What is a Guarantee Agreement?
Guarantee Agreement and its Characteristics within the Scope of Article 581 of the Turkish Code of Obligations
Entrance
Article 581 of the Turkish Code of Obligations ("TBK") sets forth the definition and basic framework of a guarantee agreement. A guarantee is a security contract that plays a critical role, particularly in commercial life, credit transactions, bank guarantees, and the trust relationship between creditor and debtor. The purpose of the contract is to provide security to the creditor against the possibility of the debtor failing to fulfill their obligation.
This article will examine in detail the definition, elements, characteristics, validity requirements of guarantee agreements, and the Supreme Court's approach to them; it will also address problems encountered in practice and offer solutions.
Definition of Guarantee in Article 581 of the Turkish Code of Obligations
According to Article 581 of the Turkish Code of Obligations:
"A guarantee agreement is a contract in which the guarantor undertakes to be responsible to the creditor for the consequences of the debtor's failure to fulfill their debt."
Based on this provision, it is understood that a guarantee agreement is essentially an ancillary contract . The guarantor does not assume the principal debtor's debt; they only become liable in the event of non-performance of the debt.
Characteristics of a Guarantee Agreement
1. Secondary Quality
A guarantee is dependent on the principal debt. If there is no valid principal debt, no guarantee arises. This the principle of subsidiarity . For example, if a guarantee is given for an invalid debt, the guarantee is also considered invalid.
2. Form Adherence
According to Article 583 of the Turkish Code of Obligations, the validity of a guarantee agreement is subject to written form. Furthermore, the amount of the guarantor's liability and the date must be stated in their own handwriting. This a mandatory regulation.
3. Personal Guarantee
A suretyship is a personal guarantee agreement. The surety is liable with their own assets if the debtor fails to fulfill their debt. In this respect, it differs from collateral such as pledges.
4. Independence – Helping to Fulfill the Original Obligation
A guarantee is an independent contract, but it is dependent on the existence of the principal debt. When the debt is settled, the guarantee also terminates.
5. Free Contract
As a general rule, a guarantee agreement is gratuitous for the guarantor. However, in practice, it is possible to obtain a benefit in return for a guarantee in commercial relationships (for example, a guarantee in favor of partners).
Establishment and Validity Conditions of Guarantee
1. Formal Requirements
-
It must be done in writing.
-
The guarantor must write the following in their own handwriting:
-
Guarantee date
-
Bail limit (upper limit)
-
-
Spousal consent (Turkish Code of Obligations, Article 584): For married individuals, the validity of a guarantee depends on the written consent of the spouse.
2. Parties
-
Creditor: The party who will benefit from the guarantee.
-
Debtor: The person who assumes the original debt obligation.
-
Guarantor: The person responsible if the principal debtor fails to fulfill their debt.
3. Driving licence
The guarantor must have legal capacity. Individuals with limited legal capacity cannot act as guarantors.
4. Subject of the Bail
Guarantees can be applied to both monetary debts and performance obligations. However, in practice, they are mostly arranged for monetary debts.
Types of Bail
1. Ordinary Bail
The guarantor's liability is conditional upon the debtor failing to repay the debt and the legal proceedings against the debtor being unsuccessful. The creditor must first approach the debtor.
2. Joint and Several Guarantee
The creditor can approach the guarantor directly. In practice, this is the most common type of guarantee in bank loans.
3. Joint Guarantee
It is when multiple guarantors jointly assume responsibility for the same debt.
4. Recourse Guarantee
A guarantor has the right to seek recourse against the debtor after undertaking the fulfillment of the debt.
The Terms and Consequences of Bail
1. The Guarantor's Responsibility
The guarantor's liability is limited to the amount and date specified in their own handwriting. As a rule, this liability cannot exceed the guarantee limit.
2. The guarantor's Rights of Defense
-
The defense that the original debt has been extinguished
-
Debtor's defenses of non-payment
-
The defense is that the guarantor should not be approached without prior follow-up
3. The guarantor's right of recourse against the debtor
A guarantor can seek recourse against the principal debtor after paying off the debt. This is one of the most fundamental characteristics of a guarantee.
4. Termination of Bail
-
With the termination of the principal debt
-
Upon the expiration of the bail period
-
By the creditor waiving the right to act as guarantor
Supreme Court Practice
The Supreme Court places great importance on the formal requirements in guarantee agreements . In particular, failure to write the amount of liability and the date in the guarantor's own handwriting leads to the invalidity of the agreement.
For example, in a 2019 decision by the 11th Civil Chamber of the Supreme Court of Appeals, it was explicitly stated that the absence of a handwritten date on a guarantee agreement renders the agreement invalid.
Furthermore, the Supreme Court has repeatedly ruled that a guarantee is invalid if the spouse's consent is not obtained.
Problems in Practice
-
Standard Forms in Bank Agreements:
Guarantees in bank loan agreements are generally added to standard printed contracts. However, if matters that should be handwritten are left in printed form, the contract may become invalid. -
Failure to Obtain Spousal Consent
: If married guarantors sign without their spouse's permission, the contract becomes null and void. -
Failure to Specify the Limit:
The failure to clearly state the maximum liability amount of the guarantor creates ambiguity and poses a risk to the creditor.
Conclusion
A guarantee agreement, regulated by Article 581 of the Turkish Code of Obligations, is an important security instrument concerning both the creditor and the debtor. For the agreement to be valid, it must strictly adhere to the formal requirements.
In practice, the written form, the guarantor's handwriting, spousal consent, and the specification of the limit are of critical importance. The Supreme Court also adopts a strict approach on these matters.
In conclusion, when the legal nature and characteristics of a guarantee agreement are correctly understood, both the loss of rights for the parties can be prevented and a strong guarantee can be provided for the creditor.
About Post Author
