law: Is there a reciprocal duty of good faith between a surety or guarantor and the principal obligor, independent of any explicit contractual provision to that effect? If so, what is the relationship between that duty and the surety's indemnification rights against the principal obligor?
Part I of this Article surveys the contexts in which these suretyship issues arise in modern commercial law. Part II shows that American courts are split on the questions of the existence and extent of any duty of good faith on the part of the surety, and the effect of that duty on a surety's indemnification rights. Part III describes the overall approach to those questions offered by the recent Restatement (Third) of Suretyship and Guaranty. While the Restatement implicitly recognizes a duty of good faith performance of the surety contract, it makes no attempt to explain how that duty relates to a surety's extensive indemnification rights when the surety performs over a defense available to it. Moreover, the rules articulated in the Restatement for this situation--where it attempts to articulate rules at all--are unsatisfactory, conceptually and practically. Part IV of this Article demonstrates that, unlike the Restatement, the early modern Roman lawyers considered in some detail the relationship between the duty of good faith and the surety's indemnification rights. These lawyers, working within the ius commune (i.e. the European legal system influenced by the Roman law), concluded that the duty of good faith required a surety to conduct at least a minimal investigation into the defenses against the creditor potentially available to the surety and to assert those that were not frivolous. Although the surety could perform despite the availability of technical defenses (apices iuris) without impairing its indemnification rights, the duty of good faith severely circumscribed the surety's ability to do so. Indeed, the surety's rights under the Roman law were much more limited than under the Restatement.
Keywords: legal history, suretyship, commercial law, Roman law, Restatement, ius comune
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