Turkey: "De Facto" Acceptance And Partial Acceptance Under Turkish Laws And FIDIC Contracts

In accordance with the economic and commercial growth and the increase of the need for investments in almost all areas of the commercial and social life, several major infrastructural projects have started to be realized in Turkey for the last decades. However, although there are many projects in Turkey which have been accomplished with great success, some contractors have indeed faced some problems and suffered severe consequences in many other projects, sometimes due to the reasons which are attributable to the administrative authorities or the other contractors included in the project and sometimes due to the lack of proper regulations under their project contracts.

Two of the major problems which are confronted by the contractors, especially in construction projects, are the absence of the partial acceptance procedures for the projects, the contractor of which is a consortium, and the absence of a provision regarding the "de facto" acceptance which is the physical usage of the completed works by the owner without first performing the related preliminary acceptance procedures. For that reason, we have hereby analyzed whether the partial preliminary acceptance of the completed works under a contract is legally possible and whether the contractor may claim against the owner that the hand over and the usage by the owner of the completed works should be considered as an acceptance or not.

GENERAL PROVISIONS FOR PARTIAL ACCEPTANCE

Due to the wide size of the projects and the complexity of the works included in the same, most of the contractors prefer to enter into such projects with other contractors who have the adequate experience and knowledge, via establishing consortiums or joint ventures, in order to share the works and the responsibilities related to the same.

The main problem in such a formation in respect of the subject matter of this analyses occurs in case of the presence of a consortium. Since, in the projects which are undertaken by a consortium, the acceptance of the works may be delayed or suspended due to the reasons totally attributable to the other contractors (such as the other member of the consortium may fail to complete its part of the works on time), it should be beneficial to request for the inclusion of a "partial acceptance procedure" in the project contract, in order to avoid any delays or suspensions in the acceptance of the works undertaken by each member of the consortium. However, it is also important to know the general provisions of Turkish laws related to the partial acceptance, in order to make an assessment whether the owner may be forced to accept partial acceptance although such a provision is not included in the contract.

Although there isn't any precise provision in the Turkish Code of Obligations regarding the conditions which have to be present for the partial acceptance to take place, the second paragraph of Article 479 of the said Code, which is one of the articles which regulates the "Independent Contractor Agreements", states that;

"If the work has been decided to be paid piecemeal and the price has been determined as per pieces, the price of each piece is paid at the moment of delivery ."

In addition, in the doctrine it is denoted that the abovementioned provision of the Code of Obligations is only applicable for the independent contractor agreements which are related to the consecutive delivery of the works that are divisible and are able to be determined by number, measure and weight. It is also stated in the doctrine that the price corresponding to every part of the work must be defined in the contract for the partial acceptance.

In parallel with the foregoing well accepted opinion in the doctrine, it is also regulated in the Law No. 4735 (Law of Public Procurement Contracts) that the partial acceptance may only be possible for the parts which are suitable for independent usage. Although most of the project contracts which are executed by the administrative authorities for specific projects, such as the construction of dams and HEPPs, are not subject to the said Law and therefore the provisions of this Law shall not be binding for the same, it may be enlightening to understand the perspective of the administration in such cases and the possible allegations with regard to the future claims.

Furthermore, in accordance with the abovementioned provision of the Code of Obligations, in almost every decision of the Supreme Court in relation with the subject matter, it is stated that the partial acceptance can only take place if it is explicitly agreed by the parties in the contract.

However, not only the agreement of the parties but also some other legal parameters should be present for the maintenance of partial acceptance. Accordingly, a contract should include the following in order for the contractors to request for the realization of the partial delivery and acceptance:

  • the partial acceptance shall explicitly be determined in the contract,
  • the price of each part shall be determined in the contract,
  • the works under the contract shall be divisible and shall be able to be determined by number, measure and weight, and
  • the parts which shall be subject to partial acceptance under the contract shall be adequate for independent usage.

In addition; Article 41 (Preliminary Acceptance) of the General Specifications for Public Works ("GSPW"), a general specifications document which is generally attached to the construction contracts executed by the administrative authorities, states that;

"In the case of construction and service works under a single contract which are to be completed in parts in various stages, the same preliminary acceptance procedure shall apply to each section, unless otherwise is provided for in the contract."

In accordance with the abovementioned GSPW provision, if the work has been agreed to be completed and delivered in parts in various stages in a contract, of which the GSPW is an integrated part, then the partial acceptance of the works can be possible for the said works, unless otherwise is stated under the same contract.

In the light of the above stated explanations, it can be assumed that since the mutual agreement of the parties is the main condition for the partial acceptance to take place under Turkish jurisprudence and the sole evidence for this mutual agreement is the contract, the absence of a provision for partial acceptance in the contract would simply preclude the contractors of raising any claim against the owner with respect to partial acceptance of the completed works. For that reason, in order to avoid any possible complications which may be experienced with the owner, the procedure for the partial acceptance, including the above stated legal parameters, should be inserted into the related project contract.

GENERAL PROVISIONS FOR "DE FACTO ACCEPTANCE"

Another problem which is generally confronted by the contractors who are party to a project contract executed by the administrative authorities in Turkey is the usage by the administration of the completed works under the contract without first performing the related preliminary acceptance procedures. In such cases, since generally some of the payments are agreed to be paid on the preliminary acceptance and the respective preliminary acceptance is not performed by the owner, the related payments cannot be obtained, the responsibilities of the contractors under the contract still survives, and the possible deformations and costs related to the usage of the said works may have to be compensated and remedied by the contractors.

Since, there isn't any regulation in Turkish Laws regarding this matter, the decisions of the Supreme Court gains importance for the evaluation of the subject matter. When the decision of the 15th Chamber of Supreme Court dated 1981 is analyzed, it may be seen that if the work is physically taken over by the owner and is used effectively without the preliminary acceptance of the same which should necessarily have taken place, this means that there isn't any deficiency in the works which prevents the usage by the Owner. Accordingly if there isn't any deficiency in the works which prevents the usage of the said works, then there is no rightful ground for the owner to abstain from the preparation of the preliminary acceptance certificate. Pursuant to such decision of the Supreme Court, if the owner physically takes over the respective works which are already completed by the contractor and the same are still in use and effect, then there shouldn't be any obstacle for the owner to prepare the preliminary acceptance certificate of the said works after the delivery and accordingly, for the contractor to claim its damages in relation with the delay in preparation of the said preliminary acceptance certificate.

However, it is vitally important that, in order for the contractor to be entitled to claim its damages in accordance with the general provisions and any related contractual provision, the contractor should have reserved all the rights related to its claims in relation with the delay in the performance of the preliminary acceptance procedures in a written manner by latest the issuance of the preliminary acceptance certificate or should have caused the owner to insert a reservation clause about the subject matter in the text of the preliminary acceptance certificate.

FIDIC PROVISIONS FOR "DE FACTO ACCEPTANCE"

As a result of the need of both the contractors and the owners for a concrete and fair contract, in some of the projects in Turkey or abroad, the FIDIC contracts are preferred for the realization of such projects. For that reason; it is also important for the contractors to be aware of the related provisions of such FIDIC contracts which are for the benefit of the same in relation with the "de facto acceptance".

Both 1987 4th Edition and 1999 1st edition of the FIDIC Conditions of Contract for Works of Civil Engineering Construction ("Red Book") include precise provisions regarding the de facto acceptance by the owner.

It is stated in Article 48.1 of the Red Book 4th Edition that;

"When the whole of the works have been substantially completed and have satisfactorily passed any Tests on Completions prescribed by the Contract, the Contractor may give a notice to that effect to the Engineer, with a copy to the Employer, accompanied by a written undertaking to finish with due expedition any outstanding work during the Defects Liability Period. Such notice and undertaking shall be deemed to be a request by the Contractor for the Engineer to issue a Taking-Over Certificate in respect of the Works. The Engineer shall, within 21 days of the date of delivery of such notice, either issue to the Contractor, with a copy to the Employer, a Taking-Over Certificate stating the date on which in his opinion, the Works were substantially completed in accordance with the Contract, or give instructions in writing to the Contractor specifying all the work which, in the Engineer's opinion, is required to be done by the Contractor before the issue of such Certificate. The Engineer shall also notify the Contractor of any Defects in the Works effecting substantial completion that may appear after such instructions and before completion of the Works specified therein. The Contractor shall be entitled to receive such Taking-Over Certificate within 21 days of completion to the satisfaction of the Engineer, of the Works so specified and remedying any defects so notified. "

It is also stated in 48.2 of the same edition of Red Book that,

"Similarly; in accordance with the procedure set out in Sub-Clause 48.1, the Contractor may request and the Engineer shall issue a Taking-Over Certificate in respect of:

  1. any Section in respect of which a separate Time for Completion is provided in the Appendix to Tender.
  2. any substantial part of the Permanent Works which has been both completed to the satisfaction of the Engineer and, otherwise than as provided for in the Contract, occupied or used by the Employer, or
  3. any part of the Permanent Works which the Employer has elected to occupy or used prior to completion (where such prior occupation or use is not provided for in the Contract or has not been agreed by the Contractor as a temporary measure). "

When these two articles are evaluated, it may be assumed that, in a possible case regarding the "de facto acceptance", the abovementioned provisions of FIDIC Red Book shall be the main ground of the claim that the usage of the works by the owner shall be deemed as an acceptance and the preliminary acceptance certificate should have been issued in accordance with these provisions.

When the provisions of Red Book 1999 1st Edition is evaluated, it may be seen that such contract includes a more detailed provision regarding the de facto acceptance by the owner which indicates the intention to prevent unjust usage of the completed works.

Pursuant to Article 10.2 (Taking Over of Parts of the Works) of Red Book 1999 1st Edition;

"The engineer may, at the sole discretion of the Employer, issue a Taking – Over Certificate for any part of the Permanent Works.

The Employer shall not use any part of the Works (other than as a temporary measure which is either specified in the Contract or agreed by both Parties) unless and until the Engineer has issued a Taking-Over Certificate for this part. However, if the employer does use any part of the Works before the Taking-Over Certificate is issued;

  1. the part which is used shall be deemed to have been taken over as from the date on which it is used,
  2. the Contractor shall cease to be liable for the care of such part as from this date, when responsibility shall pass to the Employer, and
  3. if requested by the Contractor, the Engineer shall issue a Taking-Over Certificate for this part."

It can clearly be understood from the Article that, in the projects for which the Red Book 1999 1st Edition is agreed to be the contract of the project, the owner shall not be entitled to use any part of the completed works unless otherwise agreed by the contractor and also the contractor shall be released from its responsibilities in relation with the care of the completed works.

Finally, it is vitally important to note that, any claim on the grounds of the abovementioned provisions of the Red Book shall also be subject to the condition of reservation of the rights by the contractor as already mentioned above.

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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