The Creditor’s Duty to Disclose in Suretyship Contracts: Good Faith, Material Information, and Judicial Practice under Iraqi Law

Abstract

Background: The duty of creditors to disclose material information to guarantors raises important questions concerning the protection of consent in contracts characterized by unequal bargaining power. Professional creditors often possess superior information about the principal debtor’s financial condition and ability to meet contractual obligations. This study examines the development of the disclosure duty under Iraqi law, focusing on Federal Baghdad Court of Appeal Decision No. 312/T/2019 and subsequent judicial decisions.
Methods: The study adopts a doctrinal and comparative legal methodology, analyzing relevant provisions of the Iraqi Civil Code concerning good faith, fraud by concealment, materiality, and the burden of proof. It examines the principal judgment and three additional Iraqi court decisions issued between 2020 and 2022, comparing the Iraqi approach with developments in three neighboring legal systems.
Results: The findings indicate that Iraqi courts increasingly recognize the legal consequences of non-disclosure where creditors possess material information unknown to guarantors that could reasonably influence their decisions to provide guarantees. Materiality is assessed contextually, considering the nature of the information, the creditor’s professional status, and the parties’ circumstances. However, judicial decisions reveal inconsistencies regarding the scope of disclosure obligations, materiality assessment, burden of proof, and legal consequences of non-disclosure.
Conclusion: The study recommends legislative clarification of creditors’ disclosure obligations under Iraqi law, including the categories of material information, the timing of disclosure, the parties’ respective duties, and the consequences and evidentiary requirements of non-compliance. Such clarification would strengthen guarantor protection, improve legal certainty, reduce conflicting judicial interpretations, and maintain a fair balance between creditor interests and guarantors’ rights.