Definition Of Bank Guarantee Agreement

The definition of guarantee agreements is not found in the law or subordinate regulations, and their definition varies according to the case law of the Supreme Court and legal doctrine. The first definition of guarantee agreements was provided by German jurist Rudolf Stammler. According to this definition, “A guarantee agreement is an agreement whereby one person undertakes, without consideration, to assume all or part of the risks associated with another person’s undertaking aimed at achieving a specific result, with the purpose of providing assistance and encouragement.” [1]

The Supreme Court of Appeals defines it as follows: “A guarantee agreement is a non-accessory agreement whereby one person guarantees to another that a particular result will be achieved in an undertaking.”[2] and “In a guarantee agreement, the guarantor provides the beneficiary with a non-accessory guarantee for the performance of the beneficiary’s obligation to a third party.” [3]To provide a definition, a guarantee contract is a contract that is not ancillary, such that the guarantor does not seek consideration from the beneficiary, but rather independently assumes the risks of the undertaking or business in question, either partially or entirely, with the aim of inducing the beneficiary to undertake the undertaking or business.

According to Reisoğlu, a guarantee contract is “a contract whereby the guarantor independently undertakes to assume the risk of loss arising from the non-occurrence of an act or event that is more or less uncertain in the future, in connection with an undertaking to be undertaken by the beneficiary.”[4]

According to Barlas, a bank guarantee letter is defined as “a letter issued by a bank in which it accepts and undertakes to pay a certain amount of money to the creditor upon the first request of the creditor in the event that the debtor fails to perform an obligation it has assumed towards the creditor.”[5]

According to Tandoğan, “A guarantee contract is a contract whereby the guarantor assumes, through an independent commitment, the risk of loss arising from the failure of the beneficiary to perform a specific act or from the failure of a third party with whom the beneficiary has entered into a debt relationship to perform its obligation.”[6]

Tekinalp defines it as “the bank’s guarantee, upon the request of its customer, to pay a certain amount to a third party who is in a legal relationship with the customer, in the event that the customer fails to fulfill its obligation arising from this relationship or, regardless of whether any performance has been made, in the event of the occurrence of a feared event.”[7]

According to Doğan, it is more important to determine the elements that a guarantee contract must contain rather than defining it. In this context, the conditions are that the beneficiary is directed to take a specific course of action, the guarantor assumes a specific risk, and an independent obligation is incurred.[8]

According to Akyazan, a bank guarantee is defined as “a letter issued by a bank to a creditor guaranteeing the performance of an obligation undertaken by the debtor towards the creditor.“[9]

According to Develioğlu, a guarantee is “a contract whereby the guarantor undertakes to pay a certain amount of money to the beneficiary if a third party fails to perform or properly perform its obligation to the beneficiary.” It is defined as “[10] .”

According to Kaplan, bank guarantee letters are among the primary examples of guarantee commitments and are defined as “a contract entered into by a bank, at the request and instruction of its customer, to secure the customer’s obligation to a third party under the underlying sales or work contracts, to ensure that the obligations undertaken by the customer are performed flawlessly and on time, a contract that imposes a unilateral obligation on the bank toward the third party.“

In conclusion, bank guarantee contracts are a type of contract whereby the bank undertakes to pay a certain amount to the beneficiary upon the occurrence of a risk assumed on behalf of its customer and the beneficiary’s request to the bank, and such contract is independent of the underlying legal relationship between the beneficiary and the customer.

The term “Demand Guarantees” has no direct equivalent in Turkish law; however, the term used in accordance with ICC rules corresponds to guarantee contracts in the form of letters of guarantee under Turkish law.[11]

Year: 2025

Application: Definition Of Bank Guarantee Agreement

Lawyers: Mehmet Said Sarıbaş & Bilal Akbaba

E-mail: info@saribasakbaba.av.tr

Website: saribasakbaba.av.tr

[1] Reisoğlu Seza, Guarantee Agreement, Ankara, 1963, p. 6; Tandoğan Haluk, Guarantee Agreement, Its Nature and Distinction from Similar Legal Relations, Ankara 1959, p. 6; Ekici and Durukanoğlu, p. 31.

[2] YİBK 11.06.1969, E.1969/4 K.1969/6 (Official Gazette 03.10.1969, No. 13317).

[3] Supreme Court of Appeals, 11th Civil Chamber, E.1985/4169, K.1985/5613, Date: 15.10.1985. (www.lexpera.com)

[4] Seza Reisoğlu, Guarantee Agreement, Ankara, 1963, p. 9.

[5] Nami Barlas, Bank Guarantee Letters in the Turkish Legal System, Istanbul, 1986, p. 7.

[6] Haluk Tandoğan, Guarantee Agreement, Ankara, 1963, p. 12.

[7] Ünal Tekinalp, Principles of Bank Law, Vol. I, Istanbul, 1988, p. 372.

[8] Vahit Doğan, Bank Guarantee Letters, April 2011, Seçkin Publishing, 4th Edition, pp. 39-44.

[9] Akyazan, Sıtkı, “Various Problems Arising from Bank Guarantee Letters in Practice,” BATİDER, Vol. VII, No. 3, 1974, p. 567. (www.lexpera.com) (accessed on 14/03/2022)

[10] Hüseyin Murat Develioğlu, Independent Guarantee Contracts (With Explanations Regarding the ICC’s URDG Provisions, 1st Edition, Istanbul, July 2021, On İki Levha Publishing, p. 19.

[11] Ekici and Durukanoğlu, p. 36.