In case a legal conflict arises out of a certain agreement, the first thing to do is determining the nature of (i.e., identifying) that agreement in order to specify the applicable statutory provisions. Misidentification of an agreement inevitably leads to wrong statutory provisions being applied to the same, which may have tragic consequences.
Although frequently used in practice, brokerage agreement (simsarlik sozlesmesi) is not a well-conceived term in Turkish business environments. There are several cases where most people, including legal practitioners, have considerable difficulties in distinguishing between brokerage agreement on one hand and commission agreement (komisyon sozlesmesi) and agency agreement (vekalet sozlesmesi) on the other hand. That these agreements may, in some cases, actually be intertwined is also another fact. The latter means there may be instances where the relevant provisions of the Turkish Code of Obligations1 ("the TCO") regarding agency agreement would directly be applied to a brokerage agreement or a commission agreement.
In light of the above, one thing is for sure: The close relationship between the above-mentioned agreements is worth being considered. Accordingly, this article sets forth the main features of brokerage agreement and particularly points out its differences from other agreements.
Article 520 of the TCO provides that brokerage agreement is an agreement whereby a broker (i) undertakes to put two (or more) parties in contact in order for such parties to enter into a prospective agreement and (ii) becomes entitled to a brokerage fee only if such agreement is made.
Let us illustrate a brokerage agreement through an example: X is a manufacturing company which naturally aims at finding new clients for its goods. In this respect, X enters into a brokerage agreement with broker B. Using his connections, B puts X in contact with Y which is a potential client. X and Y start negotiations.
As a general rule, B is completely independent from both sides.
Pursuant to the TCO;
- X shall pay a brokerage fee to B only if X enters into an agreement with Y.
- If the prospective agreement between X and Y is made on a condition precedent, B would only be entitled to brokerage fee provided that the said condition occurs.
- The amount of the brokerage fee, which X would pay to B, does not have to be specified in the brokerage agreement between X and B. If not specified in the brokerage agreement, such fee would be set by court according to the relevant tariff, and if there is no tariff, according to local practice (teamul).
- Brokerage agreement does not have to be made in written from save for brokerage agreements regarding real properties.
- X shall reimburse B for the expenses (if any) which B has incurred in respect of the prospective agreement even in case such agreement is not made, provided that this is agreed on in the brokerage agreement.
- With regards to the prospective agreement, B shall have a general obligation to act in the interests of X. In case B acts in the interests of Y or receives an unlawful fee (which would most probably be unknown to X) from Y in a manner contrary to the good faith rules, it forfeits its right to brokerage fee together with all the relevant expenses it has incurred.
- X does not have to grant B the authority to represent X before Y with regards to the prospective agreement. This means X can enter into the said agreement on its own, which is not related at all to the brokerage agreement between X and B. That is to say, agency and/or representation is not an indispensable element of a brokerage agreement. Only the act of introducing X and Y to each other entitles B to brokerage fee under the brokerage agreement. B does not have to play any role in the execution and/or performance of the agreement between X and Y. This is where brokerage agreement most differs from agency and commission agreements.
- In addition to being the broker between X and Y, B can also act as an agent for X (and even for Y!) and thus execute the prospective agreement with Y on behalf of X. In this case, the contractual relationship between X and B is of hybrid nature (i.e., brokerage and agency).
- Besides X, B can also enter into a separate brokerage agreement with Y and touch a second brokerage fee. This is what real estate brokers do in practice. In this case, B shall pay utmost attention to equally protect the interests of both parties. Otherwise, it may forfeit its right to brokerage fee(s) together with all the relevant expenses it has incurred.
- As a general rule, the TCO provisions regarding agency agreement shall also be applicable to brokerage agreements. The exception of this rule is where the TCO provides specific provisions applicable to brokerage agreements in its Articles 520 to 525.
- If B sold (in its own name but for the account of X) the goods of X to Y and received a commission (from X) on the sales price, the contractual relationship between X and B would be defined as a commission agreement.
1. Law No. 6098 published in the Official Gazette No. 27836 on 4 February 2011.
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.