It is very common in Turkey that the companies, specifically
from some certain industries such as textile, retail i.e having
long term trade relations apply to running account relations which
enables the buyer to obtain goods up to the limit and to deduct
following the agreed period of time elapsed.
Running accounts are mostly known as non-regulated area and
implemented upon verbal consensus between the companies.
However, Turkish Law does not allow to structure an unsettled
account considering the foreseen "risk of conflict" in
terms of reciprocal demands of the parties.
In this article you will find the legal framework of the running
accounts in Turkish Law with special focus to interest
Pursuant to the article 89 of the Turkish Commercial Law,
"Running Account" implementation shall be subject to an
agreement in which the parties thereto have receivables from each
other either arising from any cause of action or the relationship
and relinquish to ask them separately and severally since they
agree to structure credit-debit entries on their trade and settle
the outstanding after certain period of time.
The records on a running account do not bind the parties unless
it has been agreed in written.
The principles applied to running accounts in Turkish law are
basically as follows;
Unless otherwise agreed, credits or debits on a running account
do not foreclose right of action or defense of either party with
respect to the promissory transaction or the contract.
In cases where the credits have been born prior to the current
running account and recorded with the consent of the parties shall
not be deemed as renewed unless otherwise agreed.
Charging for a commercial paper on a running account would only
be effected provided that the amount deemed to have been received
and be effective.
At the end of each accounting period, the outstanding amount
after the settlement is charged as new item for following
accounting period. The amount shall be paid if the contract is
terminated or outstanding amount is levied.
The dishonored commercial papers on a running account shall be
returned to drawee or endorser and removed from the account
In Turkish law, pursuant to the article 93 of the Turkish
Commercial Law; Receivables to be spent or arised from money and
goods delivered to be ready for a particular disposal and non
exchangeable receivables shall not be charged to a running
As of the date of determination and recording of the balance the
interest shall be applied to the sum. However the Turkish law does
not allow compound interest or any implementation may cause
compound interest even the parties mutually agree by contract.
Parties of a running account contract, provided that not less
than three months, may decide at any time to start adding interest
to the principal amount and fix the interest and commission rate if
In Turkish law, as the nature of requirement of a contract for
effectiveness of a running account and as result of the obligation
of fixing an accounting period by law, none of the parties prior to
the cessation of the current running account shall not be
considered either as the creditor or the debtor The legal status of
the parties are only determined after the cut off at the end of the
A running account contract seems special type of contracts since
the law regulates the termination clauses very specially.
Accordingly a running account contract is terminated upon i) expiry
of the agreed period, ii) notice of either party in cases where the
term has not been fixed and, iii) insolvency of either party.
However there is no certain clauses with respect to the implicit or
automatic renewals of the contracts in comparison between
accounting period and contract terms. This seems the most crucial
issue for the companies which have mid term trade relations under a
Pursuant to the article 99 of the Turkish Commercial Law
Contract if one of the parties dies or is restricted during the
effectiveness of the contract the legal representatives of both
parties and their successors may terminate the contract for the
current account ten days advance notice.
The prescription period is five years for all kind of claims
will be effective after termination of running account
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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