The assignment and assumption of debt are regulated in our legal system under the Turkish Code of Obligations. In our legal system, there is no requirement for consent for the transfer of a claim to a third party, whereas the consent of the creditor is required for the transfer of the debt. The assumption of debt consists of two parts: internal assumption and external assumption.
Internal Assumption of Debt
ARTICLE 195 – A person who enters into an internal assumption agreement with the debtor assumes the obligation to release the debtor from their debt, either by personally performing the debt or by assuming the debt with the creditor’s consent. The debtor cannot demand the performance of the obligation from the other party until they have fulfilled the debt arising from the internal assumption agreement.
If the debtor is not relieved of their debt, they may request security from the other party.
The internal assumption does not eliminate the debtor’s debt. The original debtor remains responsible to the creditor. The person entering into the internal assumption agreement assumes an obligation towards the original debtor. As understood from the legal provision, the person who makes the internal assumption either performs the debt personally or assumes the debt to release the original creditor from the debt. The contractor of the internal loan agreement cannot demand the performance of the debt from the original debtor until they have fulfilled the obligation arising from the contract.
External assumption of debt
Article 196 – The replacement of the debtor and the release of the debt can be done through a contract between the debtor, the creditor, and the person assuming the debt.
The notification of the internal assumption agreement by the debtor to the creditor, with the consent of the person assuming the debt, signifies the proposal for the external assumption agreement.
The creditor’s acceptance can be explicit or implicit. If the creditor accepts the performance of the person assuming the debt or shows consent to any other act made by the person assuming the debt in their capacity as the debtor, it will be considered as acceptance of the assumption of the debt.
The Turkish Civil Code has provided the possibility of debt transfer. As mentioned in the introduction of our article, no consent is required for the transfer of a claim, while the debtor’s consent is necessary for the transfer of the debt. The notification to the creditor that a third party will perform the debt constitutes a proposal. The transferability of the debt depends on the creditor’s response to this proposal. The creditor can directly accept the proposal. If the creditor, without a clear declaration, accepts the actions of the third party as though they were the original debtor, it will be considered as an acceptance of the proposal.
With the assumption of the debt contract, although the debt remains the same, the debtor changes. This contract does not change the debt to be performed; it only changes the person who will perform it.
Court of Cassation 15th Civil Chamber, E.2014/6570, K.2015/3208, 9.6.2015
The assumption of debt is a legal institution that leads to a change in the parties to a debt relationship. In the assumption of debt, although the subject of the debt relationship does not change, a change in the parties occurs. The person assuming the debt, by entering into an agreement for the external assumption of the debt with the creditor, relieves the original debtor of the debt, and the person assuming the debt takes their place. Accordingly, the person assuming the debt has performed their obligation arising from the internal assumption agreement with the debtor when they enter into the external assumption agreement with the creditor. Therefore, after the external assumption agreement is made, the creditor can only demand the debt from the third person who assumed the debt, not from the original debtor who transferred the debt.
In practice, the external assumption agreement often emerges as the performance of a commitment to release the debtor from the debt under an internal assumption agreement made between the debtor and the third party assuming the debt. There is no obligation to establish a contract between the original debtor and the person assuming the debt.
ARTICLE 197- The creditor may always accept the proposal for the assumption of debt. However, the person assuming the debt or the previous debtor may set a time limit for acceptance. If the creditor remains silent until the expiration of this period, the proposal is considered rejected.
Before the creditor accepts the proposal, if a new internal assumption agreement is made and a proposal is made to the creditor regarding this second assumption, the person who made the first proposal is relieved of being bound by it.
At the stage of establishing the external assumption agreement, no time limit for acceptance is specified in the law for the creditor after the proposal is made. The creditor may declare acceptance or rejection at any time. The law does not impose any restriction on the debtor’s side, allowing them to set a time limit for the acceptance of the proposal, in accordance with the principle of freedom of contract.
The conditions of the external assumption agreement.
-There is no specific form requirement for the external assumption agreement as regulated by the law. It can be made in writing or orally.
-The parties must have the legal capacity to act.
-The validity of the assumption agreement is not affected by whether the principal debt is valid or not.
ARTICLE 200- If the external assumption agreement becomes void, the rights of bona fide third parties shall remain protected, and the original debt will continue to exist along with all related debts.
Furthermore, unless the person assuming the debt proves that they cannot be blamed for the invalidity of the assumption agreement and the creditor’s loss, the creditor may request the assumption party to compensate for the loss suffered due to the loss of previously provided security or for any other reason.
The invalidity of the assumption agreement does not eliminate related debts. In the case of the assumption agreement’s validity being compromised, if the person assuming the debt does not prove their innocence, they will be jointly liable with the original debtor for the compensation of the loss.
Court of Cassation rulings regarding the assumption of debt.
(Canceled) 14th Civil Chamber 2012/10503 E., 2012/12506 K.
The case concerns the request for the cancellation and registration of the title deed, based on the claim that the independent unit, which was agreed to be transferred to the contractor under the land share construction contract between the landowner and the contractor, was purchased.
The defendant contractor argued that the assignment contract was terminated because the plaintiff did not fulfill their obligation, and therefore, there was no possibility for registration. The representatives of the other defendant contractor company claimed that the case should be dismissed due to lack of jurisdiction, while the defendant landowners argued that the construction contract was terminated and therefore, they had no obligation for registration, defending the dismissal of the case.
The court ruled for the dismissal of the case, as an assignment prohibition was included in the construction contract.
The plaintiff’s lawyer has appealed the judgment.
In the case of a contractor with a construction contract involving land share who transfers his personal right to a third party (assigns it), it is necessary to determine whether the third party can demand performance. This requires first clarifying whether the contractor has fulfilled his obligation (the obligation to create and deliver the work), and then whether he has fulfilled his other obligations under the contract.
The legal nature of the “assignment of claims and assumption of debt” in the case at hand, as well as the contractor’s obligations in land share construction contracts, must be examined and evaluated within the framework of the provisions of the land share construction contract.
The assignment of claims and assumption of debt are regulated in Articles 183 to 204 of the Turkish Code of Obligations. The assignment of a claim allows the entire claim, along with all its associated (subsidiary and priority) rights, to pass to the assignee, and this process does not require the debtor’s consent. The assignment of a claim is valid even in the face of the debtor’s objection and produces legal effects. After the assignment of the claim, the debtor’s main counterpart is the person who has taken over the claim. Thus, in order for the debtor to be relieved of the debt, after the assignment, the debtor must fulfill the debt to the assignee.
It is clear that the assignment of the claim leads to certain relationships between the assignor and the debtor (landowner). As the assignee takes the place of the previous creditor (the contractor), it becomes their right to demand performance from the debtor (landowner) and, when necessary, to compel the debtor to perform.
In the case of a third party who takes over the independent unit from the contractor (who had a land share construction contract with the landowner), the third party must first prove the validity of the assignment in order to compel the landowner (the debtor) to perform. However, even if the assignment process is proven, as explained above, the landowner, as the addressee of the performance request, is not immediately required to comply with the request. Indeed, according to Article 167 of the Turkish Code of Obligations, “The debtor may assert the defenses that they have against the assignor against the assignee as well.” Therefore, after learning of the assignment, the debtor can assert any defenses that they could have asserted against the previous creditor, against the new creditor (the assignee).
The subject of the assignment of the claim will be the real claim that the contractor has earned under the construction contract with the landowner. If the contractor has not earned the right from the landowner, the assignment of that claim to a third party is insignificant for the landowner. Furthermore, if the contractor assigns a personal right to a third party without fully or partially fulfilling their primary obligation to the landowner, the third party cannot compel the landowner to perform under Article 97 of the Turkish Code of Obligations, as the landowner has the right to benefit from this provision.
Here, some explanations are necessary regarding the contractor’s obligations arising from the construction contract. In general, under construction contracts, the contractor commits to creating a certain work and delivering it to the employer. The contractor’s “obligation to create the work” is based on Article 470 of the Turkish Code of Obligations. According to this provision: “A construction contract is a contract where the contractor undertakes to create a work, and the employer undertakes to pay a fee in return.”
The main obligation of the contractor in construction contracts is to create a work by performing the job and deliver the created work to the employer (in land share construction contracts, to construct the building according to the contract, its purpose, and the rules of engineering and art, and deliver it to the landowner). As a general rule, the essence of the contract is the complete performance as agreed. Otherwise, the balance of expected benefits from the contract will be disrupted to the detriment of one party. In such a case, the contractor cannot be considered to have fulfilled their obligation.
As for the specific case; in the decision cited by the court, our Court’s ruling dated 22.11.2011 with case number 2011/13614-14161, the construction contract concerning the assigned right subject to the case was made between the landowners …, …, and … and the contractors … and …, with the notary document number …, dated 02.09.1995, and this contract includes a provision prohibiting assignment in Article 3. In the current case, however, as there was no assignment prohibition in the construction contract dated 05.09.1995 with notary document number …, the court made an incorrect comparison by using an irrelevant precedent, which did not align with the content of the contract, and decided to reject the case.
The court should, in light of the above-mentioned principles and explanations, examine and evaluate the specific case within the framework of the land share construction contract provisions and make a decision accordingly.
For this reason, the decision should be overturned.
CONCLUSION: For the reasons explained above, the judgment is OVERTURNED.
In the decision of the Court of Cassation General Assembly of Civil Chambers, dated 25.5.2011, with case number E.2011/221 K.2011/347
In the external assumption of debt, the ancillary rights related to the receivable continue, and unless they are strictly personal rights of the debtor, the third party assumes responsibility for fulfilling these rights. The new debtor (the third party) cannot raise defenses arising from the relationship between the old debtor and themselves against the creditor. These defenses pertain to the relationship between the old debtor and the new debtor, and can only be raised between these parties.
…Therefore, the defendant Ministry is obligated to fulfill the debt it has assumed against the plaintiff creditor. If it fails to do so, it must bear the consequences. Despite the existence of an external relationship between the creditor and the debtor, based on the internal relationship with the foundation to which the debt was transferred, it is not possible to entertain the defense that the foundation is liable for the debt in relation to the plaintiff.
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