What is the legal validity of a pledge of faith?

What is a Trust Agreement? Legal Nature and Validity Requirements

Entrance

A contract of trust is a special type of debt relationship established between parties based on trust. Although not explicitly regulated in the Turkish Code of Obligations, this type of contract, which is widely used today, particularly in real estate transfers, company shares, asset management, and debt relationships, has a long-standing practice and accepted structure in the legal world.

This article will examine in detail the legal nature of trust agreements, their validity requirements, the difficulties in proving them, and their practical application through case studies.

1. Definition and Legal Nature of a Trust Agreement

A contract of trust is a contract based on reliance that stipulates the transfer of ownership of a property to another person for a specific purpose and with limited authority, to be returned once that purpose is achieved.

The most critical element here is that the transfer appears to be a complete transfer of ownership, but in the background, this transfer is limited by a contract of trust for a specific purpose.

Typical Examples:

A transfers his registered property to B in exchange for a future debt.
A company partner transfers their shares to another partner as collateral.
A person threatened with bankruptcy transfers their assets to a trusted third party.

2. Elements of the Covenant of Faith

For a pledge of faith to be considered valid, certain elements must be present:

Trust Relationship (Belief): There must be a relationship based on trust between the parties.
Intention Regarding the Transfer of Ownership: The transfer of ownership of the property must have actually taken place in the land registry or official records.
Purpose Limitation: The transfer of ownership is limited to a specific purpose.
Return Obligation: The return of the goods must be stipulated once the purpose has been achieved.
Explicit, Not Implicit Agreement: While written agreements generally facilitate proof, notarization is not required.

3. The Difference Between a Covenant of Faith and a Collusion

Contracts of trust and collusion (Turkish Code of Obligations, Article 19) are often confused. However, there are fundamental differences between these two concepts:

Covenant of Faith	Collusion
It is a transfer made with genuine will.	The apparent action differs from the true intention.
The purpose is temporary and based on trust.	The aim is to deceive third parties.
It is binding between the parties.	It is invalid even between the parties.

4. Proof of the Trust Covenant and Legal Challenges

Trust agreements, when not made in writing, often lead to serious problems in terms of proof. In Turkish law, written evidence is generally required. If there is no written document, proof by witness testimony is not possible (Code of Civil Procedure, Article 200).

However, proof can be supported by irrefutable private documents, such as notarized documents prepared immediately after the transfer of title or bank records.

5. The Contract of Faith in Practice: A Case Study

The Incident:
Ali Bey borrows 2,000,000 TL from Zeynep Hanım to continue his business. As security, he temporarily transfers the title deed of an apartment he owns in Istanbul to Zeynep Hanım. A written "trust agreement" is made between the parties. Six months later, the loan is repaid, but Zeynep Hanım does not return the title deed. Ali Bey files a lawsuit for the return of the title deed.

Assessment:
Since there is a written trust agreement between the parties, Mr. Ali will be able to prove that the title deed is subject to a trust transfer. The court will decide to return the title deed, finding that the ownership serves its intended purpose.

6. Validity of the Trust Agreement

Trust agreements are valid under Turkish law. However, this validity is subject to certain limitations:

It must not be contrary to public order.
It should not be a collusive transaction concealing a genuine transfer of ownership.
It must not be intended for the purpose of concealing assets or evading taxes.

7. Where are Creed Covenants Most Commonly Used?

Real Estate Transfer (Via Title Deed)
Company Share Transfer (with Commercial Registry Registration)
Vehicle Transfer (in Traffic Registration Procedures)
Collateral Acquisitions in the Construction Sector
Agency + Collateral Structures in Banking

8. Points to Consider During Implementation

A pledge of faith must be in writing.
Having it done in the presence of a notary increases its probative value.
The purpose and duration must be clearly stated.
All correspondence, bank records, and email exchanges made after the transfer must be preserved.

Conclusion

Trust agreements form the legal basis for transfers of ownership based on trust in practice. However, for these agreements to be valid and to prevent future legal disputes, it is crucial that they are carefully drafted and documented in writing. When the trust relationship between the parties is damaged, a sound evidence strategy is vital for success in proving the trust agreement and claiming restitution.

Debt security, law of obligations, transfer based on trust, fiduciary transaction in law, fiduciary contract, collusion, transfer of title, return of immovable property, of Obligations Article 19, written proof

Single Blog Title