We previously reported in our Client Alert of February 2013 that
the New Turkish Code of Obligations (the
"TCO"), which came into force on 1st
July, 2012 introduced major changes to form requirements in
relation to personal guarantees.
One such major change introduced in Article 584 is that the
consent of the spouse of a personal guarantor should be obtained
prior to OR, at the latest, at the time of execution of the
personal guarantee; otherwise that guarantee will be invalid.
While Article 584 expressly refers to suretyship, Article 603 of
the same legislation extends the application of this new
requirement to all personal guarantees. It follows that avalists
(i.e. persons guaranteeing valuable instruments such as cheques or
promissory notes) are also caught by this requirement.
In a recent case (numbered 2013/16400 Esas and 2013/25100 Karar
of the 12th Chamber), the avalists of a cheque objected to its
execution on the ground that their spouses' consents were not
obtained pursuant to the requirement in Article 584 of TCO; so that
their personal guarantees were invalid. The first instance court
accepted the avalists' objections and gave judgment against the
Claimant. The Claimant appealed the decision to the Appeal Court.
The Court of Appeal overturning the judgment held surprisingly that
(i) the avalisation of a cheque is a commercial
issue and is subject to the provisions of the Turkish Commercial
Code ("TCC"); (ii)
there is no requirement in the TCC that spousal consent is required
and (iii) Article 584 of TCO is not applicable in
this case. Therefore, the avalists could not avoid liability.
This decision received criticism given that the TCO explicitly
provides that its provisions shall be applicable to all personal
guarantees; which suggests that it is irrelevant whether the
underlying transaction is commercial or not. It remains to be seen
whether the Court of Appeal will establish a consistent precedent
in this regard or whether this approach shall be reversed in future
appeal court judgments.
Until the courts have sufficiently tested this issue and
conclusive precedent is established, creditors would be well
advised to err on the side of caution and insist on spousal consent
from personal guarantors including avalists.
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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