REALWorld Law


Security documents

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?



The use of parent or third party guarantees (whether bank or otherwise) as a security for the obligations of a contractor is governed by article 1799–1 of the French Civil Code. The owner (maître d'ouvrage) must deliver to the contractor (entrepreneur) a joint bank guarantee equal to the entire price of the contract in order to secure the payment obligation owed to the contractor.

The owner is entitled to retain an amount not exceeding 5% of the entire price of the project in order to guarantee the remediation of any defects arising on the date of acceptance of the works. However, if the contractor delivers a bank guarantee equal to an amount not exceeding 5% of the price to the owner, the owner must pay 100% of the price to the contractor.