Turkey: Impossibility Of Performance Under Contracts

Naturally; the performance of the parties' obligations is the main aim of each contract. In respect of general law principle of "pacta sunt servanda", performance of the obligations under a contract shall not be affected from the changing conditions following the execution of such contract and the parties should comply with the provisions of the respective contract as agreed between the same.

However, despite of the principle of "pacta sunt servanda"; in some cases the parties cannot fulfill their obligations due to some circumstances or conditions beyond the control of the parties. In this case; upon satisfaction of some conditions, the party whose performance is affected from such circumstance may be entitled to claim "Impossibility of Performance" under Turkish law.

The impossibility of performance is regulated under Articles 136, 137 and 138 of the Turkish Code of Obligations ("TCO").

  1. Impossibility of performance in general

In accordance with Article 136 of TCO; if it is impossible to perform all the obligations under the contract due to the reasons that are not attributable to the obligor, the obligor shall be released from performing the related obligations. However, unless the obligor dully and timely notifies the creditor on the impossibility of the performance of the obligations and takes necessary precautions to prevent the increase of loss, the obligor shall be liable for the compensation of the resulting losses.

According to the decision of the 3rd Civil Chamber of Supreme Court numbered E.2013/10595 K.2013/12801 and dated 17.09.2013, the nature of the impossibility, whether it is objective or subjective, shall not affect the release of the obligations under the contract if the conditions or circumstances are beyond the control of the parties. In other words; in respect of mentioned court decision, the nature of impossibility does not take into consideration during judgement process and the fundamental point to determine the impossibility is whether such conditions are beyond the control of the parties or not.

  1. Partial impossibility of performance

Pursuant to Article 137 of TCO; when the performance of the obligations under a contract is partially impossible due to reasons for which the obligor cannot be held responsible, the obligor shall be released from the obligations which became partially impossible.

However, if it is clearly understood from the interpretation of the contract that such contract would not be concluded if the respective impossibility would have been foreseen by the parties in advance, then all of the obligations under such contract shall be terminated.

In case the creditor agrees with the partial performance, the corresponding payments shall be released proportionally. In case the creditor does not agree with partial performance or the corresponding payment has an indivisible character, absolute impossibility provisions as explained above shall be applied.

  1. Adoption and Revocation of the Conditions of the Contract

In the case of impossibility of performance, the obligor can request for the adaptation or the revocation of the contract from the court in accordance with Article 138 of TCO, provided that the below stated conditions exist:

  1. An unexpected event which was unforeseen and not expected to be foreseen by the obligor should occur after the execution of the contract
  2. The unexpected event should occur beyond the control of the obligor
  3. In respect of the Principle of Good Faith, performance of the obligations should become excessively burdensome for the obligor because of the unexpected event
  4. Obligor should have performed his obligations by reserving its rights for hardship or not yet performed the obligations under the contract.

The mentioned Article provides two remedies to the obligor; (i) to request for the adaptation of the contract with the changed circumstances, (ii) to revoke the contract.

Impossibility of performance mostly applies in cases where a force majeure event or, for some significant cases, the change of economic conditions makes it wholly or partially impossible to perform the related obligations.

Under Turkish laws, although force majeure is a valid reason for termination of an agreement, there is not any regulation which defines force majeure or states the objective criteria of the same. There by, the Supreme Court evaluates every concrete case by taking into consideration of the specific aspects of the same. Although there isn't any regulation under Turkish Laws which itemizes the events of "Force Majeure", according to the decision of the 15th Civil Chamber of Supreme Court numbered E. 2005/2684 K. 2005/3640 and dated 16.6.2005, it is possible for the parties of a contract to impose the necessary regulations under such agreement.

Generally, the Supreme Court does not accept the change of the economic conditions, high devaluation, and monetary depreciation as a reason for applying the impossibility of performance, since the same consider such occasions as the realities of Turkey and that these cases cannot be accepted as unexpected event which was unforeseen or not expected to be foreseen. However, the Supreme Court evaluates the conditions for adaptation or termination of the contract under Article 138 in each concrete case and, in significant occasions, may accept such reasons for applying the impossibility of performance provisions. (Decision of 13th Civil Chamber of Supreme Court numbered E.2012/8250 K.2013/2623 and dated 7.02.2013, Decision of 13th Supreme Court numbered E.2013/1042 K.2013/31247 and dated 12.12.2013.)

As explained above, in respect of the current decisions of Supreme Court and the mentioned Articles of TCO; the parties of a contract may terminate the related obligations wholly or partially, in case the conditions of the impossibility of performance occur under the respective contract. 

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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