Türkçe
WHAT IS A SURETY AGREEMENT UNDER TURKISH CODE OF OBLIGATIONS?
A surety agreement, which is one of the types of personal guarantee regulated in detail under Articles 581 to 603 of the Turkish Code of Obligations numbered 6098 (“TCO”), is defined under Article 581 of the TCO as “the contract under which the surety undertakes to be personally responsible for the consequences of the debtor’s failure to fulfill his debt to the creditor”.
WHAT ARE THE TYPES OF SURETY AGREEMENT?
The surety types which are regulated under Articles 585 to 588 of the TCO is as follows:
a) Simple Surety: A surety agreement will be considered as simple (ordinary) surety agreement, if the surety has not declared under such agreement that he is a joint surety or if there is a hesitation in this regard.
b) Joint Surety: According to Article 586 of the TCO, if the surety has accepted to assume the liability as a joint surety or any other expression is included in the contract in this means, the surety will be considered as joint surety.
c) Co-Surety: Pursuant to Article 587 of the TCO; if more than one person provides a surety for the same debt, each of them will be liable for his own share as an ordinary surety and for the shares of other sureties as a collateral surety.
d) Collateral Surety and Counter Surety: According to Article 588 of the TCO; the collateral surety, who provides a guarantee to the creditor for the surety’s debt, will be liable together with such surety, as an ordinary surety. Counter surety is the surety who provides a guarantee for the collection of the recourse receivable from the debtor by the surety.
WHAT ARE THE DIFFERENCES BETWEEN THE TYPES OF THE SURETY AGREEMENT IN TERMS OF COLLECTION OF RECEIVABLES?
Simple Surety
In accordance with Article 585 of the TCO; as a principle, in simple surety, the creditor cannot initiate debt collection proceedings against the surety unless he resorts to the debtor first. However, it is possible for the creditor to apply directly to the surety in the following situations:
a) If a definitive certificate of insolvency is issued for the debtor as a result of the debt enforcement proceeding,
b) If it became impossible or significantly difficult to pursue debt collection procedures against the debtor in Turkey,
c) If the debtor declared bankruptcy, or
d) If a concordat period is granted to the debtor.
In cases where simple surety is in question, if the receivable is secured with a pledge before or during the surety, the surety may request for the collection of the receivable through the pledge first. However, if the debtor has declared bankruptcy or a concordat period is granted to the same, this provision will not apply.
Joint Surety
In joint surety, the creditor may initiate debt collection procedures against the surety without first applying to the debtor or converting the immovable pledge into cash. In order for the creditor to pursue such debt collection procedures against the surety, the debtor must be in delay to perform its obligations and must fail to remedy such delay despite of a warning or must be explicitly incapable to pay its debts.
If the receivable is secured with a movable pledge or pledge of receivables, the creditor cannot pursue debt collection procedures against the surety before the liquidation of the respective pledge. However; the legislator has brought three separate exceptions to this principle. In cases where it is determined in advance by the judge that the receivable cannot be fully compensated by liquidating the pledge, or if the debtor goes bankrupt or if a concordat period is granted to the debtor, then the creditor may pursue debt collection procedures against the surety before the liquidation of the pledge.
Co-Surety
In Co-Surety; each of the sureties, who assume liability together with the debtor or together with other sureties as a joint surety, shall be responsible for the entire debt.
However, a co-surety may refrain from making payment in excess of his portion, if the debt collection proceedings have not been commenced against all other jointly liable co-sureties who assumed liability before or at the same time with the co-surety and who may be subjected to debt collection proceedings in Turkey. This right can also be exercised if other co-sureties have paid their own portions or provided in-kind security.
Unless there is an agreement to the contrary, the surety who compensates the debt has the right to recourse against other sureties who have not paid their portions before. This right can also be exercised before recourse to the debtor. If the creditor knows or needs to know that the surety assumes that other persons are or will be a surety for the same receivable, the surety will be released from his obligations in case this assumption is not realized later, or if one of the sureties is released from surety debt by the creditor or if the surety is declared null and void.
Collateral Surety and Counter Surety
The collateral surety undertakes to be personally responsible for the obligations of the primary surety who is a party to the surety contract, if the primary surety is not capable of paying the debt to the creditor. In this case, the collateral surety becomes responsible as a simple surety. In this type of surety agreement concluded between the creditor and the surety signing the surety contract and the counter surety, when the first surety pays the debt of the debtor to the creditor and accordingly, the right of the surety to recourse to the principal debtor arises, the counter surety, as a principle, is subjected to debt collection procedures within the provisions of simple surety. It is possible to envisage that the counter surety will be liable under the provisions of joint surety.
CONCLUSION
As can be seen, the processes regarding the collection of a receivable from the surety in a debt relationship that has not been performed by the debtor differ according to the types of surety. In that respect; In the light of our explanations above; for the creditor, the most advantageous type of the surety agreements concluded to guarantee the collection of the receivable is, of course, joint surety.
In joint surety, the creditor can directly pursue debt collection proceedings against the surety without first pursuing the debtor or converting the immovable pledge into cash. Thus, the creditor would be able to collect its debt from the surety who has the ability to pay the receivables, without dealing with time and money consuming litigation or execution processes against the debtor who is incapable of making the necessary payments. However, if the validity conditions which must be complied with are not taken into account while concluding a joint surety agreement, the creditor may lose this advantageous situation and the surety contract may be subject to simple surety provisions. You can review our related article to have detailed information about the aforementioned validity conditions.
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