The OHADA Law provides for two types of collateral securities to wit; Surety-Bonds and Letter of Guaranty. Both forms of guarantee are aimed at protecting the creditor in the transaction.
Surety-bond
A surety-bond shall be a contract in which the guarantor undertakes and the creditor accepts to perform the debtor’s obligation if the later fails to perform it himself. Such undertaking maybe contracted without the creditor’s authority and even without his knowledge.
Whatever the nature of the obligation guaranteed, the surety-bond shall not be presumed. Under penalty of being declared void, it shall be expressly agreed upon between the guarantor and the creditor.
A surety-bond shall be recorded in a deed bearing the signature of the two parties and an indication in the guarantor’s handwriting of the maximum amount guaranteed in words and in figures. A guarantor who does not or is unable to write shall be subject to a specified procedure.
Letter of Guaranty
A letter of guarantee according to the OHADA Law shall be an agreement by which at the request or on the instructions of the principal, the guarantor undertakes to pay a fixed amount to the beneficiary upon the latter’s first call.
A counter-guaranty letter shall be an agreement by which at the request or on the instructions of the principal or the guarantor, the counter-guarantor undertakes to pay a fixed amount to the guarantor upon the latter’s first call.
Letters of guarantee and counter-guaranty may not under penalty of being declared void be subscribed by natural persons. They shall give rise to separate liabilities distinct from the agreements, deeds and acts likely to be at their origin.
Guaranty and counter-guaranty agreements shall not be presumed. They shall be recorded in writing and shall indicate under penalty of being declared void; the designation of the letter of guaranty or counter-guaranty at first call, the name of the principal, the name of the beneficiary, the name of the guarantor or counter-guarantor etc.