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A suretyship agreement, is an agreement concluded between the surety and the creditor, although it gives rise to a tripartite relationship between the principal debtor, the surety and the creditor. The conditions of validity of the suretyship agreement are laid down in Art. 582 et seq. of the TCO. In this article, we examine the definition of the agreement, its conditions of validity, the rule on spousal consent and the relevant decisions of the Court of Cassation.
According to Article 581 of the Turkish Code of Obligations: "A suretyship agreement is an agreement whereby the surety undertakes, vis-à-vis the creditor, to be personally liable for the consequences of the debtor’s failure to perform its debt.”
In other words, through a suretyship agreement the surety undertakes, vis-à-vis a person’s creditor, to be liable for the performance of the principal debt. This agreement involves a tripartite relationship: the principal debtor, the surety and the principal creditor. The debt for whose performance the surety undertakes to be liable is called the “principal debt”. Although it is a tripartite relationship, the agreement is concluded between the surety and the principal creditor.
The article examines the conditions of validity of the suretyship agreement under four headings:
The first sentence of Article 582/I TCO provides: "A contract of suretyship may be concluded for an existing and valid debt." Since the obligation arising from the contract of suretyship is an ancillary obligation, its existence depends on a principal debt. However, it is not an essential element that the principal debt exists at the time the contract of suretyship is concluded. This is addressed in the remainder of the relevant provision, and the point of reference here is that it is sufficient for the debt to exist at the time it falls due, when the creditor will have recourse to the surety and may commence proceedings against the surety.
For the principal debt to be valid, the wills of the parties must correspond. In addition, the contract giving rise to the principal debt must not be defective on grounds such as its subject matter being unlawful, immoral or impossible, or simulation, lack of form or lack of capacity, because such contracts, being invalid, directly render the contract of suretyship invalid as well. Likewise, if the contract has been rescinded on grounds such as defective consent or gross disparity (gabin), the contract of suretyship becomes invalid. Here, under Article 39 TCO, if the principal debtor does not exercise the right of rescission within one year and rescind the contract, or waives the right of rescission, the contract will be deemed to have been concluded retroactively free of any defect, and the contract of suretyship will thus remain valid.
Future and conditional debts
The debt to be guaranteed may be an existing debt, but it may also be a future or conditional debt. However, such debts must be determinable. An example is a contract of suretyship concluded with a bank on behalf of a person who will obtain a loan from that bank in the future.
Article 582/II TCO introduces an exception regarding the validity of the principal debt. Under this provision: "A person who gives a personal guarantee for a debt for which the debtor is not liable by reason of error or lack of capacity shall be liable under the statutory provisions on suretyship if, at the time of assuming the obligation, he knew of the defect vitiating the contract. The same rule applies to a person who stands surety for a debt that is time-barred as regards the debtor." Here, the error and lack of capacity originate from the principal debtor.
In this context, the lack of capacity to be understood is limited incapacity, because a contract concluded by a person with limited incapacity is provisionally ineffective until ratified by the legal representative. Consequently, upon ratification it becomes valid and the contract of suretyship will also remain valid. However, if the legal representative declares that ratification is refused, the provisional ineffectiveness becomes definitive nullity and the contract of suretyship will also lose its validity. Furthermore, if the principal debtor is considered to be wholly incapable, the principal debt relationship will never have arisen; therefore, even if the surety knows that the principal debtor is wholly incapable, the contract of suretyship cannot produce effects, since its existence depends on the validity of the principal debt.
Finally, the following may be said on this subject: until the right of rescission or ratification is exercised, the surety may temporarily refuse to perform the suretyship obligation. This result can be achieved by applying by analogy Article 140 TCO, which, in relation to set-off, gives the surety the right to refuse payment.
Although freedom of contract is adopted in the Turkish legal system, there are provisions prescribing certain formal requirements in order to protect the parties. One type of contract subject to formal requirements is the suretyship agreement. For this type of contract, the legislator has set out the formal requirements in Art. 583 of the TCO, the first paragraph of which reads as follows;
“A contract of suretyship shall not be valid unless it is made in writing and specifies the maximum amount for which the surety will be liable and the date of the suretyship. The surety must state in his own handwriting in the contract of suretyship the maximum amount for which he is liable, the date of the suretyship and, in the case of joint and several suretyship, that he assumes the obligation in that capacity or by any expression to that effect.”
TBK m. 583/1
In other words, the contract of suretyship must first of all be made in writing. The specified conditions must be set out in writing in the contract of suretyship. Finally, these conditions must also be stated in the surety's own handwriting. A contract of suretyship that does not comply with these formal requirements will not be valid.
According to the first paragraph, the elements that must be stated in writing in a suretyship agreement are as follows:
The second paragraph provides: "The granting of special authority to stand surety on one's behalf and a promise to the other party or a third party to stand surety are also subject to the same formal requirements. The parties may agree, in compliance with the written form, to limit the surety's liability to a certain amount of the debt." By virtue of this provision, these matters are also subject to the same formal requirements as those in the first paragraph.
The third paragraph also states that amendments made after the contract of suretyship has been concluded which increase liability are subject to the same form.
Although these conditions are specific to suretyship, since the contract of suretyship imposes obligations on one party only, under Article 14/1 TCO it is sufficient for the contract of suretyship to bear only the surety's signature. The creditor's name need not appear in the contract, but the debtor's name must be stated.
Important · Maximum amount
Finally, the maximum amount of the suretyship must be stated in monetary terms. If no maximum amount is specified in the contract, the contract will again be invalid. This condition must be fulfilled even if the secured debt is not a monetary debt.
A person who has capacity to act also has capacity to stand surety. However, persons who are wholly incapable and persons with limited incapacity cannot conclude a contract of suretyship either themselves or through their legal representatives. This is provided for in the Turkish Civil Code and is also among the transactions that legal representatives are prohibited from carrying out.
As stated above, the conclusion of a contract of suretyship by persons with limited capacity is subject to special conditions. However, at this point it is worth mentioning something we did not state above: persons for whom a curator (kayyım) has been appointed have capacity to stand surety. We derive this from Article 458 TCC. The provision reads: "The appointment of a curator for a person does not affect his capacity to act." Therefore, as we have stated, a person who has capacity to act also has capacity to stand surety.
Since, under a contract of suretyship, the surety will be liable for the principal debtor's failure to perform the debt, there is a risk of the surety incurring a financial burden. For this reason, economic difficulties arising in the event of such a financial burden may cause the family unit to be shaken. Accordingly, the subject of "Spousal Consent", which was not included in Code of Obligations No. 818, has been included in the new Code of Obligations. On the ground that the provisions of Article 584/I-II TCO slowed down business life, paragraph III entered into force in 2013, introducing a number of exceptions in which spousal consent is not required.
If we set out the provisions, the first two paragraphs read as follows: "Unless there is a judgment of separation issued by a court or a legal right to live separately has arisen, one spouse may stand surety only with the written consent of the other; this consent must be given before or, at the latest, at the time the contract is concluded. (para. 1) Spousal consent is not required for subsequent amendments to the contract of suretyship which do not increase the amount for which the surety will be liable, convert an ordinary suretyship into a joint and several suretyship, or significantly reduce the securities in favour of the surety. (para. 2)"
Under this provision, for one of the spouses to stand surety for a debt, the other spouse must give written consent to this transaction. Spousal consent is a condition of validity, and in its absence the contract produces no legal effect or consequences. No distinction is made as to whether the spouse required to give consent is the wife or the husband.
The consent given by the spouse must be given at the latest at the time the contract is concluded. Consent in the form of ratification given after the contract has been concluded does not render the contract valid. Therefore, the spouse must either give permission by declaring it in writing before the contract is concluded, or participate in the transaction by declaring consent at the time of the transaction.
As stated in the text of the law, certain amendments that do not produce consequences to the detriment of the surety may be made without obtaining the other spouse's consent. However, for the other grounds specified in the law, spousal consent is still a condition of validity.
It is worth listing one by one the principles introduced by paragraph III added by the latest amendment. The exceptional cases of contracts of suretyship in which spousal consent is not required are:
Cases where the spouse’s consent is not required · TCO Art. 584/III
– Suretyships given in connection with the business or company by the owner of a commercial enterprise registered in the trade registry or by a partner or manager of a commercial company
– Suretyships to be given by tradespeople or craftspeople registered in the register of tradespeople and craftspeople in connection with their professional activities,
– Suretyships to be given for loans to be extended under Law No. 5570 dated 27/12/2006 on the Extension of Interest-Subsidised Loans by Publicly Owned Banks
– Suretyships to be given for loans to be extended to cooperative members by agricultural credit, agricultural sales, and tradespeople and craftspeople credit and guarantee cooperatives and by public institutions and organisations.
As a result of this added paragraph, the institution of spousal consent, which was introduced to protect the family, has lost much of its effectiveness.
Practical checklist · Form
Practical checklist · Spouse’s consent
Decision on the requirement that the debt subject to the contract of suretyship be determinable;
“Since the damage resulting from misuse of the leased property was not knowable and determinable at the time the contract of suretyship was drawn up, the surety cannot be held liable for the amount of compensation.”
(6th Civil Chamber, 27.11.2014, 2014/3278 E., 2014/13173 K.)
Decision on the exception to the requirement of spousal consent;
"The Regional Court of Appeal decided to dismiss the application on the merits on the grounds that spousal consent had not been obtained in respect of the suretyships given by the defendants who signed, as sureties, the general loan agreement signed on 06.07.2012, when Turkish Code of Obligations No. 6098 was in force, but that the defendants were partners and managers of the principal debtor company, and that, pursuant to Article 584/3 of Turkish Code of Obligations No. 6098 as amended on 28.03.2013, the requirement of spousal consent had been removed for suretyships given by company partners and managers in favour of the company. However, the amendment on which the Regional Court of Appeal based its judgment was made on 28.03.2013 by Article 77 of Law No. 6455, and Article 90 of that Law states that the amendments made by that Law shall enter into force on the date of their publication in the Official Gazette. There is also no provision that the said amendment shall have retroactive effect. In this case, Article 584/3 TCO, which entered into force on 28.03.2013, cannot be applied to the contract concluded on 06.07.2012. Accordingly, whereas the Regional Court of Appeal should have delivered its judgment taking into account that the spousal consent of the defendants who signed as sureties the contract concluded on 06.07.2012 had not been obtained and that Article 584/3 of Turkish Code of Obligations No. 6098, which entered into force on 28.03.2013, could not be applied to the specific case, its decision to dismiss the application on the merits on the grounds stated in writing was not found to be correct, and the decision had to be reversed and set aside."
(11th Civil Chamber, 11/03/2019, 2017/4612 E., 2019/1947 K.)
Related legislation: Turkish Code of Obligations No. 6098 (mevzuat.gov.tr)
Under Art. 581 of the TBK, it is the contract by which the surety undertakes towards the creditor to be personally liable for the consequences of the debtor’s failure to perform its debt. Although there is a three-way relationship between the principal debtor, the surety and the creditor, the contract is concluded between the surety and the creditor.
The contract must be made in writing, and the maximum amount for which the surety will be liable and the date of the suretyship must be stated. The surety must write the maximum amount, the date and, if a joint and several surety, that capacity in his or her own handwriting. Subsequent amendments increasing liability are subject to the same form.
According to the article, the maximum amount must be stated in monetary terms; otherwise the contract is invalid. This requirement applies even if the secured debt is not a monetary debt.
TBK m. 584’e göre mahkemece verilmiş ayrılık kararı veya yasal ayrı yaşama hakkı yoksa, eşlerden biri ancak diğerinin yazılı rızasıyla kefil olabilir. Rıza sözleşmeden önce ya da en geç kurulması anında verilmelidir; sonradan verilen icazet sözleşmeyi geçerli kılmaz.
Spousal consent is not required for suretyships given by the owner of an enterprise registered in the trade registry, or by a partner or manager of a company, in connection with the enterprise or company; for the professional suretyships of tradespeople and craftspeople; for loans under Law No. 5570; and for certain loans extended to cooperative members.
Makalede aktarılan Yargıtay 11. HD’nin 2017/4612 E., 2019/1947 K. sayılı kararına göre, 28.03.2013’te yürürlüğe giren m. 584/3 geçmişe etkili değildir; 06.07.2012 tarihli sözleşmeye uygulanamaz.
Makaleye göre tam ve sınırlı ehliyetsizler ne kendileri ne de yasal temsilcileri aracılığıyla kefil olabilir. TMK m. 458’e göre kayyım atanması fiil ehliyetini etkilemediğinden, kendisine kayyım atanan kişi kefalet ehliyetine sahiptir.
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