Turkey: The Validity Terms Of Security Agreements Pursuant To New Code Of Obligations

The New Turkish Code of Obligations numbered 6098 ("TCO") which has entered into force on 01.07.2012 regulates security agreements in article 581 and following articles.

TCO article 581 defines the security agreement. Accordingly, the guarantor personally guarantees the consequences of the debtor's failure to pay towards the creditor in the security agreements.

The validity of the security agreement is subject to some conditions. They are as follows: (i) there shall be a present and valid principal debt, (ii) it shall be made in written form and (iii) the approval of the spouse shall be received.

The Presence of a Present and Valid Principal Debt

According to article 582 of TCO, the security agreement may be concluded for a present debt. However, security agreement may be concluded for a future or a contingent debt which will become effective when the debt is due or a condition is fulfilled. In such a case, it is not required that the principal debt is present whilst the security agreement was concluded; it is sufficient that the principal debt is present when the creditor demands performance of the security. The security for a contingent debt shall become effective when the condition is fulfilled. On the other hand, if the security is granted for a debt secured by a condition subsequent, the debt of the guarantor shall be ended when the condition is fulfilled.

It is also stipulated in the article that the security agreements may only be concluded for a valid debt. Therefore, if the principal debt is born from a null and void transaction due to contradiction to law, impossibility, simulation, lack of sensibility, then the security shall deemed to be invalid.

However, if the person who guarantees a debt personally knows the invalidity of the debt due to lapse or incapacity, whilst concluding the security agreement, then he shall be liable pursuant to security provisions. Also, if the guarantor knows that the prescription time of debt has been elapsed whilst concluding the security agreement, he shall also be held liable.

According to article 582, it is stated that the guarantor may not waive his rights in advance unless otherwise is stipulated by law.

Written Form of Security Agreements

According to article 583, the security agreement shall be deemed void unless it is concluded in written form, and the maximum limit which the guarantor shall be liable and the date of security are stated therein.

The article stipulates for a qualified written form since some parts of the security agreement shall be arranged by handwriting. Accordingly, the guarantor shall state the following by handwriting in the security agreement: (i) maximum limit which the guarantor shall be liable (ii) the date of security and (iii) if he is a joint guarantor, then he shall state that he is liable from the debt as a joint guarantor.

The amendments made upon the security agreement which also increase the liability of the guarantor shall also be made in the form foreseen for security.

The same form shall also be valid when the guarantor acts as a guarantor for him by a special authority and he commits to act as a guarantor.

The parties may decide to limit the liability of the guarantor with a certain part of the debt provided that it is made in written form.

Receiving the Approval of the Spouse

Article 584 brings a provision which limits the guarantor capacity for the married person. Spouse may only act as a guarantor with a written approval of the other unless there is a court order for divorce or there is a legal separation order.

The approval of the spouse shall be received prior to concluding the agreement or whilst the agreement is being concluded at the latest.

The approval of the spouse is not required if the amendments made upon the security agreement do not cause an increase in the security amount or do not turn the ordinary security into joint security or do not decrease the security which are for the benefits of the guarantor considerably.

Conclusion

In articles 581 and the following articles of TCO which has entered into force on 01.07.2012, the security agreement is defined as "an agreement in which the guarantor personally guarantees the consequences of the debtor's failure to pay towards the creditor" and it is regulated that the validity of the security agreement is subject to some conditions.

These conditions are:

  1. there shall be a present and valid principal debt,
  2. it shall be made in written form,
  3. the approval of the spouse shall be received.

It is not required that the principal debt is present whilst the security agreement is being concluded; it is sufficient that the principal debt is present when the creditor demands performance of the security.

Also, the principal debt shall be valid. However, if the person who guarantees a debt personally knows the invalidity of the debt due to lapse or incapacity, whilst concluding the security agreement, or if the guarantor knows the prescription time of debt has been elapsed whilst concluding the security agreement, then he shall also be held liable pursuant to security provisions.

The article stipulates qualified written form for the security agreements. Accordingly, the security agreement shall be concluded in writing and guarantor shall state the maximum limit which the guarantor shall be liable of, the date of security and if he is a joint guarantor, that he is liable from the debt as a joint guarantor by handwriting.

Article 584 of TCO brings an additional provision for the married person. Accordingly, the validity of the security agreement is subject to approval of the other and such approval shall be received prior to concluding the agreement or whilst the agreement is being concluded at the latest.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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