Turkey: Types Of Contracts Of Suretyship Within The Scope Of The Turkish Code Of Obligations

Last Updated: 19 November 2013
Article by Ceyda Buyukoral

Articles 585 to 588 of the Turkish Code of Obligations ("TCO") numbered 6098 and dated 01.07.2012 set forth the types of Contracts of Suretyship. The types of Contracts of Suretyship are named in the TCO as i) simple surety ii) joint and several surety iii) co-surety and iv) collateral surety and counter-surety.

Simple Surety

According to Article 585 TCO, the creditor cannot resort to debt recovery via a simple surety before suing the principal debtor. The creditor may resort to the surety only under the following circumstances:

1. If a definitive certificate of loss is issued as a result of the debt enforcement proceeding,

2. If the debtor can no longer or hardly be sued in Turkey,

3. If the debtor is declared bankrupt, and

4. If the debtor obtains a debt restructuring moratorium.

Where the claim is secured by pledges, a simple surety may include a provision that requires the creditor to satisfy his claim first from such pledges. But this provision shall not be applied if the debtor has been declared bankrupt or obtained a debt restructuring moratorium.

Where the surety was undertaken solely to cover a shortfall, the surety may only be enforced if a definitive certificate of loss has been issued as a result of the debt enforcement proceeding or the debtor can no longer be sued in Turkey or a composition agreement has been concluded. In such a case, an obligation to first resort to the principal debtor may be regulated by the contract.

Joint and Several Surety

According to Article 586 TCO, if the guarantor assumes responsibility for an obligation where the words "joint and several", or an equivalent phrase, are appended, the creditor may resort to him before suing the principal debtor or before foreclosure of pledged immovable property. However, for the application of this provision, the principal debtor must be in default on his debt payments and be issued with payment reminders to no avail, or be manifestly insolvent.

Where the debt is secured by a pledged chattel or claim, the surety may not be enforced before going after said pledged chattels and claims. However, the surety can be enforced before pursuing the pledge if the pledge is deemed by the court unlikely to cover the debt or where the debtor has been declared bankrupt or obtained a debt restructuring moratorium.

Co-surety

According to Article 587 TCO, where two or more persons stand surety for the same obligation, each of them is liable as guarantors for their share and as collateral surety for the shares of the others.

Where the sureties have assumed joint and several liabilities by agreement with the principal debtor or among themselves, each of them is liable for the whole obligation. However, a co-surety may refuse to pay more than his share if the debt enforcement proceedings have not been commenced against all other jointly and severally liable co-sureties with whom he entered into the contract of suretyship, and who may be sued for the obligation in Turkey. He has the same right if his co-sureties have paid their share or furnished real security. Unless otherwise agreed, a co-surety who paid his share has a right of recourse against other jointly and severally liable co-sureties to the extent that each of them has not yet paid their share. This right may be exercised before recourse against the principal debtor.

Where it was apparent to the creditor that the surety entered into the contract on the condition that others would stand surety with him for the same principal obligation, the surety is released if such condition is not fulfilled or if subsequently one of the co-sureties is released from his liability by the creditor, or if his undertaking is declared invalid.

Where several persons have independently agreed to stand surety for the same principal obligation, each of them is liable for the whole amount of the obligation. However, unless otherwise agreed, a surety who pays the whole amount of the obligation has a right of recourse against the others for their respective shares.

Collateral Surety and Counter-Surety

According to Article 588 TCO, a collateral surety who stands to the creditor for performance of the obligation assumed by the primary surety is liable together with the latter in the same way as a simple surety is liable with the principal debtor.

A counter surety acts as guarantor for the right of recourse of the surety against the debtor.

Conclusion

The types of Contract of Suretyship are named in the TCO as i) simple surety ii) joint and several surety iii) co-surety and iv) collateral surety and counter-surety.

Pursuant to Article 585 TCO, the creditor cannot enforce a suretyship agreement before suing the principal debtor.

Article 586 TCO stipulates that in a situation of joint and several surety, if the surety stands as guarantor for an obligation by appending the words "joint and several" in the contract, then the creditor may resort to the guarantor before suing the principal debtor.

Pursuant to Article 587, in a co-surety, where two or more persons serve as guarantors for the same obligation, each of them is liable as surety for their share and as collateral surety for the shares of the others.

According to Article 588 TCO, a collateral surety who guarantees the performance of the obligation assumed by the primary surety is liable together with latter in the same way that a simple surety is liable for the principal debtor.

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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Authors
Ceyda Buyukoral
 
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