To what extent must a guarantor answer for a company’s debts when the bank itself continued to extend credit despite the company’s severely impaired financial position?

This question is particularly important for anyone who has provided a personal guarantee for a company. In Order No. 21651 of 24 June 2026, the Italian Court of Cassation held that a guarantor may rely on the bank’s negligent conduct in granting credit and, where the legal requirements are met, invoke the creditor’s contributory fault under Article 1227 of the Italian Civil Code, potentially reducing the claim pursued against the guarantor.

The decision matters because it shifts attention from the mere existence of the guarantee to the bank’s conduct during its relationship with the principal debtor.

The case

The dispute arose from a payment order obtained by a bank against a company and its guarantors for exposure under current-account and credit-facility arrangements.

One guarantor argued that the bank had continued to grant or maintain credit even though the company’s financial condition was already seriously compromised, thereby contributing to the increase in the debt later claimed from the guarantor.

The Court of Appeal held that this circumstance could not be relied on as a defence. The Court of Cassation rejected that approach and set aside the decision on this point.

Abusive granting of credit may be raised by the guarantor

The central passage of the order concerns the relationship between Articles 1945 and 1227 of the Italian Civil Code.

Abusive credit may be relevant where a bank, intentionally or negligently, continues to finance a company in serious financial difficulty with no concrete prospect of recovery, thereby contributing to the worsening of its distress.

The effects of that conduct are not necessarily limited to the principal debtor.

Article 1945 allows the guarantor to raise against the creditor the defences available to the principal debtor in relation to the guaranteed obligation, except those of a strictly personal nature.

Accordingly, if the bank’s conduct contributed to the loss or increased the debt exposure, the guarantor may invoke the creditor’s contributory fault under Article 1227, with possible consequences for the amount recoverable by the bank.

A defence that does not necessarily require a damages claim

The ruling also clarifies an important procedural issue.

The creditor’s contributory fault under Article 1227(1) is not a defence that must be pleaded in a formal technical sense, but a matter of defence.

The court may therefore take it into account of its own motion when the relevant facts have been properly introduced into the proceedings, subject to procedural time limits and res judicata.

The guarantor does not necessarily need to bring a separate damages claim against the bank: the bank’s conduct may be relied on directly in resisting the credit claim.

The defence under Article 1957 is different

The order also draws an important distinction.

Unlike contributory fault under Article 1227, the time bar under Article 1957 is a defence in the strict sense and must be raised by the guarantor in due time.

In proceedings opposing a payment order, the facts required to identify when the relevant period began must therefore also be pleaded promptly. In the case before the Court, the defence was raised only in the final written submissions and was held to be late.

Why the decision matters

Order No. 21651/2026 provides an important indication for guarantor defences: signing the guarantee does not make the bank’s later conduct toward the financed company irrelevant.

If the bank continued to grant credit to a company whose economic and financial condition was seriously impaired, and that conduct contributed to increasing the exposure, the guarantor may rely on those circumstances.

This does not automatically release the guarantor. The company’s condition when credit was granted or maintained, the bank’s conduct and its actual causal contribution to the increased debt must be established in the individual case.

The principle remains significant: a claim against the guarantor cannot be assessed without considering the creditor’s own role in creating and increasing the guaranteed debt.