Turkey: Distinguishing Between Guarantee And Suretyship Agreements

Introduction

As is widely known, legal transactions are formed upon consensus of declarations of intent. The purposes of the parties engaging in the legal transactions are reflected in these declarations of intent. However, the parties' declarations of intent may not reflect the real intention of the parties at all times. In some cases, the real intentions of the parties must be determined. The disputes arising in practice mainly originate from determining the nature of the relationship between the parties, making it necessary to determine the rules applicable to this relationship. Even though parties may define their relationship in a certain way, the determination of the nature of the legal relationship between parties must be made according to their real intentions1. This general rule is based on Article 182 of the Code of Obligations numbered 818 ("CO") and Article 19 of the Turkish Code of Obligations numbered 6098 ("TCO"). Pursuant to the two articles specified, while determining and interpreting the type and content of an agreement, the real and common intentions of the parties shall be taken into consideration regardless of the words used by the parties by mistake or with the intention to hide their real purposes.

Consequently, the legal nature of the relationship between the parties in all cases shall be determined by considering whether or not the declaration of intent of the parties legally qualifies their relationship3.

Guarantee or Suretyship?

One of the circumstances which requires interpretation of the parties' intentions under Turkish law is a dispute concerning whether a security relationship between the parties is a guarantee agreement or a suretyship agreement. This matter has been discussed in the doctrine and rulings of the Court for a long time4.

Determining whether the nature of the security relationship between parties is a guarantee agreement or a suretyship agreement is essential, due to differences in the conditions concerning the formation, features and the articles of the agreements, even though their function of security is similar. It is useful to begin by mentioning the differences between these two agreements briefly5.

For instance, since the obligations arising from suretyship agreements are accessory to the obligations arising from the main agreement, the invalidity of the main agreement shall result in the invalidity of the suretyship agreement. However, in cases where there is a guarantee agreement independent from the main agreement, the creditor of the guarantee agreement may recourse to the guarantor even if the principal obligation becomes or is deemed invalid.

Another difference between these two agreements is in the exceptions and objections arising from the main agreement. In a suretyship agreement, the surety may exercise the exceptions and objections of the principal debtor against the creditor, whereas the guarantor of a guarantee agreement may not exercise the exceptions and objections of the principal debtor against the principal creditor.

The main difference with respect to these agreements is the form requirements. Suretyship agreements may be concluded only by complying with important form requirements, whereas the validity of a guarantee agreement does not require any special form6.

As seen, there are important differences between these two security agreements. Therefore, a determination of which agreement the parties desire to sign is important. It is observed that parties often use the terms "suretyship agreement" and "guarantee agreement" interchangeably, thus the real intentions of the parties while signing the agreement must be determined. For instance, a 2001 decision of the General Assembly of the Civil Chambers of the Court of Cassation concluded that an agreement referred to as a guarantee agreement by the parties was actually a suretyship agreement, and the Court ruled that the agreement was invalid, since the requirements of form were not respected7.

Criteria to be Considered

Certain criteria may be used for distinguishing these two types of agreements8. The first criteria to be taken into account are the expressions used by the parties. Despite the fact that the expressions of the parties are not sufficient to determine the nature of agreement, it is apparent that these expressions are the starting point for determining the nature of the legal relationship. As has been already indicated, the usage of these two words in place of each other causes substantial problems. This circumstance is mostly observed in translations made from foreign languages into Turkish. The English word "guarantee" is translated into Turkish both as "guarantee" and "suretyship". However, the nature of the agreement is not taken into consideration in the course of translation. Therefore, the expressions used by the parties are important in determining the nature of the agreement. Nonetheless, the clarity of the parties' expressions does not remove the need for interpretation.

Other criteria, which can be used, to distinguish between these two agreements are the clauses stipulated in the agreement. Some of the clauses stipulated in the agreement may indicate the presence of a guarantee agreement, whereas some clauses may indicate the presence of a suretyship agreement. For instance, it may be inferred that a waiver of exception aimed at proceeding against the principal debtor instead of the surety or the exception of foreclosure or waiver of the right of recourse may indicate the presence of a suretyship agreement, since the aforesaid exceptions are seen only in suretyship agreements; and it may be accepted that the clauses on waiver of these rights can only be regarded as a suretyship agreement. Additionally, a clause concerning the several and joint liability of both parties may result in the assessment of the security as a suretyship. Further, a reference in the security agreement to the principal agreement from which the principal obligation arises may indicate the presence of a suretyship agreement, since a suretyship agreement is an accessory to the principal agreement, whereas a guarantee agreement is an agreement independent from the principal agreement from which the principal obligation raises.

Furthermore, clauses regarding payment on first request, being bound by an unconditional and non-recourse obligation or the non-existence of an objection right to the debt may result in the determination that the agreement is a guarantee agreement.

Conclusion

As demonstrated, guarantee agreements and suretyship agreements are two different types of agreements which can be easily mistaken for one another. However, it is important to discern between the two, and the above-stated criteria may be used to do so. However, the criteria stated above are separately insufficient for the determination of the nature of an agreement. Besides, each legal relationship has its unique conditions. Therefore, each situation must be assessed on a case-by-case basis when determining if a security relationship is a guarantee agreement or a suretyship agreement.

Footnotes

1. Kocayusufpaşaoğlu, Necip / Hatemi, Hüseyin / Serozan, Rona / Arpaci, Abdulkadir, Borçlar Hukuku, Genel Bölüm, Istanbul 2008, p. 332. The author indicates that if the intentions of the parties are declared falsely, the rule of "falsa demonstratio non nocet" shall be applied and the nature of the agreement will be determined through an interpretation of the real intentions of the parties

2. For critique of the article please see For critique of the article please see Kocayusufpaşaoğlu/Hatemi/Serozan/Arpacı, p. 332. According to the author, the article in question has the assumption that the real intentions of the parties are known and it does not regulate how the unknown intentions will be examined. It is indisputable that the author's critique applies to Art. 19 of TCO, since the above article is the same as Article 18 of CO.

3. Even though it may be claimed that interpretation is not necessary if the intentions of the parties are sufficiently clear (in claris non fit interpretatio), this view is justifiably criticized in the doctrine. Please see Kocayusufpaşaoğlu/Hatemi/Serozan/Arpacı , p. 333. Even if the parties use clear expressions, the determination of intentions, which are opposite to what has been expressed, can only be determined through interpretation. Not applying the method of interpretation because of the clear expressions of the parties may result in undesirable consequences. Therefore, even if the parties' intentions are clearly expressed, determining the real intention of the parties is important.

4. Barlas, Nami, Kefalet Hukukuna İlişkin Bazı Sorunlar/ Yargıtay Uygulaması, Ticaret Hukuku ve Yargıtay Kararları Sempozyumu, 2005, XXI, p. 56 vd.; Develioğlu, Hüseyin Murat: Kefalet Sözleşmesini Düzenleyen Hükümler Işığında Bağımsız Garanti Sözleşmeleri, İstanbul, 2009; Kocaman, Arif, B., Banka Teminat Mektuplarının Hukuki Niteliği Üzerine, Batider 1990, p. 49 - 64; Özen, Burak, Kefalet Sözleşmesi, İstanbul 2012.

5. For detailed explanations concerning the differences between suretyship and guarantee agreements and the regulations adopted by the TCO, please see Asik Zibel, Berna, Guarantee and Suretyship Agreements, Erdem - Erdem Newsletter, September 2011.

6. However, Article 603 of the Turkish Code of Obligations is reserved. Namely, pursuant to the aforesaid article, in all security relationships which real persons are party to, including guarantee agreements, the requirements of form set forth for the suretyship agreement shall be complied with.

7. Please see Yarg. HGK. 4.7.2001 Tarih E. 2001/19 – 534, K. 2001/583 (www.kazanci.com) For detailed assessment of the decision please see Kocaman, Arif, B., Yargıtay Hukuk Genel Kurulu'nun 4.7.2001 Tarih ve E. 2001/19-534, K. 2001/583 Sayılı Kararı Üzerine Bir Değerlendirme – Kredi Kartı İlişkisinde Bankaya Karşı Verilen Kişisel Teminatın Hukuki Niteliği: Garanti mi, Kefalet mi?, Ticaret Hukuku ve Yargıtay Kararları Sempozyumu, 2003, C.XIX, p. 65 et seq..

8. For detailed information please see DevelioÄxlu, p. 225-228.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions