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LAW OF OBLIGATIONS
213
“
In the event that the surety accepts the undertaking as a joint
and several surety or under any other similar term, the creditor
may apply to the surety without applying to the obligor or
without disclosure of the immovable pledge provided that the
obligor should be in default and the notice becomes fruitless or
the obligor should clearly be lack of payment ability.
In the event that the debt is secured with a movable pledge
subject to delivery or pledge of receivable, the surety should not
be applied before foreclosure of those pledges…”
In light of the above, in order for the creditor to apply directly to
the surety, the first condition is that the obligor must default for the
performance of the obligation. However, the satisfaction of this condition
alone is not sufficient. It is also necessary that either the notice becomes
fruitless or the obligor should clearly be lack of payment ability.
Expiry and Termination of Suretyship
As per Article 598 of the NTCO; if the suretyship is granted by a
real person even for an indefinite period, the suretyship itself will expire
automatically at the end of ten years following the execution of the
suretyship contract. The suretyship period may be extended with the
consent of the surety for a new period of maximum ten years provided
however that the extension should be completed, at the earliest, one year
prior the termination of the suretyship contract.
In addition to the above, Article 599 of the NTCO sets forth a
new provision which is not defined under TCO; i.e. the termination
(revocation) right of the surety. In accordance with this article, in case
of a suretyship for future debts, if the debtor’s prior financial condition
significantly disrupts after the execution of the suretyship contract, or
the debtor’s financial condition is much worse than the surety assumes
in good faith; then the surety may terminate the suretyship contract with
a written notice at any time prior the occurrence of the debt. However,
in such case the surety will be liable to compensate the damages of the
debtor.