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SURETY AGREEMENT AND SPOUSAL CONSENT REQUIREMENT

An Evaluation Within the Scope of Articles 582-584 and 603 of the Turkish Code of Obligations

Atty. Med. Fatih Mehmet Tercan

info@tercanhukuk.com

1. Introduction

The surety agreement is one of the most deep-rooted and frequently encountered personal security institutions in the law of obligations in practice. Resorted to in many areas from banking transactions to lease agreements, and from commercial loans to cooperative financing, this agreement can yield severe legal and economic consequences for both the surety and their family. Acting upon this reality, the Turkish Code of Obligations (TCO) No. 6098 has introduced much stricter validity conditions for the surety agreement compared to previous regulations; in particular, it has made the written consent of spouses mandatory for married individuals to become a surety. This article, after addressing the basic elements and validity conditions of the surety agreement, examines the spousal consent requirement in detail, and evaluates the exceptions where consent is not sought and the reflections of the regulation on personal security agreements within the framework of TCO Art. 603.

2. Basic Elements and Validity Conditions of the Surety Agreement

Pursuant to TCO Art. 582, a surety agreement is a contract in which the surety undertakes to the creditor to be personally liable for the consequences of the debtor's failure to perform their debt. The agreement can be established for an existing and valid debt, as well as for a debt that will arise in the future or is subject to a condition; in this case, the suretyship takes effect when the debt arises or the condition is fulfilled. As a rule, the invalidity of the principal debt relationship also invalidates the suretyship. However, if the surety has become a surety knowing the deficiency that vitiates the contract, such as mistake or lack of capacity, their liability continues. The same rule applies to a person who becomes a surety for a debt that is time-barred.

TCO Art. 583 mandates the following elements for the validity of the surety agreement:

• The agreement must be made in writing.
• The maximum amount for which the surety will be liable must be clearly stated.
• The date of the suretyship must be written.
• If the suretyship is joint and several, these matters must be handwritten by the surety.

These formal conditions apply not only at the establishment of the agreement but also with respect to subsequent amendments that increase the liability of the surety.

3. Spousal Consent Requirement in the Surety Agreement (TCO Art. 584)

Pursuant to TCO Art. 584/I, one of the spouses can only become a surety with the written consent of the other, unless there is a separation decision given by a court or a legal right to live apart has arisen. It is mandatory that this consent be given prior to the establishment of the agreement or, at the latest, at the moment of its establishment. With this provision, the legislator has limited the freedom of contract in order to protect the economic integrity of the family.

Spousal consent is a constitutive validity condition of the surety agreement; in its absence, the agreement is absolutely null and void from the beginning. This law of invalidity can be benefited from without any gender discrimination: if the woman becomes the surety, the written consent of the man is required, and if the man becomes the surety, the written consent of the woman is required. Consent may be given in ordinary written form; there is no notary requirement, and the presence of the spouse's signature on the suretyship text is also considered sufficient (Court of Cassation 11th Civil Chamber, 29.04.2015, Merit 2015/4997, Decision 2015/6071). On the other hand, even if the consent is given after the agreement is established, it is not considered valid; subsequent ratification does not meet the condition sought by TCO Art. 584.

3.2.Consent for Subsequent Amendments

In accordance with TCO Art. 584/II, the renewed consent of the spouse is required for subsequent amendments to the surety agreement that increase the amount for which the surety will be liable, convert an ordinary suretyship into a joint and several suretyship, or significantly reduce the securities in favor of the surety. In contrast, amendments that produce consequences in favor of the surety are exempt from this requirement.

4. Exceptional Cases Where Spousal Consent Will Not Be Sought

Following heavy criticism that TCO Art. 584 slowed down business life from the day it entered into force, a third paragraph was added to the article with Article 77 of Law No. 6455 on 28.03.2013. With this regulation, in order to facilitate the flow of commercial life, four situations where spousal consent will not be sought have been specified:

• Suretyships to be provided by the owner of a commercial enterprise registered in the trade registry or the partner or manager of a commercial company regarding the enterprise or the company.
• Suretyships to be provided by tradesmen or craftsmen registered in the tradesmen and craftsmen registry regarding their professional activities.
• Suretyships to be provided for loans to be utilized within the scope of Law No. 5570 on the Provision of Interest-Supported Loans by Public Capital Banks.
• Suretyships to be provided for loans to be extended to cooperative partners by agricultural credit, agricultural sales, and tradesmen and craftsmen credit and surety cooperatives, as well as by public institutions and organizations.

For these exceptions to be applicable, the surety must be registered in the relevant registry, and the suretyship must be directly connected to the enterprise or professional activity. The Court of Cassation requires the transaction connection to be demonstrated with documents in suretyships provided in the capacity of a commercial company partner or manager. Furthermore, these exceptions will not be applied retroactively; it has also been confirmed by regional court of justice decisions that the exception cannot be applied to surety agreements prior to its effective date (Istanbul Regional Court of Justice 16th Civil Chamber, Merit 2017/1596, Decision 2019/734).

5. Application of the Spousal Consent Requirement to Personal Security Agreements (TCO Art. 603)

TCO Art. 603 has stipulated that the provisions regarding the form of suretyship, the capacity to become a surety, and the consent of the spouse; shall also be applied to other agreements made under a different name by real persons concerning the provision of personal security. Within this scope, personal security agreements such as guarantee, joint assumption of debt, letter of comfort/patronage, and credit mandate are also subject to the spousal consent requirement. For the article to be applicable, three elements must coexist: the security provider being a real person, the security bearing a personal nature (real securities such as pledge or mortgage are excluded), and the existence of an agreement made under a name other than suretyship. Legal transactions other than contracts are not within the scope of application of TCO Art. 603. On the other hand, with the decision of the Grand General Assembly on the Unification of Judgments of the Court of Cassation dated 20.04.2018 and numbered Merit 2017/4, Decision 2018/5, it was accepted that TCO Art. 584 would not be applied to the institution of aval, which is valid for bills of exchange. This decision is of great importance in terms of determining the limits of the application of the spousal consent requirement to personal security institutions.

6. Conclusion

The spousal consent requirement regulated in TCO Art. 584 is not merely a formal necessity, but a mandatory validity condition that protects the family economy. The absence of consent renders the agreement absolutely null and void from the very beginning; even if enforcement proceedings have been initiated against the surety, the surety can request the determination that they do not owe the debt through a negative declaratory action. The exceptions added in 2013 attempt to re-establish the balance between the operability of commercial life and the aim of family protection. However, it is rightly criticized in doctrine that the economic security of family members is occasionally endangered, especially within the scope of commercial exceptions. As a matter of fact, it is emphasized that these exceptional cases significantly reduce the intra-family predictability whereby the spouse can evaluate the burden arising from the suretyship liability. Thanks to the wide scope of application introduced by TCO Art. 603, the spousal consent safeguard also encompasses personal security agreements other than the name of suretyship; thus, attempts to circumvent the requirement through arrangements made under different names are prevented. Considering that disputes regarding the form, time, and scope of consent are frequently brought to the judiciary in practice, showing due diligence to the matter during the establishment of the contract is of great importance for both creditors and sureties.

Legal Basis and Judicial Decisions

• Turkish Code of Obligations No. 6098 Art. 582, 583, 584, 603.
• Law No. 6455 Art. 77 (3rd paragraph added to TCO Art. 584, 28.03.2013).
• Law No. 5570 on the Provision of Interest-Supported Loans by Public Capital Banks.
• Court of Cassation 19th Civil Chamber, Merit 2013/7678, Decision 2013/10719.
• Court of Cassation 8th Civil Chamber, Merit 2013/14327, Decision 2013/12865.
• Court of Cassation 11th Civil Chamber, Merit 2015/4997, Decision 2015/6071.
• Court of Cassation Grand General Assembly on the Unification of Judgments, Merit 2017/4, Decision 2018/5 (20.04.2018).
• Istanbul Regional Court of Justice 16th Civil Chamber, Merit 2017/1596, Decision 2019/734.