(1) A joint and several obligor to whom Article 11.1.10 applies may also exercise the rights of the obligee, including all rights securing their performance, to recover the excess from all or any of the other obligors to the extent of each obligor’s unperformed share.
(2) An obligee who has not received full performance retains its rights against the co-obligors to the extent of the unperformed part, with precedence over co-obligors exercising contributory claims.
1. Subrogation in the obligee’s rights
A joint and several obligor who has paid more than its share to the obligee has a contributory claim against the other obligors under Article 11.1.10. Article 11.1.11(1) gives the co-obligor who has such a contributory claim the possibility of benefiting from the rights of the obligee, including all rights securing their performance. This possibility is of particular value to the joint and several obligor when the rights of the obligee are secured, because the contributory right under Article 11.1.10 is not secured.
1. Bank X has lent EUR 500,000 to companies A and B as joint and several obligors, secured by a mortgage on A’s premises. B reimburses the full amount of the loan. Under Article 11.1.10, B has an unsecured claim against A for contribution in the amount of EUR 250,000. B may also exercise X’s rights against A up to the amount of EUR 250,000, including enforcement of the mortgage on A’s premises.
2. Obligee’s rights reserved and preferred
By providing that an obligee who has not received full performance retains its rights against the joint and several obligors, and by giving those retained rights of the obligee precedence over the rights of the performing obligor, the rule in Article 11.1.11(2) assures that the benefit given to the joint and several obligor in Article 11.1.11(1) does not detrimentally affect the remaining rights of the obligee. This precedence may be effectuated by deferring enforcement of the claim of the performing joint and several obligor under Article 11.1.11(1) until full performance is received by the obligee.
2. The facts are the same as in Illustration 1, except that B has reimbursed only EUR 400,000 of the loan, and the remaining EUR 100,000 remain unpaid. B has a contributory claim against A for the amount in excess of its own share, i.e. EUR 150,000 (EUR 400,000 - EUR 250,000). B also has the right to exercise X's rights against A up to that amount, including enforcement of the mortgage on A's premises. However, as X's rights with respect to the remaining EUR 100,000 have precedence over the rights of B, enforcement of B's rights against A may not occur until after X has received repayment of the remaining EUR 100,000.
The rule on precedence is subject to the possible application of mandatory rules providing otherwise in insolvency proceedings.