Turkey: The Unlikelihood Of A Subsequent Debt Repayment In Accordance With The Swiss Federal Court Decision Dated 21 July 2015

Introduction

Both in the Turkish Code of Obligations ("TCO") and the Swiss Code of Obligations ("SCO"), the notion of unlikely debt repayment is regulated under two different parts. According to Article 27 of the TCO (Article 20 of SCO), contracts with an impossible subject are null and void.

In the case of a subsequent unlikelihood of debt repayment, the consequences vary according to differing circumstances: if the debtor is not responsible for the occurrence of the unlikelihood for the debt to be made whole, the debt ends according to Article 136 of TCO (Article 119 of SCO). To the contrary, if the debtor is responsible for the occurrence of the unlikely repayment, the denouncement of the contract is controversial.

The Swiss Federal Court adopted a different view in its recent decision, which will be examined. Below, the doctrinal view on the subsequent unlikelihood of repayment for which the debtor is responsible will be addressed and, lastly, the new precedent of the Swiss Federal Court will be analyzed.

The View of Non-Termination of the Debt Even If the Debtor is Responsible for the Subsequent Unlikelihood of Repayment

According to widely accepted doctrinal views, if the debtor is not responsible for the unlikely repayment of the debt, the debt does not terminate, only the content of the debt changes, and the debt transforms into compensation liability according to the TCO, Article 112. In synallagmatic contracts, the liability of the creditor to fulfill his debt obligations continues.

If the debt does not end, all securities linked to this debt continue to exist, a lapse of time continues, and all defenses related to the debt at the beginning may be brought forward by the creditor in terms of a compensation claim.

The View of Terminating the Debt in Cases Where the Debtor is Responsible for the Subsequent Unlikelihood of the Debt Repayment

According to another view, termination of the debt by the subsequent repayment unlikelihood is not related to the fault of the debtor; even if the debtor is at fault, the debt ends - as if the non-repayment has occurred due no fault of his own (Article 136 of TCO) - and the compensation obligation is in line with Article 112 of TCO.

The View of the Federal Court in its Decision Dated 21 July 2015 and Numbered 4A_101/2015

The Swiss Federal Court embraced a different view compared to its previous view in its 21 July 2015, 4A_101/2015 numbered decision, which is a follow up to the first view. In this decision, it was ruled that if subsequent unlikelihood of debt repayment occurred due the fault of the debtor, the creditor may revoke the contract if the counter-performance obtained in part holds no significance for him.

Indeed, according to this view, which is accepted in the Swiss doctrine and, particularly, by SEROZAN in the Turkish doctrine1, even in the event of unlikelihood of debt repayment occurring due to the fault of the debtor, Articles 112 and 125 of the TCO (Articles 97,107,109 of SCO) shall be applied by analogy, and the creditor shall have the right to revoke the contract.

According to this view, it is unreasonable to prevent the creditor from requesting the restitution of the performance already executed in the event of non-repayment where the debtor is liable, as it is possible to request so when the debtor is not so liable. In parallel, as it is possible to revoke the contract where performance of the obligation is possible in in the event of default, the same right to revoke the contract shall exist in cases where it is impossible to perform the obligation.

If this view is accepted, in the event of the unlikelihood of repayment of a debt of a the debtor is responsible, the creditor will have a right of choice, the same as in the event of default of the debtor, and may claim either the compensation of the positive damage or the negative damage by revoking the contract. In the event that the amount of the negative damage is higher than the positive damage, revoking the contract is more beneficial for the creditor.

The Federal Court reasoned its stated decision as follows: in the event of subsequent unlikelihood of repayment of a debt of which a debtor is responsible, it is not right to place the creditor in a worse situation than that of the default of the debtor2. Especially, if part of the obligation that was performed, prior to the debt being unpaid, has no significance for the creditor any longer, and different from the default situation, the creditor may not terminate the contract3. In such a case, it would be convenient to grant a formative right to the creditor allowing ex tunc termination of the contract through application of Articles 107 II and 109 of the SCO (Articles 123 and 125 of TCO) by analogy. Accordingly, the court decided that such a right to revoke is necessary for the parties to escape their conventional obligations entirely, and revert to their conditions during the formation of contractual relationship. The debtor will be held liable for reimbursement of any negative damages4.

Conclusion

The highly supported decision of the Federal Court dated 21 July 2015 and numbered 4A_101/2015, in Switzerland, holds a minority view under Turkish Law. Yet, this decision of the Swiss Federal Court will heat up discussions on this issue in Turkey.

Footnotes

[1] Rona SEROZAN, Termination of the Contract (Sözleşmeden Dönme), İstanbul 2007, p. 265 ff.

[2] TF, 4A_101/2015, c. 4.5 (21.07.2015).

[3] TF, 4A_101/2015, c. 4.4 (21.07.2015).

[4] TF, 4A_101/2015, c. 4.4 (21.07.2015).

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions