The State of Guarantees after the Transfer of Claim or Transfer of Debt

Modern economy has adopted that obligation is commercial as a valuable property, and should not be limited to the relation between the creditor and the debtor. Iranian law has adopted two mechanisms i.e. the contract of guarantee and draft for the transfer of claim. On the other hand, article 292 of the civil code has recognized the new term of "novation" and immediately after that the article 293 states that in the process of novation, guarantees of prior debt would not extend to subsequent debt. Since the Iranian legislator of the Civil code has taken the articles 1271 and 1272 of the French Civil Code into consideration, while writing the above – mentioned articles of Iranian Civil Code, and the French law requires creation of a new obligation following a movation, it is quite natural that the guarantees of prior obligation are extinguished as a result of substitution are extinguished as a result of substitution. However, due care dictates that the clauses II and III of article 292 of the Civil Code do not indicate a real novation, but introduce guarantee and draft confirming the transfer of obligation rather than its substitution. On the other hand, the dominant view of Shiite jurisprudents to which Iranian Civil Code owes itself recognizes the extinction of the guarantees of debt by guarantee and draft. In our opinion, the legislator – while writing the article 292 of the Civil Code – has wittingly taken the form from the French Law and has replaced the unfamiliar institutions of "novation by substitution of debtor" and "novation by substitution of creditor" by the contract of guarantee and that of draft which have proved to be very helpful in practice. In the legal systems of different countries, the two legal institution of novation and transfer of obligation are usually recognized as two distinct entities having their own specific effects. However, In Iranian Law, transfer of debt and novation have the same concept and effects. It is noteworthy that it is possible that identical legal entities have their own effects in each state. For instance you may compare the institution of movation in Iranian law with that of novation in other legal systems in terms of its nature and effects.