The main feature of an ordinary guarantee, in contrast to a joint liability guarantee, is that the guarantor has the right of prior claim defense. In ordinary guarantees, the creditor must first pursue the primary debtor, and only if the main contract dispute undergoes litigation or arbitration and compulsory enforcement of the debtor’s assets fails can the creditor demand that the guarantor fulfill the guarantee obligation. Before the implementation of the "Civil Code," judicial interpretations of the Guarantee Law had specified when the statute of limitations for ordinary guarantees begins, but this conflicted with provisions in the Guarantee Law itself. To resolve this, the "Civil Code" introduced a new provision, ensuring consistency within guarantee-related regulations.

I. New Provisions in the Civil Code on the Starting Point of the Statute of Limitations for Ordinary Guarantee Debt

The Judicial Interpretation of the Guarantee Law, Article 34, Paragraph 1, states that if a creditor of an ordinary guarantee initiates litigation or arbitration against the debtor before the expiration of the guarantee period, the statute of limitations for the guarantee debt starts from the effective date of the judgment or arbitration award. This interpretation sets “the effective date of the judgment or arbitration award” as the starting point for calculating the statute of limitations for ordinary guarantee debt.

However, this rule conflicts with Article 17 of the Guarantee Law. According to Article 17, Paragraph 2, the guarantor in an ordinary guarantee may refuse responsibility until the main contract dispute has been litigated or arbitrated and the debtor’s assets have been subject to enforcement without satisfying the debt. This means that at the time the judgment or award becomes effective, there may have been no compulsory enforcement on the debtor’s assets, and thus the guarantor’s right to a defense (prior claim defense) is still valid. Therefore, if the statute of limitations starts at this point, it lacks both logical consistency and fairness.

In response to this, Article 694, Paragraph 1 of the Civil Code has been revised to state: “If the creditor of an ordinary guarantee initiates litigation or arbitration against the debtor before the expiration of the guarantee period, the statute of limitations for the guarantee debt begins from the date on which the guarantor’s right to refuse responsibility lapses.” This amendment resolves inconsistencies in the current rules, creating a more cohesive set of legal provisions for guarantee contracts.

II. Understanding "The Date the Guarantor’s Right to Refuse Responsibility Lapses"

According to the "Civil Code," this date includes two scenarios:

1. General Circumstances  

Typically, after the main contract dispute undergoes litigation or arbitration and compulsory enforcement of the debtor's assets fails to satisfy the debt, the creditor can then require the guarantor to fulfill their obligation. At this point, the guarantor loses the right to refuse responsibility, and the statute of limitations for the guarantee debt begins.

2. Exceptional Circumstances  

Certain exceptions may prevent the guarantor from invoking the defense that the creditor must first pursue the primary debtor. Article 687, Paragraph 2 of the "Civil Code" expands on existing rules by adding a fourth exception, specifically when: The debtor's whereabouts are unknown and no assets are available for enforcement; The debtor has been declared bankrupt; The creditor can prove the debtor’s assets are insufficient to meet the debt or the debtor has lost repayment capacity; The guarantor has waived the right of prior claim defense in writing.

If any of these exceptions occur, the creditor has the right to directly seek fulfillment from the guarantor without first pursuing the debtor. When these exceptions arise, the guarantor’s right to refuse lapses, and the statute of limitations for the guarantee debt begins from this date.

Practical Tip

The guarantee period and the statute of limitations for guarantee debt are two distinct concepts and should not be confused. The guarantee period is determined by the agreement between the parties; if no agreement is made or the terms are unclear, the guarantee period defaults to six months from the expiration of the principal debt’s performance period. For the creditor to hold the guarantor accountable, action must be taken within this guarantee period. In the case of an ordinary guarantee, the creditor must file a lawsuit or arbitration against the debtor within this period, while in a joint liability guarantee, the creditor must request the guarantor to assume liability within the same timeframe. The statute of limitations for guarantee debt, however, is three years. For an ordinary guarantee, it starts from the date when the guarantor’s right to refuse responsibility lapses, and for a joint liability guarantee, it starts from the date the creditor requests the guarantor to assume responsibility.