How to Raise the Defense of Lack of Consideration in a Check? | Turkish Commercial Code, Supreme Court Decisions and Practice

How to Raise the Defense of Insufficient Consideration on a Check?

Entrance

A check is one of the most important negotiable instruments regulated in the Turkish Commercial Code (TTK). As a rule, a check a means of paymentand is issued for the purpose of paying the amount stated on it. However, in practice, there is not always a real economic transaction behind the check. This is where the "defense of lack of consideration" comes into play.

The defense of "lack of consideration" is a defense raised by the drawer or debtor of a check against the holder, stating that "there is no actual consideration on the back of this check." This issue, highly debated in commercial law, is important both for the legal security of the parties and for the negotiability of the instrument.

Legal Nature of Checks

A check is a negotiable instrument in the nature of a money order, issued in accordance with Articles 780 et seq. of the Turkish Commercial Code and containing the mandatory elements listed in the law . The legislator has emphasized the check's function as a means of payment, and therefore has stipulated that a check should constitute an "unjustified" and "abstract" acknowledgment of debt.

Therefore, a check does not necessarily require an underlying debt relationship to be valid. However, this limits the scope of defenses such as the defense of lack of consideration.

What is the Defense of Lack of Consideration?

The defense of lack of consideration is raised because the underlying relationship that gave rise to the issuance of the check never existed or subsequently became invalid.

For example:

If the drawer has issued a check without actually receiving the goods or services,
If the underlying contract (e.g., sales contract) is invalid,
If the agreement between the parties is unlawful,

In this situation, the defense "the check is without consideration" can be made.

Legal Basis of the Defense of Lack of Consideration

Turkish Commercial Code Article 687: In a check, the underlying debt relationship is separate and independent from the check itself.
Articles 599 and 600 of the Turkish Commercial Coderegulate the principle of the abstract nature of negotiable instruments.
Turkish Code of Obligations, Articles 19-20: Nullity of obligations arising from unlawful or invalid contracts.

The defense of lack of consideration stems from these provisions.

Against whom can the defense of lack of consideration be invoked?

It is quite important to determine against whom the defense of lack of consideration can be raised.

1. Against the First Creditor (Subjective Defense)

The first holder who receives the check directly from the drawer is aware of the underlying relationship. Therefore, the defense of lack of consideration can be raised against him/her.

2. Against Bona fide third parties

If a check has been transferred and passed to a third party, the principle of the abstract nature of negotiable instruments is preserved in favor of the "good faith holder". In this case, the defense of lack of consideration cannot be raised.

The defense will only be valid if it is proven that the holder acted in bad faith, that is, that he knew or should have known that the check was worthless.

3. Within the Sales Chain

When a check is transferred by endorsement, the defense of lack of consideration cannot be raised against every endorser. It is only possible against "persons who were directly aware of the underlying debt relationship".

Methods of Raising the Defense of Lack of Consideration

1. Defence Before the Court

In a debt collection lawsuit filed to recover the amount of a check , the debtor may raise the defense of lack of consideration. To do this:

Concrete evidence must be presented to show that the check is without consideration.
It is necessary to prove that the underlying contract is invalid, non-performanced, or unlawful.

2. Objection to Enforcement Proceedings

When the holder demands payment of the check amount through summary enforcement proceedings , the debtor may raise the defense of lack of consideration in their objection to the enforcement office

3. The Aspect of Criminal Liability

According to the Check Law No. 5941, those who issue bounced checks may face criminal penalties. However, if it is proven that the check was without sufficient funds, the drawer is not subject to criminal liability.

The Defense of Lack of Consideration in Supreme Court Decisions

The Court of Cassation has adopted the following principles in its jurisprudence regarding the defense of lack of consideration:

The Supreme Court of Appeals, General Assembly of Judges, Case No. 2007/19-865 E., Decision No. 2007/911 K., stated:
"Even though a check is an abstract acknowledgment of debt, the defense of lack of consideration can be raised against the first holder."
The 11th Civil Chamber of the Supreme Court of Appeals, Case No. 2015/10346, Decision No. 2016/4561, stated:
"The defense of lack of consideration cannot be raised against bona fide third parties."
The 19th Civil Chamber of the Supreme Court of Appeals, Case No. 2018/4621, Decision No. 2019/7854, stated:
"If it is proven that the holder knew or should have known that the bond was without consideration, a defense may be raised."

Problems Encountered in Practice

Difficulty of proof: The party raising the defense of lack of consideration bears the burden of proving the invalidity or lack of consideration of the underlying relationship.
Presumption of good faith: It is quite difficult to prove the holder's bad faith.
Undermining confidence in the check system: The widespread acceptance of the defense of lack of consideration impairs the negotiability of negotiable instruments.
Overlapping criminal and civil proceedings: A claim of lack of consideration can lead to different outcomes in both criminal and civil courts.

Protection of Holders Against the Defense of Lack of Consideration

Legislators have introduced protective regulations to safeguard holders of checks in order to preserve their economic function.

Protection of the bona fide holder: Due to the principle of abstraction, the holder can claim their due regardless of the underlying relationship on the check.
Chain of liability: The drawer, endorser, and guarantor cannot be relieved of liability by invoking the defense of lack of consideration; they can only raise this defense against the original creditor.

Proposed Solutions

Specialization within specialized commercial courts to expedite the examination of claims of lack of consideration
Relaxing the standards of evidence to make it easier to prove the holder's bad faith ,
The parties may prepare additional documents regarding the underlying relationship when issuing the check (e.g., contract, delivery receipt),
Harmonization of legal doctrine and Supreme Court precedents.

Conclusion

The defense of lack of consideration in a check is one of the most controversial issues in negotiable instruments law. While the principle of abstractness of the check protects the holder, defenses based on the underlying relationship aim to protect the rights of the drawer.

The defense of lack of consideration can only be raised against the first pregnant woman or if it is proven that the pregnant woman acted in bad faith. Therefore, in practice, it largely on the issue of proof .

Single Blog Title