Turkey: The New Code Of Obligations: An Overview

In accordance with Turkey's growing social needs, as well as considering its technological enhancements, the need to amend and improve major codes has become indispensable. Accordingly, the current Turkish Code of Obligations1 (the "TCO") will be replaced by the New Code of Obligations (the "New TCO") as of 1 July 2012. There are specific articles addressing some of the new regulations in this newsletter, as well as articles in some of our earlier newsletters. With this article, we present a general overview of previously unaddressed regulations of the New TCO. In the following section, each subject is addressed separately for ease of reference.

(i) New Regulations Regarding Employment Agreements:

  • The concepts of "sexual harassment" or "mobbing" do not exist in the TCO or Labor Law2. The legal gap, especially in the case of mobbing, was filled by court rulings.

    The New TCO, however, regulates both sexual harassment and mobbing through a specific article. The employer is now obliged to take necessary actions that will prevent employees from exposure to such acts and minimize the damage for those who are already exposed to such behavior. However, we believe that the lack of a clearer definition for "mobbing" remains a problem.

    One of the most important sanctions that the New TCO provides for sexual harassment and mobbing cases is the determination of liability for compensation. Any breach of contract or the law by the employer that causes damage to the employee (physical or non-physical damages) will be resolved in accordance with the rules of "contractual liabilities," instead of through tort rules, to ensure that the victim's rights are better protected.
  • The TCO did not have a specific provision on the time limit of "non-competition" agreements for employees after termination of employment; rather, it indicated that such agreements would be applied only if they are effective for an "appropriate time period." The New TCO provides an upper limit for such agreements of 2 years.
  • The New TCO also provides that the employer may have general regulations that cover job performance, and may give "special instructions" to employees. These employees are obliged to follow the instructions to the extent that they are reasonable. We believe that application of the "special instructions" practice will differ from the current TCO practice.
  • There is also a new regulation regarding the payment of "intermediation fees" to the employee. If the employer and the employee agree, the employee will be entitled to an intermediation fee to assist in establishing a commercial relationship between the employer and a third person.
  • Moreover, if the employer and the employee agree that the employee may use his/her own vehicle for the performance of the employer's commercial activities, the employer shall pay the taxes, mandatory liability insurance premiums and an appropriate compensation for depreciation of the vehicle.
  • The New TCO also amends the termination notice periods for employment agreements of indefinite duration based on the length of the employment period. With this amendment, the actual termination notice will be two weeks for employment of at least one year, four weeks for employment of one to five years, and six weeks for employment of more than five years that is similar to the corresponding regulation in the Labor Law.

It is worth noting that the regulations of the New TCO do not remove or repeal the Labor Law regulations. The new regulations will only apply in circumstances where the New TCO governs employment.

(ii) For parties who have not determined the yearly contractual or default interest under their agreement, the New TCO rule establishes the application of the valid and relevant regulations for the accrual of interest.

While parties are free to set a contractual interest rate, there will now be an upper limit. The annual interest rate shall not exceed the statutory interest rate by more than 50%.

Where interest accrues due to the debtor's default, the contractual ceiling is higher: statutory interest+100%.

(iii) The New TCO also provides for a new set of rules of "Standard Terms and Conditions" (Genel İşlem Şartları) that had previously gone unaddressed by the TCO. With these provisions, the law aims to protect persons from abstract and one-sided agreements unilaterally drafted by a company so as to not be negotiatable. A detailed defi nition for Standard Terms and Conditions is provided, and validity conditions of such agreements are also regulated.

(iv) Statutes of limitation for compensation for both torts and unjust enrichment claims are extended by the New TCO. A one year time limit for both claims is extended to two years.

(v) A new regulation on the effectiveness period of the annotated rights of purchase, pre-emption and buy-back arising from sales agreements in the land registry is determined as 10 years by the New TCO, thereby harmonizing Articles 735 and 736 of the current TCO.

(vi) The New TCO, consistent with the Law of Intellectual and Artistic Works, requires publishing agreements to be in written form. Moreover, the printing freedom of publishers granted under the TCO has been amended. The New TCO requires a statement of the time period or printing amount in the publishing agreements to have fixed terms.

(vii) In accordance with the Electronic Signature Law, the New TCO recognizes an electronic signature as an original signature in written forms of agreements. With this rule, an electronic signature will be sufficient to execute an agreement. Pursuant to this Article, documents that contain secured electronic signatures or documents that are sent via fax or other transmission methods with confirmation may also be considered as written.

(viii) The New TCO introduces the concept of "Danger Liability." Liability for the owner of an enterprise and its operator, if any, will now be joint liability for damages arising from a signifi cantly dangerous commercial activity. Even though such activity is duly authorized by the relevant public authority such as via a license, the person suffering damages will be entitled to compensation.

(ix) Under the TCO, as soon as the agreement is established, all of the profits and losses of the tangible goods will be transferred to the buyer. However, under the New TCO (setting aside agreements to the contrary and other reserved probabilities) for moveable estates, the profi ts and losses will now be transferred to the buyer, together with the transfer of the possession and ownership of the goods; whereas, for immovable estates, registration under the title registry will effect the transfer.

Footnotes

1 No. 818, enacted in 1926.

2 No. 4857, enacted in 2003.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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