Italian Supreme Court 2025 Rejects the “On First Demand” Clause: What Changes for Surety Bonds

What the Supreme Court Established

The Italian Supreme Court, with Ordinance No. 14687 of 2025, established a significant principle for those entering into surety bond contracts. The “on first demand” clause may be declared null for being unfair if it waives the six-month term provided by Article 1957 of the Italian Civil Code.

This means that when a surety bond contract obliges the guarantor to pay immediately upon the creditor’s simple request, without respecting the time limits set by law, the clause is considered unbalanced and therefore null.

The Supreme Court reiterated that the six-month term under Article 1957 of the Civil Code is a fundamental protection for the guarantor and cannot be arbitrarily eliminated. In the absence of genuine negotiation, the “on first demand” clause is deemed unfair and must be annulled.

The Issue of Waiving the Six-Month Term

Article 1957 of the Italian Civil Code stipulates that the creditor must take action against the guarantor within six months from the due date of the principal obligation. If they fail to do so, they lose the right to demand payment.

This term is designed to prevent the guarantor from being exposed indefinitely to the risk of having to pay. However, in many banking and insurance surety bonds, an “on first demand” clause is included, allowing the creditor to demand immediate payment, even years later.

According to the Supreme Court, this waiver creates a clear imbalance between the parties and violates the guarantor’s rights. If the clause was not subject to individual negotiation but was simply imposed through a standard form, it is null for being unfair.

In other words, no bank or insurance company can claim to eliminate the temporal protection provided by Article 1957 of the Civil Code.

Practical Effects for Guarantor and Creditor

When the “on first demand” clause is declared null, the rules of Article 1957 fully apply. The creditor can no longer demand immediate payment at any time but must respect the six-month term.

The guarantor, on the other hand, can invoke the nullity of the clause and demand that the legal framework be applied. The surety bond contract remains valid, but without the unfair part.

This principle applies to both banking and insurance surety bonds, which are widely used by companies in public tenders or for guarantees related to advances and contractual obligations.

For businesses, the Supreme Court’s ruling represents significant protection: the guarantee cannot be transformed into an unlimited commitment over time.

Relationship with Other Rulings

For years, case law has debated the distinction between a surety bond and an autonomous guarantee contract. Some past rulings held that the presence of an “on first demand” clause was sufficient to make the guarantee autonomous, i.e., independent of the principal debt.

Other rulings, however, argued that this clause alone is not enough to change the nature of the contract. The guarantor must still be able to raise the defenses provided by law.

With Ordinance No. 14687/2025, the Supreme Court definitively clarifies that the six-month term under Article 1957 of the Civil Code cannot be waived without falling into nullity for unfairness.

This decision sets a definitive precedent in the debate and imposes greater balance in guarantee contracts, protecting the guarantor and promoting transparency in the financial market.

What Changes for Those Who Signed a Surety Bond

Those who have signed a surety bond containing an “on first demand” clause should carefully review the contract. If the clause allows the creditor to demand payment at any time without respecting the six-month term, it is potentially null.

In this case, the guarantor can request a declaration of nullity and ensure that the creditor complies with the legal time limits.

For businesses, this means that an insurance surety bond signed for participating in a public tender or securing an advance cannot include clauses that eliminate the time limits set by the Civil Code.

This principle also applies to individuals who sign surety bonds related to loans or lease agreements: the six-month term is a protection that cannot be removed.

Role of Associations and Possible Protections

Consumer protection associations and specialized organizations can assist citizens and businesses in verifying the fairness of signed surety bonds.

In particular, they can:

• Provide preliminary information on the risks of unfair clauses;
• Assist in drafting objections or appeals;
• Report widespread unfair practices to supervisory authorities.

For those who have signed a surety bond with an “on first demand” clause, it is advisable to request a full copy of the contract and consult a lawyer or expert in guarantee law to assess the possibility of invoking nullity.

Frequently Asked Questions About the Nullity of the “On First Demand” Clause

The Supreme Court’s 2025 ruling sets a definitive precedent in the field of surety bonds. The “on first demand” clause, if it eliminates or modifies the six-month term provided by Article 1957 of the Civil Code, is null for unfairness.

The creditor must comply with legal time limits, while the guarantor has the right to oppose and demand the application of the legal framework.

For businesses and individuals, this decision ensures contractual balance and serves as a reminder to always carefully review insurance surety bonds before signing.