Plenum of the Constitutional Court clarified a number of issues related to the credit and mortgage
Plenum of the Constitutional Court clarified a number of issues related to the credit and mortgage

The Plenum of the Constitutional Court of the Republic of Azerbaijan issued a decision on the interpretation of a number of articles of the Civil Code of the Republic of Azerbaijan and the Law on Mortgage on mortgage issues on 31 May 2018.

            This decision mainly focuses on "credit line agreements" and their impact on banks' obligations, as well as their terms and status of guarantor. The "Credit Line Agreement" is concluded between the bank and individuals, and is aimed at facilitating access to financial resources for individuals. That is, the bank intends to grant a loan to the individual in the future. The Plenum of the Constitutional Court decided that the credit line agreement is not an expression of intent, but a contract. Thus, the credit line agreement creates a undertaking to the bank, that in the future, if the other side of the contract requires, the bank should issue a loan under the terms of the contract. This may not be the case only when the financial condition of the person requiring a loan is substantially deteriorated between the time when the loan was actually credited to the time the contract was closed and the conclusion is reached that the loan can not be repaid.

            On the other hand, the credit line agreement must clearly outline the terms of the guarantee and mortgage. Otherwise, these terms must be agreed upon by the guarantor or the mortgagee, if they are actually determined at the time the loan is received.  If the amount, duration and interest rate of the loan on the terms and conditions set forth in the loan agreement will aggravate the condition of the guarantor, this will be considered as grounds for termination of guarantee.

            Also, the Plenum of the Constitutional Court made a decision on interpretation of Articles 472.1 and 1306 of the Civil Code of the Republic of Azerbaijan on 4 June 2018. The essence of the decision is to clarify the rights and obligations of the heirs and guarantors in relation to the debts of the deceased.

            The Plenary of the Constitutional Court in its judgment indicated that the heirs of the deceased are primarily responsible for the debts of the deceased. However, it should be noted that the heirs are liable only in proportion to their inheritance share. Guaratee is not terminated by the death of the main creditor. Thus, when the heirs can not repay the debt, or if the amount of their inheritance is insufficient to do so, the guarantor is obliged to repay that debt in full. Similarly, the interest arising from the debt of the deceased must also be borne by heirs and guarantors.