§ 7. A guarantee follows the limitation period for the main claim
If a claim (krav) is secured by a guarantee (kausjon) or a guarantee (garanti), the claim against the guarantor (kausjonist) becomes time-barred (foreldet) under the same rules as the main claim. This applies even if the creditor (kreditor) must first try to get paid by the principal debtor (hovedskyldner). So the guarantor cannot always count the period from the day the creditor first demanded money from the guarantor.
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The text of the law (unofficial translation)
When a claim (fordring) is secured by a guarantee or an equivalent guarantee, the limitation period (foreldelsesfrist) in relation to the guarantor is calculated under the same rules that apply to the main claim. It is of no significance for the calculation that performance (oppfyllelse) cannot be demanded from the guarantor until payment has been sought in vain from the principal debtor, or that the guarantee is otherwise of a subsidiary nature.
What does this mean?
Section 7 is about guarantees. A guarantee means that a person or business promises to pay if the actual debtor (skyldner) does not pay. The person who owes the money in the first place is called the principal debtor. The person who stands behind the debt and guarantees it is called the guarantor (kausjonist or garantist).
A common example is parents who act as guarantors for their child's loan. The bank lends the money to the child. The parents promise the bank that they can be made to pay if the child does not pay. The parents have not received the loan themselves, but they have taken on the risk.
Section 7 says that the limitation period against the guarantor is calculated under the same rules as for the main claim. This means that you do not create an entirely new period just because the claim can also be directed at the guarantor. If the main claim becomes time-barred after 3 years, the guarantor's liability follows the same system. If the main claim becomes time-barred after 10 years, the guarantor's liability follows the same system.
This may be surprising. Many people believe that the period against the guarantor only starts when the creditor can actually demand payment from the guarantor. That is not the case under section 7. The law states expressly that it makes no difference that the creditor must first try to get payment from the principal debtor.
This also applies when the guarantee is subsidiary. Subsidiary means that the guarantor can only be made to pay after the principal debtor fails to pay. In plain language: the guarantor is second in line. But for limitation (foreldelse), that does not help. The period is still calculated based on the main claim.
This is strict, but practical. If the period against the guarantor only started much later, a guarantor's liability could hang around for a very long time. Section 7 means that all parties must keep an eye on the main claim. The bank, the lender or the creditor must keep track of the period. The guarantor should also keep an eye on it, because an old claim can remain alive if the period has been interrupted.
When does a claim against a guarantor become time-barred?
Claims against a guarantor become time-barred under the same rules as the main claim. This means that you must first find out what the main claim is. Is it an ordinary monetary claim (pengekrav) with a 3-year period? Is it a loan of money (pengelån) with a 10-year period? Is it a claim established by a judgment (dom), with a new 10-year period? Once you know this, you can assess the guarantor's liability.
This does not necessarily mean that the guarantor is always released when the principal debtor is released. You must read section 7 together with § 25. § 25 says, among other things, that in the case of a guarantee or an equivalent guarantee, the claim against the guarantor is considered time-barred when limitation has occurred in relation to the principal debtor before the claim has been asserted against the guarantor through certain steps. This shows how closely the guarantor's liability is linked to the main claim.
For the person who holds the claim, the lesson is simple: you must keep track of the period against both the principal debtor and the guarantor. You should not wait until the principal debtor has been difficult for many years before you do anything about the guarantee. If you let the main claim become time-barred, the guarantee may also be lost.
For the guarantor, the lesson is also simple: you should know what you have signed. A guarantee is not just a formality. It can make you liable for other people's debt. And even if you are not asked to pay straight away, the liability can follow the main claim for a long time.
This is particularly important with loans. If the main claim is a loan of money with a 10-year limitation period under § 5, the guarantor's liability may also be tied to this long period. If the loan is later established by a judgment or an enforceable title (tvangsgrunnlag), new periods may arise under the rules on interruption of the limitation period (fristavbrudd) and new periods. That is why a guarantor's liability can last longer than the guarantor first thinks.
What does it mean that the guarantee is subsidiary?
A subsidiary guarantee means that the creditor cannot go straight to the guarantor right away. The creditor must first try to get the money from the principal debtor. If the principal debtor does not pay, the guarantor can be made to pay.
That sounds like strong protection. And it is protection against being asked to pay too early. But it is not a separate limitation rule. Section 7 says that it is of no significance for the calculation that performance cannot be demanded from the guarantor until payment has been sought in vain from the principal debtor.
In practice, this means that the period can run even though the creditor cannot yet demand money from the guarantor. That may seem strange. But the law chooses to link the period to the main claim. The main claim is the claim itself. The guarantee is security for that claim.
If you are a guarantor, you should therefore not think: "I haven't received a claim yet, so the period hasn't started." That may be wrong. The period may already have started because the main claim has fallen due.
If you are a creditor, you should not think: "I can wait with the guarantor until everything else has been tried." That may also be wrong. You must make sure that limitation is interrupted in time.
What happens if you get it wrong?
If you are a creditor and overlook section 7, you may lose the guarantee. That can be serious. A guarantee is often the reason you felt secure when the agreement was made. But the security is not worth much if you let the limitation period run out.
If you are a guarantor and do not understand section 7, you may be surprised. You may be asked to pay long after the principal debtor stopped paying. At the same time, you may have objections if the claim is time-barred. That is why you should always ask for an overview: what is the main claim, when did it fall due, what interruptions of the limitation period have occurred, and why does the creditor believe that the claim is still alive?
If you are the principal debtor, you should know that the guarantor may be drawn in if you do not pay. This can cause problems in families and friendships. Many guarantees are given precisely between people who trust each other. That is why a guarantee should not be entered into lightly.
Examples
Kari takes out a loan of NOK 300,000. Her father, Per, acts as guarantor. The loan is to be repaid over time. Kari stops paying. The bank first tries to get payment from Kari. Per thinks he does not need to keep an eye on things. After all, he has not received a claim from the bank yet. But section 7 means that the limitation period against Per is calculated under the same rules that apply to the bank's claim against Kari. The fact that the bank must first try to get the money from Kari does not mean that the period against Per automatically starts later. If the bank lets the main claim become time-barred without interrupting the period correctly, this may affect the claim against Per. The bank must therefore keep control of the limitation. Per should also keep an eye on it and ask for documentation if the bank later makes a claim against him.
Mette runs a small business. She supplies goods to another business. The owner of the buying business gives a personal guarantee for the payment. The invoice (faktura) is not paid. Mette sends payment reminders (purring) to the business for several years, but does nothing against the owner who gave the guarantee. If the main claim against the business follows the 3-year period and is not interrupted in time, the guarantee may also become difficult to use. Mette should therefore have followed up both the business and the guarantor before the period ran out. It is not always enough to have a guarantee in the drawer. The guarantee must be used correctly, and the period must be kept track of.
Common mistakes
- Believing that the period against the guarantor only starts when the guarantor receives a claim
- Believing that a subsidiary guarantee gives a new limitation period
- Waiting too long to follow up the guarantor
- Not checking which period applies to the main claim
- Believing that a guarantee is just a formality with no real risk
What should you do?
If you are a creditor, you should set up deadline tracking from day one. Write down the due date (forfallsdato) of the main claim. Write down who the guarantor is. Follow up both tracks before the deadline approaches.
If you are a guarantor, you should ask for a copy of the loan agreement (låneavtale), the guarantee and the payment plan. You should know the maximum amount you can be liable for. You should also ask to be notified if the principal debtor is in breach of contract.
If you receive a claim as a guarantor, you should ask for documentation. Ask when the main claim fell due. Ask whether the limitation period has been interrupted. Ask whether the principal debtor is still liable. Ask which provision the creditor is relying on. Do not pay until you understand what you are paying.