Suretyship Agreements

A bonding contract usually consists of three parties, the creditor (for example. B the bank), the main debtor (for example. B the student) and the warranty (. B for example the parents and parents of the student). The guarantee commits to the creditor that the principal debtor who remains bound will fulfill his obligation to the creditor, and if the principal debtor does not, the guarantee will compensate the creditor. Simply put, the guarantee agrees to follow in the principal debtor`s footsteps if and when the debtor can no longer provide financially for these shoes. Another difference between these two agreements is the exceptions and objections that arise from the main agreement. In a guarantee agreement, the guarantee may exercise the principal debtor`s exceptions and objections to the creditor, while the surety of a guarantee agreement cannot exercise the principal debtor`s exceptions and objections to the principal creditor. The principal debtor may use all the usual contractual defences against the creditor, including inability, illegality, inability to work, fraud, coercion, insolvency or insolvency relief. However, the guarantee may enter into a contract with the creditor which, despite the client`s defence, is held liable, and a surety whom has taken the guarantee informed of the creditor`s fraud or coercion remains bound, even if the principal debtor is dismissed. If the guarantee is addressed to the principal debtor and asks for a refund, the principal can – as he noted – object to him acting in bad faith. Some criteria can be used to distinguish between these two types of chords. The first criteria to be considered are the expressions used by the parties.

While the parties` statements are not sufficient to determine the nature of the agreement, it is clear that these expressions are the starting point for determining the nature of the legal relationship. As has already been mentioned, the use of these two words instead of each other causes considerable problems. This is especially the case for translations of foreign languages into Turkish. The English word “guarantee” is translated into Turkish as a “guarantee” and “guarantee.” However, the nature of the agreement is not taken into account in the translation. Therefore, the expressions used by the parties are important in determining the nature of the agreement. However, the clarity of the parties` statements does not exempt the interpretation. It is essential to determine whether the nature of the security relationship between the parties is a guarantee contract or a guarantee agreement, because of differences in the conditions relating to the training, characteristics and articles of the agreements, even if their security function is similar. First, it is worth mentioning briefly the differences between these two agreements.

In the recent case of Moss – another v KMSA Distributortors (673/2018) [2019] ZASCA 81, the Supreme Court of Appeal (SCA) considered whether a bonding contract, attached to a particular agreement, also offered the creditor the guarantee on debts contracted under a separate prior agreement between the same parties. The continuation of guarantee clauses is often included in guarantee agreements, regardless of the potential impact of these clauses.