INTRODUCTION
According to the Turkish Language Association, deposit means a certain amount of money given as collateral during the conclusion of a contract. This payment is often used to ensure the parties commitment to the contract and assurance that it will be carried out. In practice, terms such as binding money, deposit, security price, withdrawal money and penalty clause are often confused with each other in daily life. We would also like to point out that the concept of the deposit is not specifically regulated in the Turkish Code of Obligations No. 6098 ("TCO").
In this article, we discuss the concepts of deposit, binding money, withdrawal money and the procedures for the return of the deposit fee, which are quite confused in practice and daily life.
A. LEGAL DESCRIPTION OF THE DEPOSIT FEE
Although there has been a discussion in the Turkish doctrine as to whether the legal definition of a deposit is a binding money or a withdrawal money, it should be noted that in accordance with the established practice and jurisprudence, the definition of a deposit is accepted as a binding money. Pursuant to Article 177 of the TCO, the binding money regulated as "A certain amount of money given by a party during the conclusion of a contract is deemed to be given as evidence of the conclusion of the contract, not as a withdrawal money. Unless there is a contract or local custom to the contrary, the binding money shall be deducted from the principal receivable."
The established practice of the Court of Cassation, as in the doctrine, also confirms the characterization of the deposit as a binding money. In a decision of the Third Civil Chamber of the Court of Cassation, this matter is exemplified as "...Pursuant to Article 156 of the Code, in the case of a binding money, the main thing is that it is given as evidence of the conclusion of the contract. Unless it is explicitly stipulated that it is a withdrawal compensation, money given as a deposit or binding money cannot be a withdrawal compensation, and the party who gave it is authorized to recover it, whether he was justified in canceling the contract..." (E. 2013/21340, K. 2014/6498)
B. FUNCTIONS OF THE DEPOSIT FEE
1. The Deposit is Evidence of the Conclusion of the Contract
As we mentioned above, one of the most significant functions of the deposit is that it serves as evidence that the contract has been concluded. As is also known, one of the general principles of the TCO is freedom of form. This issue is clearly regulated in Article 12 of the TCO. According to the Article, "Unless otherwise stipulated by law, the validity of contracts shall not be dependent on any form." As a consequence of this general principle, in daily life, it will be difficult to prove the conclusion of a contract that is not made in accordance with the form. In this respect, the deposit will be the only evidence that the contract has been concluded.
2. Deposit Fee Constitutes Partial Performance
A certain amount of money that is given in order to demonstrate that the contract has been concluded serves the function of partial performance pursuant to the explicit provision regulated under Article 177/2 of the TCO. According to the relevant provision, "Unless there is an agreement or local custom to the contrary, the binding money is deducted from the principal receivable."
3. Deposit Fee Facilitates the Performance of the Contract or the Obtaining of Compensation
By making a deposit payment under the contract, the parties can ensure the performance of the obligation or compensation by placing a clause in the contract between them, and thus the payment will serve as a security. In addition, this payment will facilitate compliance with the contract by the parties.
4. Withdrawal Money and Presumption
In practice, deposit fee and withdrawal money are quite confused concepts. In this context, we need to mention the withdrawal money in this section. In the case that one of the parties gives money to the other party during the conclusion of the contract and has the right to withdrawal the contract, it shall be considered as withdrawal money pursuant to Article 178 of the TCO. The withdrawal money entitles both the payer and the payee to rescind the contract in return for certain amounts. In this context, pursuant to Article 178 of the TCO, the right of rescission is regulated with different consequences, accordingly, "If a withdrawal money has been agreed, each party is deemed authorized to rescind the contract; in this case, if the party who has given the money rescinds, he/she shall return what he/she has given; if the party who has received the money rescinds, he/she shall return twice what he/she has received."
The parties may specify a period of time within, which the right of withdrawal must be used. However, the withdrawal money usually functions during the period between the conclusion and performance of the contract and its purpose can be achieved during this period. Therefore, the right of withdrawal must be exercised before the performance of the contract, because the main function of the withdrawal money is to allow the parties to withdraw from the contract.
There is no explicit regulation on how the withdrawal money will be applied in case of non-withdrawal from the contract. The same conclusion can be applied to the withdrawal money by comparison, as in the regulation for the deposit. In this respect, it may be accepted that if the parties do not withdraw from the contract, the withdrawal money paid should be deducted from the principal debt. Therefore, the withdrawal money is regarded as a payment in the performance of the contract.
According to Article 177 of the TCO, the money given at the conclusion of the contract is presumptively considered as a deposit fee (binding money) and is evidence of the conclusion of the contract. This article aims to facilitate the proving of the contract. The party claiming that the money given is withdrawal money is obliged to prove this fact. According to the presumption, it is essential that the money given at the time of the contract is considered as a deposit (binding money).
C. PROCEDURE FOR THE REFUND OF THE DEPOSIT
1. In Case of Invalidity of the Contract
Another controversial subject is the principles governing the return of the deposit upon the annulment or nullity of the contract. In this respect, the predominant view in the Turkish doctrine advocates that the deposit fee, which is an accessory right dependent on the validity of the main contract, should be refunded in accordance with the provisions on unjust enrichment in the case of invalidity of the contract. This point is also stated in the relevant decisions of the Court of Cassation. Accordingly, in a judgment of the 3rd Civil Chamber of the Court of Cassation, it is stated that "The lawsuit is related to the request for annulment of the objection to the enforcement proceeding, which includes the return of the deposit paid in accordance with the ordinary written real estate sales contract according to the provisions of unjust enrichment. The dispute on the appeal is whether the deposit paid to the seller in accordance with the external real estate contract can be demanded back in case the title deed transfer does not take place. The contract concluded between the parties is for the sale of immovable real estate and is invalid since it is not drawn up officially, which is a requirement for validity. Due to the invalid contract, everyone can demand back what they have given." (E. 2016/2288 K. 2017/12263 T. 20.9.2017).
2. Non-performance or Improper Performance of the Contract
Another case where the return of the deposit is required is the non-performance or improper performance of the performance agreed upon in the contract. Accordingly, the return of the deposit, which is in the nature of a binding money, in cases where the performance is not performed at all or as required, can be examined within the framework of Article 112 of the TCO, which is a general provision. The provision is regulated as follows: "If the obligation is not performed at all or as required, the debtor is obliged to compensate the creditor for the damage arising therefrom, unless he proves that no fault can be attributed to him." Pursuant to the relevant provision, the procedure for the return of the deposit will depend on whether the at-fault party is the party receiving the deposit or the party giving the deposit.
2.1. Non-performance of the Performance Due to the Fault of the Party Giving the Security Deposit
If the non-performance of the contract has occurred without the fault of the party giving the deposit, the party giving the deposit may demand the return of the deposit fee within the framework of the unjust enrichment provisions.
If the performance is not performed at all or not performed properly due to the fault of the party giving the deposit, and if the party receiving the deposit fee demands the delay compensation together with the performance in full pursuant to Article 125 of the TCO, or if the party waives the performance and claims the positive damages, the contract is still in force. In these cases, since the positive damage includes the value of the performance that was not performed at all or as required, and since this performance value includes the deposit fee, this deposit fee will have to be deducted from the calculated compensation amount.
If the person who gave the deposit, which is in the character of binding money, does not perform the performance at all or as required, and the person who received the deposit demands compensation for the negative damage by exercising the right to rescind the contract, then the contract is terminated. Since the contract has been terminated, the deposit fee, which is one of the previously performed obligations, can be requested back within the framework of the unjust enrichment provisions.
The practice of the Court of Cassation at this point is that in the case of non-performance of the performance by the party giving the security deposit, the security deposit may be confiscated as it is included in the right of indemnification of the party receiving the security deposit. In the relevant decision, it is stated that "if the performance is not possible due to the fault of the party who gives the binding money, the binding money must be returned, but the bidder has the right to compensation for non-performance of the debt in this case and may retain the part of the bid money related to this compensation right." (11th Civil Chamber of the Court of Cassation E. 2014/423 K. 2014/2613 T. 14.2.2014)
2.2. Non-Performance of the Performance Due to the Fault of the Party Receiving the Deposit
When the consequences of the non-performance of the performance by the party receiving the deposit are examined, the return of the deposit in the case that the performance of the obligation becomes impossible without the fault of the party receiving the deposit will be examined within the scope of Article 136 of the TCO. The relevant provision stipulates that "If the performance of the obligation becomes impossible due to reasons for which the debtor cannot be held responsible, the obligation is terminated. In mutual obligation contracts, the debtor who is released from the obligation due to impossibility is responsible for returning the performance received from the other party in accordance with the provisions of unjust enrichment and loses the right to demand the performance that has not yet been performed to him." Accordingly, the deposit given due to the terminated debt will have to be returned in accordance with the provisions of unjust enrichment.
If the failure to perform the performance of the contractual obligation by the person who received the deposit fee is due to the fault of the person, the return of the deposit will be realized according to the provisions of the contract, and the person who received the deposit fee may be requested to compensate the damage incurred in addition to the deposit fee. There are also opposite opinions in the doctrine that argue that the return of the performances should be realized according to the unjust enrichment provisions.
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.
