1. INTRODUCTION
One of the substantial subjects for a party to a contract is the execution of his/her undertakings whereas for the other party of the contract it is whether his/her contractual liabilities are timely and fully executed. Considering the basic contractual relationships in daily life, the possibility of one party to execute his/her liabilities is usually high whereby it is at risk for the other party to execute his/her liabilities.
For instance; in a lease, the lessee is more likely to fail fully and timely performace of its payment liability during the term of contract, wheras the lessor is likely to deliver the leased property. Since such an uncertainty is common nearly in all contractual relationships, the parties to a contract are likely to request various sureties to secure himself/herself.
Within the scope of a contractual relationship, there are various types of sureties in Turkish Law that may be provided by the debtor or by third parties, for the benefit of the creditor regarding liabilities of the debtor. This diversity originates from the execution of some type of contract for the purpose of security (transfer of the receivable for the purpose of security, establishment of usufruct on the shares of a company etc.) along with contracts which have the purpose of providing personal security per se in Turkish Law. The warrantor in a personal security contract claims to be liable within the limits of the dept. Guarantee contracts, surety contracts and mortgage agreements are among abovementioned securities. It must be known that surety contracts are commonly preferred in practice and are quite essential for the well-functioning of business.
In this article, first personal security contracts are examined in general terms in line with foregoing explanations, then surety contracts, which are very common in Turkish Law, and their differences from guaranty contracts are displayed.
2. Personal Security Contracts
In theory, personal security contracts are two sided; nevertheless, the contractual relationship behind the scenes, which pushes them to enter into a personal security contract is three sided. The sides of this relation are the warrantor (surety/guarantor), the warrantee (creditor/acceptor) and the debtor (beneficiary) and in principle, each one of them has to be in a contractual relationship with the other. In practice, it is recommended for the creditor to stipulate that operativeness the original agreement (any agreement) is conditional upon providing of a security. Following this request of the creditor, the debtor enters into in a contractual relationship with the personal security provider. It is generally accepted that, this relationship has the characteristics of an attorney agreement as well as that the parties shall have mutual rights and obligations pursuant to this agreement. The proxy (security provider) shall execute a security agreement (a suretyship or guarentee agrement for example) with the creditor (acceptor).
Diagram A: The three sided relationship between the parties to guarantee and surety contracts is displayed below:
3. Surety Contracts
3.1. Properties
One of the security types frequently used as a personal security is the surety contract. A suretyship may be provided for the beneficiary of the creditor by third parties for the purpose of securing the debtors contractual liabilities.
Pursuant to article 581 of the Turkish Code of Obligations numbered 6098 (“TCO”) suretyship is “the agreement where the surety undertakes to be personally liable against the creditor, for non-execution of the obligations of the deptor” . Accordingly, such an obligation is conditional, since the obligations of the surety arise in the event in which the main debtor fails to execute its obligations partially or completely. The obligation arising from a surety contract is secondary to the obligation of the surety which depends on the primary obligation. In case of extinction of the primary obligation, obligations of the surety shall also extinct.
In a surety contract, the surety has the right to claim and plea (when the obligation does not exist, is not due, the contract is invalid, the obligation has ended due to another reason, defense of non-performance by the debtor etc.) against the creditor as if the debtor. Furthermore the obligation of the surety shall not become due unless the primary obligation is due.
It must be stated that, in surety contracts, the enforcement of the principal debtor is primary and essential. The surety is only an assistor between the creditor and the debtor within the scope of the primary contractual obligation.
3.2. Validity and Requirements of Surety Contracts
The surety contract shall be in written form. Pursuant to article 583 of TCO, the minimum amount of the surety’s liability, the commencement date of the suretyship and any statement indicating the solidary nature of the surety when it is a joint surety, shall be written by hand as well and signed by the real person surety or by, a member of the authorized body (if there are other persons involved in the said competent authorithy, these persons as well) of a legal entity surety, otherwise the surety contract shall not be valid.
In addition, New TCO sets forth new requirements for surety contracts. Pursuant to article 584 of TCO, if a real person sırety is married, he or she can enter into the suretyship agrrement with the written consent of the other spouse, unless a split or separation order has been issued by a court. Such consent shall be granted prior to or at the moment of signature of the contract. Any failure on obtaining the consent of the other spouse will result in the invalidity of the suretyship agreement and if the other spouse grant the consent to the surety spouse after the moment of signature of the contract, the given consent shall not regenerate the contract. TCO states that there is no exception in regard to consent of the spouse. However, the exceptions below regarding the consent of the spouse in surety contracts have been introduced on April 28th, 2013 as a result of the efforts shown by the actors of business for the operability of the business life:
i. Suretyships appertaining to acorporation or enterprise registered at the trade registry, provided by the owner or partner or manager of the commercial enterprise,
ii. Suretyships provided by craft and related trades workers registered at craft and related trades workers registry regarding their professional activity,
iii. Suretyships provided for the credits to be used pursuant to the Law numbered 5570 Regarding Utilisation of Credits With Interest Intensive Operated by Banks with Public Capital and
iv. Suretyships provided for the loans to be used by agricultural credit, agricultural sales and craft and related trades workers credit and suretyship cooperatives.
In the above mentionned cases the consent of the other spouse is not necessary.
3.3. Types of Surety Contracts
Basically there are two types of suretyship; the ordinary suretyships and joint suretyships. If the surety is an ordinary surety, the creditor shall firstly claim against the primary debtor in order to raise a claim against the ordinary surety and the creditor shall show reasonable effort while claiming against the primary debtor. Otherwise if the creditor raises a claim against the ordinary guarantor before claiming against the primary debtor, the ordinary guarantor can make of plea and may thereby refuse to make any payment.
The Joint surety shall be liable (i) In case of a waiver of the surety or sureties with the right to plea for foreclosure of the pledged property if the primary debtor fails to execute its obligations and the protest fails to reach its purpose, or (ii) in case of insolvency of the guarantor or guarantors.
If the guarantor is a joint guarantor, the creditor may raise a claim against the joint guarantor before (i) claiming against the debtor or (ii) foreclosure of the pledged property. On the other hand, if there is pledge on movables or receivables as a security, in principle, the creditor must first try foreclosure of the before raising a claim against the joint guarantor. In this prospect, the creditor can directly pledge against the guarantor, in case that a judge has concluded that the receivable cannot be completely satisfied by the foreclosure of the pledge(s), that the debtor is insolvent or that there is an arrangement of bankruptcy against the debtor.
4. Difference Between Surety Contracts and Guarantee Contracts
Both surety contracts and guarantee contracts are personal security contracts and there are differences between them especially in terms of requirements and liability of the security provider. It must be noted that the guarantee contract is a contract which is commonly requested in practice by the creditor, for the reason that, distinctly, it provides stronger protection than a surety contract. Besides, pursuant to article 585 and 586 of TCO, if the receivable subject to a surety contract is secured by a pledge, the surety has the right to request that the the foreclosure of the pledge, priorly by the creditor. In other words, the surety has the right to request the foreclosure of the pledge in accordance with the relevant articles of TCO.
Guarantee contracts the are contracts that contain personal guarantees just like surety contracts. However, contrary to surety contracts, the liability of the guarantor does not depend on the existence or the validity of primary debt. As it is accepted by Supreme Court of Appeal and doctrine, the guaranty, provided as a security, has the characteristics of a guaranty of performance of the third party. Pursuant to TCO; someone who guarantees performance of a third party shall compensate the damages arising from a nonfulfillment of such an obligation. The parties may agree on the liability of the garantor to be conditioned to application in written form within a determined period of time.
Regarding the guarantee contract provided as a security, the guarantor takes it upon himself that the debtor shall duly perform his/her obligations and in case of a failure of such a performance, for instance the occurrence of a risk, the other party will be obliged to compensate the positive damage.The Supreme Court of Appeal accepts the existence of guarantee contracts provided for performance of a third party and it states that in this case the guarantor undertakes the risk of (i) non-fulfillment of the obligations and (ii) failure to reach to the expected result.
As mentioned above, on contrary to the surety contracts the guarantee contracts comprises the obligation of the guarantor which is independent of the primary obligation and in case of an invalidity of the primary obligation, the guarantor yet undertakes the compensation of the loss. In other words, independent liability of the guarantor means that its obligation does not depend on existence, validity, continuation or legal suitability of the primary obligation.
Therefore, in case of occurrence of the conditions stated in a guarantee contract, even though if the primary obligation is not due, existing or valid, the guarantor shall fullfill his/ her obligations and make the payment.
In surety contracts the guarantor may make a plea or/and raise a claim against the creditor such as the debtor whereas in guarantee contracts the guarantor who provides security and who is not involved in the contractual relationship can not make a plea or/and raise a claim against the creditor as if the debtor. Circumstances which constitute an abuse of the right of the creditor’s payment order are an exception to this rule in the guarantee contract.
In the light of foregoing, it is accepted by doctrine and especially by the decisions of the Supreme Court of Appeal that “independency” is the most important aspect that separates a guarantee contract from a surety contract. The Supreme Court of Appeal’ opinion regarding the independency criterion is as follows: “… Henceforward various authors defined guarantee contracts in accordance with their own opinions. In these definitions the common factors are the independency of the contract and the willingness of the garantor to enter into commitment. Although there is no communion in all matters, these common factors which are based on certain qualifications should be the main criteria for identification of these contracts."
In parallel with the abovementioned; the need for a guarantee contract beside the surety contract is that the obligations arising from surety contracts are secondary while the liability of the guarantor is primary and independent from the main obligation.
If the guarantor is a real person specific form requirements stated under TCO must be applied. In this manner, provisions regulated for surety contracts regarding requirements as to form, capacity and consent of the spouse shall be applied to guarantee contracts executed by real persons. For instance pursuant to article 585 and 586 of TCO, the surety has the right to request foreclosure of the pledge. Nominately, real persons may benefit from this aforementioned right. However, it should be noted that, in practice, credit institutions may request their clients to waive the right in question.
5. Conclusion
The most important feature of the surety contract which is a type of a personal security and commonly used in daily life is that it is secondary. In other words, because of the fact that the validity of the surety contract depends on the main contractual relationship the obligation arising from surety contract is a conditional obligation. When liabilities of the surety and the commen use of these agreements are considered, it is to see that the legislator has brought strict requirements and validity rules on these agreements.
In other respects; just like the surety contract, the guarantee contract is also a security type which is commonly used in commercial life. Even though guarantee contracts and surety contracts have similarities in terms of their structures, the guarantee contract is separated from the surety contract when considering its independency feature. Yet the liability of the guarantor in the guarantee contract is not based upon validity and existence of primary debt.
FOOTNOTE
1 YAVUZ, Nihat, Öğretide ve Uygulamada Türk Kefalet Hukuku, Ankara 2009, s.9.
2 Yargıtay 13. HD 2002/12569E. 2003/3985 K. 04.04.2003 T. “ …sözleşmenin hukuki mahiyeti itibariyle BK.nun 110. maddesinde sözü edilen üçüncü şahsın fiilini taahhüt niteliğinde bir garanti sözleşmesi olduğu açıktır.”
3 Yargıtay 13. Hukuk Dairesi, E. 2002/12569, K. 2003/3985, T. 04.04.2003.
4 DEVELİOĞLU, Murat, Kefalet Sözleşmesini Düzenleyen Hükümler Işığında Bağımsız Garanti Sözleşmeleri, İstanbul 2009, s. 127 vd.
5 Gerek doktrinde ve gerekse de içtihatlarda kefalet ve garantiyi ayırmak için çeşitli kıstaslar belirlenmiştir. Bunlar fer’ilik – bağımsızlık kıstası, menfaat kıstası, kişiye yönelik ilgi kıstası, Şüphe halinde kefalet karinesi, aynen ifa yükümlülüğü – tazminat yükümlülüğü kıstası ve ivaz kıstasıdır. Bu konuda detaylı bilgi için bkz. YAVUZ, a.g.e., s. 20. 6 YİBGK 11.06.1969 tarih, E. 1969/4, K. 1969/6, ayrıca bkz. YHGK, 03.12.2008, E. 2008/19-729, K. 2008/718.
6 YİBGK 11.06.1969 tarih, E. 1969/4, K. 1969/6, ayrıca bkz. YHGK, 03.12.2008, E. 2008/19-729, K. 2008/718.
