The New Code of Obligations ("the New Code") became effective in Turkey as of 1 July 2012.

The New Code includes a section regarding "general contract terms" and introduces a new legal concept for individual contracts which is open to debate. The section begins by defining "general contract terms" and then sets out the consequences if such terms are against the interests of the non-drafting party.

The New Code has been in force for a very short period of time and these provisions have not yet drawn due attention. The drafters of such conditions should be mindful of being in an undesirable position in the future due to the strict wording of the New Code as well as certain vague provisions therein.

Definition of "General Contract Terms"

According to Article 20 of the New Code, general contract terms are the provisions of a contract drafted and submitted by one of the parties unilaterally in order to be used in a variety of similar contracts in the future. The drafting party should expressly inform the other party of the existence of such terms and provide an opportunity to become aware of the content, failing which the general contract terms shall be deemed "unwritten" and have no legal effect (Article 21). General contract terms which are unusual for a contract type or transaction shall also be deemed unwritten.

Scope of Application

These provisions concern goods and services suppliers, particularly those serving a large number of customers, such as banks, insurance companies and transport companies since they are used to setting out their own rules of negotiation – namely, not to negotiate(the "take it or leave it" rule) – which is not permitted by the New Code.

Before the promulgation of the New Code, the concept of "unfair contract terms" applied only to consumer contracts pursuant to the Law on Consumer Protection. According to Article 6 of this Code, consumers are not bound by unfair terms, which are defined as being the conditions inserted by the supplier unilaterally, without negotiation, and which cause imbalance against good faith in the rights and liabilities of the parties contrary to the interests of the consumer. Under this Code, it was easy to interpret the law.

While the related provisions of the New Code are asserted to be based on Council Directive93/13/EEC of 5 April 1993 on Unfair Terms in Consumer Contracts and the German Civil Code, unlike those regulations the New Code does not exclude non-consumers (for instance, traders, commercial companies and professionals). As a result, the provisions regarding such unfair terms apply to all individuals and entities including commercial companies with stricter and more complex structures than those applicable only to consumers.

The New Code leaves no room for the drafter of such general terms to avoid the application of related provisions. One article states that it makes no difference whether the contracts prepared for the same purpose are identical or not.

It is clearly specified in the New Code that to add a specific article stating that the agreement has been negotiated before the conclusion thereof does not take the agreement or related article(s) out of the general contract term definition.

In addition to all of the above, there is one vital provision stipulating that any article which is contrary to the interest of the other party or which worsens his/her position against good faith cannot be inserted in general contract terms. This provision may create a ground for a party to allege the invalidity of any provision with which he/she is not happy even if he/she signed general conditions at the outset of the relationship.

Considering all of the above, it is quite difficult to prove that an agreement or a general contract term was negotiated between the parties. Having regard to the "prudent merchant principle", the courts would be cautious in the interpretation of the above-stated provisions of the New Code in commercial disputes (where both parties are traders or companies) since it may cause unexpected and unintended consequences.

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.