Turkey: What Is Default Of Debtor?

Default of debtor is one of the main concepts of the Law of Obligation, means that to fail to perform the obligation or to not accept the performance of obligations. If the debtor does not perform the obligation, there is default of the debtor; if the creditor does not accept the performance of obligation, there is default of the creditor. In this article, the default of the debtor is examined.

Debtor default means a delay in the performance of a debt that can be performed and is due. It is regulated by the legislator in Article 117 of the Turkish Code of Obligations as follows:

The Law requires the following 2 conditions for the default of the debtor: (i) a due and payable debt and (ii) the creditor's notice. However, even if not explicitly stated in the Law, (iii) the debt must be enforceable and (iv) the creditor must be ready to accept performance.

1. The due debt: A debt becomes due when it is time for the debtor to fulfill its obligation. In the relationship between the parties, a fixed term or a specific period of time may be set for the performance of the obligation. When the time for performance arrives, the performance of the debt becomes demandable by the creditor, in other words, the debt becomes due. If the performance of a due debt by the debtor is not fulfilled on time, a delayed performance will be occurred.
2. The payable debt: First of all, the fulfillment of the debt shall not be impossible. If the debt cannot be fulfilled because of the impossibility; the impossible performance will be occurred. The quality of being payable of the debt must continue both at the time of performance and after, in other words, after the due date has passed. In the event that a payable debt is not fulfilled at the due date, a delayed performance may be mentioned.
3. The creditor's readiness to accept performance: As mentioned at the beginning of this article, default applies to both debtor and the creditor. The creditor must be ready to accept performance at or after the time of performance; otherwise, it is creditor default. If the creditor is ready to accept performance at the time of the performance or thereafter, but the debtor delays the performance of the debt, the debtor's default occurs.
4. Creditor's notice: Creditor's notice is another condition that Law requires. Notice is a declaration of will director by the creditor to the debtor to fulfill its obligation.¹ It is not enough for the debt to be due; the Law requires the creditor to notify the debtor to perform the due debt.

As accepted in the doctrine, the validity of the notice is not subject to a form as a rule.² However, the Turkish Commercial Code requires the notice to be in writing for the merchants to default each other:

Exceptions of the Creditor's Notice Rule

The Turkish Code of Obligations requires the creditor's notice for the debtor to default as a rule, exceptions of this rule are regulated as follows:

1. In the event that the due date fixed by the parties: If the parties have determined the term for performance, the creditor is not required to send a notice to the debtor in order to declare the debtor in default if the debtor fails to perform on time. However, the term agreed by the parties must be specific; when a specific period of time is agreed, such as a calendar date or "within 1 month after the signature of the contract"; when the performance is not realized at the end of these periods, the creditor's notice is no longer required for the default of the debtor.
2. In the event that the due date has determined by one of the parties' notice: The notice mentioned here is not a creditor's notice for default; it is a notice that the debt is due. Even if the due date is not determined in the contract, the contract may authorize one of the parties to determine the time of performance. In this case, the creditor duly notifies the other party when the debt is due; upon the expiry of the date of notification, the debtor is in default without the need for any further notice.
3. In the event that the action of tort: Compensation debts arising from the tort are deemed to be due and payable as of the date of the tortious act and at the same time the compensation debtor is deemed to be in default.
4. In the event of the unjust enrichment: On repayment obligations arising from unjust enrichment, the Law makes a dual distinction according to whether the unjust enricher is in good faith or not. If the unjust enricher is in bad faith, he/she will be in default on the date of the unjust enrichment; however, if he/she is in good faith, a notice is required for default.
5. Circumstances in which notice cannot be expected according to the rule of good faith: Pursuant to Article 2 of the Turkish Civil Code, it is accepted that the cases where notice cannot be expected to be given constitute an exception to the principle of the creditor's notice, even if this phrase is not included in the Law. For example, if the debtor has expressly stated that she/he will not perform, the creditor's notice is not required for default.

After the debtor is in default, the claim for compensation for damages arising from delayed performance, default interest and whether to perform the delayed performance come to the fore. Pursuant to Article 118 of the Turkish Code of Obligations, the defaulting debtor is obliged to compensate the damage suffered by the creditor due to the late performance of the debt, unless he proves that he was not at fault in defaulting. When the debtor defaults, the creditor has optional rights arising from the Law. However, in contracts imposing mutual obligations, in order to exercise these optional rights, it is required that the debtor is given a period of time for the fulfillment.

Debtor Default in Synallagmatic Contracts

Articles 123-126 of the Turkish Code of Obligations provide additional rights to the other party - the creditor - according to the consequences of default in the event that one of the parties defaults in its primary performance in synallagmatic contracts.³

In the wording of the Law, "granting an extension", also known as an additional period, means that the creditor grants the defaulting debtor a period of time to fulfill its obligation. The extension is the last opportunity for the debtor to fulfill its obligation and thus avoid the possibility of rescission of the contract or payment of compensation instead of performance.⁴

The creditor may also specify this extension of time for the fulfillment of the debt in the notice that will put the debtor in default. The default continues during this extension of time and the debtor is obliged to pay delay compensation for the extension of time even if the debtor fulfills its obligation at the end of the extension of time.

The extension of time to be granted for performance may be determined in the contract between the parties, it may be determined by the creditor within the scope of the rule of good faith, a special provision for an extension of time may be stipulated in the Law depending on the nature of the relationship between the parties, or the determination of this period may be requested from the judge. If the extension is not "appropriate", it is accepted in the doctrine that the declaration will be effective for an appropriate period. ⁵However, there is also a perspective that the creditor's declaration will not be valid when an inappropriate period of time is granted, and that an appropriate additional period of time should be granted again and this time.⁶

Circumstances that do not require a deadline in synallagmatic contracts

In synallagmatic contracts, the creditor shall give the debtor a deadline for the performance in case of default as a rule. Exceptions to this rule are regulated in the Law as follows:

1. Granting an extension of time would be ineffective due to the situation or attitude of the debtor: If the debtor has explicitly declared that he/she will not fulfill his/her debt, then there is no need for the creditor to give an extension of time. However, this provision should not be confused with the circumstances in which a notice cannot be expected to be given according to the rule of good faith. While the issue mentioned above is the time given for the debtor to default, the issue mentioned in this section is about the time given for performance after the debtor has defaulted.
2. The performance of the debt becomes useless for the creditor as consequence of the default: This exceptional case should be evaluated on a case-by-case basis. As clearly stated in the Law, it is sought to be useless for the creditor according to the concrete situation of the creditor as a result of the default and the purpose pursued in the contract. For example, if the ordered wedding dress did not arrive at the wedding day, it is obvious that the wedding dress to be delivered after the wedding day will not be useful for the creditor.⁷
3. The performance of the debt will no longer be accepted upon non-performance at a fixed time or within a fixed period: The parties must have agreed that the obligation must be performed on the date and within the period specified in the contract and that delayed performance will not be accepted, in other words, they must have determined a definite term. Again, it should be noted that this provision should not be confused with the determination of the due by the parties.

Footnotes

1. Oğuzman Kemal /Öz Turgut, Borçlar Hukuku Genel Hükümler, 14. Edition, İstanbul 2016, p. 460

2. Eren Fikret, Borçlar Hukuku Genel Hükümler,16. Edition, Ankara 2014, s. 1093

3. Oğuzman Kemal /Öz Turgut, Borçlar Hukuku Genel Hükümler, 14. Edition, İstanbul 2016, p. 504

4. Tekinay/Akman/Burcuoğlu/Altop, Borçlar Hukuku Genel Hükümler, 7. Edition, İstanbul 1993, p. 946

5. Serozan, Borçlar Hukuku Genel Bölüm: İfa, İfa Engelleri, Haksız Zenginleşme, 8. Edition, İstanbul 2022, N.11

6. Oğuzman Kemal /Öz Turgut, Borçlar Hukuku Genel Hükümler, 14. Edition, İstanbul 2016, s. 508

7. Eren, Borçlar Hukuku Genel Hükümler, 16. Edition, Ankara 2014, p. 1113

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