Article 584 of the Turkish Code of Obligations No. 6098 (TCO) regarding the consent of the spouse in "suretyship" does not need to be applied to "aval" in accordance with Article 603 of the same Code.

In this regard, in the light of the decision of the General Assembly of the Court of Cassation Unification of Jurisprudence numbered E.2017/4 K.2018/5 and dated 20.4.2018, detailed information on the subject with its justifications will be provided below.

A- On Suretyship and Aval

1. Suretyship Agreement

A suretyship agreement is a contract whereby the surety undertakes to be personally liable to the creditor for the consequences of the debtor's non-performance (Article 582 of the TCO).

In order for the suretyship agreement to be validly established;

  • Doing it in writing;
  • The maximum amount for which the surety will be liable and the date of the surety, and if the surety is joint and several, the surety's own handwriting

(Art. 583 TCO)

Article 584 of the Turkish Code of Obligations regulates the spousal consent in suretyship. One of the spouses may only become a surety with the written consent of the other spouse, unless there is a separation decree issued by the court or the right to live separately legally arises; this consent must be given before the conclusion of the contract or at the latest at the time of its conclusion.

Since the provision of Article 584 of the Turkish Code of Obligations No. 6098 regarding the consent of the spouse has been subjected to heavy criticism that it slows down business life since the day the Law entered into force, the third paragraph added to Article 584 of the Turkish Code of Obligations on 28/03/2013 with Article 77 of the Law No. 6455, with the justification of making amendments to facilitate the natural flow of commercial life, lists the situations in which spousal consent will not be sought as follows:

  • Sureties to be given by the owner of the commercial enterprise registered in the trade registry or by the partner or manager of the commercial company in relation to the enterprise or company,
  • Guarantees to be given by tradesmen or craftsmen registered in the tradesmen and craftsmen registry in relation to their professional activities, (...)

2. Aval

Regulations on aval are set forth in Articles 700 and following of the Turkish Commercial Code No. 6102 (TCC).

Accordingly, with an aval, it is ensured that the payment of the price in bills of exchange is fully or partially secured (collateral).

An aval may be given by a natural person or by a legal entity and through its body.

An aval is a guarantee for a bill of exchange.

An advance may be given in favor of the drawer as well as in favor of endorsers or other persons who are responsible for the bill of exchange.

The avaliste shall be liable equally with the person for whom he has undertaken the obligation. It should be noted that even if the debt secured by the avaliste is null and void due to any reason other than a defect in the form, the avaliste's commitment is valid.

3. Differences between Suretyship and Aval

Suretyship and aval institutions are legal institutions that aim to provide personal guarantees and there are some differences between them.

It is possible to summarize them as follows:

a) An aval may be given for persons who are debtors on bills of exchange.

Surety can be given for any type of debt.

b) The formal requirements of an aval and suretyship are different. The endorsement of an aval is written and signed directly on the policy, bond or check or alonge.

It is possible for the suretyship to be written on the document showing the principal debt relationship or to be issued in the form of a separate contract.

C) The avaliste shall be jointly and severally liable together with the other debtors who are indebted due to the bill of exchange (Art. 724 TCC).

In suretyship, the surety is liable as an ordinary surety unless the surety writes the phrase "joint and several surety" in his/her own handwriting.

B- Application of Spousal Consent in Other Contracts Regarding Personal Guarantees

Article 603 of the Turkish Code of Obligations titled "Field of application" is as follows

"The provisions relating to the form of suretyship, the capacity to be a surety and the consent of the spouse shall also apply to other contracts made by natural persons under other names in relation to the provision of personal guarantee."

The Regulation states that the three points regarding suretyship shall also apply to other agreements made under other names in relation to the provision of personal guarantees:

  • Form of the contract,
  • Capacity to be a surety and
  • Provisions on spousal consent.

According to this,

This condition will not be required for guarantees given by legal entities other than natural persons (such as associations, foundations or companies).

Secondly, the assurance given must be a "personal assurance" (personal collateral). Objective guarantees (collateral security), such as a pledge or mortgage on money, property or rights, are also not subject to spousal consent.

Finally, thirdly, there must be a "contract" other than suretyship, even if it is made under another name, regarding the provision of personal guarantees by natural persons. A contract is concluded by the mutual and appropriate declaration of the parties' wills.

C- UNIFIED DECISIONS OF SUPREME COURTS

The subject matter of the unified decision is whether the provisions regarding the consent of the spouse in suretyship (Art. 584, 603 TCO) shall be applicable to the aval.

During the preliminary evaluation phase of the request for unified decision, the opinions of the General Assembly of Civil Chambers and the Special Chambers, which have conflicting case law, were consulted.

  1. The Opinions and Basis for the Opinion that the Consent of the Spouse is Required in Aval:

Article 603 of the Turkish Code of Obligations states that the spousal consent element, which is accepted as one of the formal requirements of the suretyship agreement, is also required for "agreements made under other names regarding the provision of personal guarantee"; however, the fact that the aval is a type of personal guarantee formed by unilateral declaration does not eliminate the said requirement; the legislator's intention with this provision is to prevent the parties from turning to other agreements in order to get rid of the form requirement in suretyship, in other words, to prevent the circumvention of the form requirement regarding spousal consent by choosing another form of personal guarantee, and the experiences obtained from the practice show that this concern is justified,

In the doctrine, it has been argued that the principle in Article 603 of the Turkish Code of Obligations covers all kinds of agreements regarding the provision of personal guarantees, and in this context also includes the aval, and that the aval is not listed in Article 584 of the same Code, which shows the exceptions; the fact that the aval and suretyship are regulated under different laws will not eliminate the principle, and in this case, just like suretyship, spousal consent should be sought in the aval.

  1. The Opinions and Basis for the Opinions that the Consent of the Spouse is not Required in Aval and Their Basis:

The institutions of suretyship and aval are completely different and regulated under different laws; the aval is a unilateral legal transaction and due to this nature, it cannot be considered as a "contract" as indicated in Article 603 of the Turkish Code of Obligations; within the framework of the principle that exceptional regulations should be interpreted narrowly, it is not possible to extend the condition in Article 584 of the Turkish Code of Obligations regarding spousal consent to cover the aval,

In the event that the form condition regarding spousal consent is also sought in the aval, the document containing the consent of the spouse must be attached to the bill of exchange and the circulation must be made in this way; on the other hand, if the spousal consent is invalid for a reason such as forgery, this defense can be asserted against anyone, and these problems will eliminate the circulation capability of the bills of exchange and will not be compatible with the rules of speed and trust in commercial transactions,

In the doctrine, it has been argued that Article 603 of the Turkish Code of Obligations aims to prevent the creditors' intention to get rid of the provisions protecting the surety by concluding contracts under other names; however, the consent of the spouse cannot be sought for the aval, which has its own specific formal provisions in another law; moreover, the aval is not a contract but a unilateral legal transaction.

3. Reasons of the General Assembly On The Unification Of Judgments

  • The formal conditions regarding the aval are clearly regulated by special provisions in the Turkish Commercial Code. The purpose of this regulation is a reflection of the necessity to set forth the aval on the bill of exchange without any hesitation in parallel with the principle of certainty in bills of exchange. An aval is a guarantee of a bill of exchange and is embodied by a unilateral declaration of will by the avalist.
  • It should be taken into consideration that if other elements other than these formal requirements set by the Turkish Commercial Code for the aval are included in the bill, these phrases may raise doubts in terms of the aval. If the aval annotation in the bill of exchange raises doubt, it affects the security of the entire bill in addition to the aval, and the security of the bill is weakened for both the beneficiary, subsequent endorsers and finally the bearer. This causes the bill to lose its circulation capability.
  • The consequences of the reflection of the formal provisions of the form provisions in the bailment to the bill of exchange should also be evaluated as a matter of form. In the event that it is stipulated that spousal consent will be sought for an advance, first of all, it should be understood from the bill whether the person who gives the aval is married or not. This is necessary for the subsequent endorsers to know whether the aval is valid or not and to be able to rely on the promissory note. It is indisputable that the inclusion of the avaliste's identity information and marital status in the promissory note or the attachment of official records regarding this issue to the promissory note will not be correct and functional in practice.
  • This drawback regarding the form also manifests itself in terms of the manner in which the spousal consent will be placed on the bill of exchange, and therefore the legal nature and liability of the aval. If the aval is placed on the front side, it may be considered that the spousal consent will also be placed on the front side. In this case, in accordance with the principle regulated in the Turkish Commercial Code, "Except for the signatures of the addressee or the issuer, any signature on the face of the bill shall be deemed as an aval annotation.", the spouse will also become an avalist; on the other hand, if the aval is placed on the back of the bill, it may be possible to confuse it with endorsement.
  • There is no doubt that both suretyship and aval provide personal security; however, it should not be overlooked that while the provisions on suretyship protect the surety against the creditor, the provisions on aval protect the bearer against the principal debtor and the applicant debtors. In this respect, comparing the provisions on suretyship and aval with each other would be incompatible with the protection purpose of the norm.
  • The requirement of spousal consent in the aval is incompatible with the circulation capability of bills of exchange. It is indisputable that with the circulation of a single bill of exchange, the bill of exchange will increase in volume with the addition of other records and documents regarding whether the avalist is married or not, and if married, the consent of the spouse to the aval. As a matter of fact, since the provision of Article 584 of the Turkish Code of Obligations No. 6098 regarding the consent of the spouse has been subjected to heavy criticism since 01/07/2012, when the Law entered into force, on the grounds of facilitating the natural flow of commercial life, on 28/03/2013, with Article 77 of the Law No. 6455, a third paragraph was added to Article 584 of the TCO as an exception provision in cases where the consent of the spouse will not be sought in the surety and which are mainly related to commercial life. The fact that the legislator did not include the aval among these exceptions is important in terms of pointing out that spousal consent is not sought in the aval from the very beginning.
  • While the legislator seeks the consent of the spouse in the surety institution regulated in the Turkish Code of Obligations, the fact that the legislator does not seek the consent of the spouse for the aval, which entered into force on the same date (01/07/2012) and which is regulated in the Turkish Commercial Code, which is a more special law, should not be evaluated as an oversight.
  • It is clear that the legislator would lead to the conclusion that the legislator would put the burden of investigating whether the avalist is married or not and whether the exceptions in Article 584/3 of the TCO exist or not on the bearer, and such a situation would impose a burden on the bearer and would not be in harmony with the speed of the circulation capability of the foreign exchange law.
  • The parties' attempts to circumvent the formal requirements of suretyship through agreements to be concluded under other names may, of course, raise similar concerns regarding the aval. However, it is indisputable that there are other methods other than aval in bills of exchange in order to secure the receivable. As such, it is always possible to eliminate threats to the economic integrity of the family through Article 2 of the Turkish Civil Code, which prevents abuse of right.

In conclusion;

As a result of the legal regulations, judicial and scientific jurisprudence and the evaluations made within this framework, it has been decided that "the regulation in Article 584 of the Turkish Code of Obligations regarding the consent of the spouse in suretyship does not need to be applied in 'aval' pursuant to Article 603 of the same Law" and the issue has been clarified in the jurisprudence and practice

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.