Under Turkish Law, the main purpose of each contract is that the parties' fulfilling their mutual obligations. One of the general principles of law and primary rule of contract law is the principle of pacta sunt servanda.
The principle intakes that the contract must be fulfilled in accordance with the first conditions as much as possible, even if the conditions existing at the time of its signing have changed in the future. In other words, the contract should be executed in accordance with the conditions in the timeframe and should not contain any changes afterwards. Therefore, the parties are obliged to fully comply with the terms of the contract between them. However, it has been taken into account that the conditions at the time of the establishment of the contract may change during the century in which we live and subsequently the parties may be significantly affected. In this context, a knew principle emerged from the Roman Law that the parties should not be bound by contract if any significant changes acquire in which it has been determined that it will be possible to adapt the contract in accordance with the “clausula rebus sic stantibus” principle.
With the spread of the COVID-19 pandemic, which is first seen in the city of Wuhan in China, to all continents and 127 countries, countries try to prevent by taking extraordinary measures such as curfew, closing of entrances and exits of their country. Within the measures taken as a result of the unexpected spread of the COVID- 19 pandemic, various sectors and commercial relations have been damaged by affecting the whole world economy. Although there are approaches regarding the current and future economic implications of the COVID-19 pandemic, the issue of whether this emerging pandemic can be considered as a force majeure in contract law is on the agenda. First of the issues to be mentioned in the related article is the concept and conditions of the principle of adaptation of the contract; subsequently, it will be discussed whether the COVID-19 pandemic can be evaluated within this scope.
i. Principle of Adaptation in Contract Law and Requirements
Article 138 of the Turkish Code of Obligations (‘’TCO’’) regulates the adaption of the contracts in the event of hardship. Preamble published by the Legislator for the Article 138 of the TCO explains how the obliteration of the basis of the transaction shall be evaluated. As stated by such, the subject matter shall be evaluated by the principle of the good faith in order to detect whether the basis of the transaction has collapsed or not. According to the related article;
‘’An extraordinary situation which is not foreseen by the parties at the time of the contract and which is not expected to be anticipated, arises from a reason not due to the debtor and changes the existing facts at the time against the debtor in such a way as to violate the rules of honesty, If the debtor has not yet fulfilled his / her obligations arising from the excessive difficulty of the performance, the debtor shall have the right to request from the judge the adaptation of the contract to the new conditions and to revoke the contract if this is not possible. In contracts of continuing obligations debtor shall terminate the contract. This provision also applies to foreign currency debts.’’
Adaptation procedure is an application aimed at sustaining the contract in which ending the contract or rescission an agreement is a more severe result than the adaptation. The reason is that, the contract is no longer standing when the obligor revoking the agreement. For the adaptation of the contract, the obligor may request an adaptation from the judge in the first instance.
There are two ways to intervene in an originally established contract. The first is adaptation, and the second is the rescission from the contract. These two options are integrated from the Turkish Civil Code by integrating them from the German Civil Code. As it stated in Article 138 of the TCO that there are three different requirements for the adaptation of the contract.
According to the article;
• An unexpected event, which was unforeseen and not expected to be foreseen by the Obligor, must occur after the contract was entered into,
• There must be no negligence on the Obligor’s side in the occurrence of the unexpected event,• Performance must have become excessively burdensome for the Obligor because of the unexpected event in light of the Principle of Good Faith,
• Obligor must perform his obligation by reserving the right of hardship or the Obligor must not yet perform the contract.
ii. The Definition of Force Majeure and Applicability
Although the force majeure is not fully explained in Turkish Law, it is expressed in two ways. One of them is “Subjective Theory (responsible and obligor-based theory)” and the other is the “Objective Theory”.
• Subjective Theory; it is a theory based on the responsibleness of the obligor. It is a theory that defines the force majeure according to the fact that it is not possible to prevent damage even if the utmost care is given according to the conditions.
• Objective Theory; This means events which the obligor is not obliged to take into account during the course of ordinary life, such as war, economic crisis, high devaluation. The essential criterion here is whether the parties can be expected to foresee the relevant event, considering all possible risk and assumptions or not. The change must have effect on the essential points of the contract and disturb the equilibrium of risks and benefits in the period between the date of the performance of the contract and when the contract was entered into.
Force majeure is often confused with contingency. There are some differences between them. First of all, force majeure refers to a situation with greater severity and intensity than the contingency. There is absolute inevitability. Force majeure, in an external event (foreign element) to the person and activity; The contingency, on the other hand, refers to an internal problem between the operation and activity procedures. Each case must be examined separately. It is expressed and perceived as one of the reasons that constitute the unthinkable result. Therefore, the force majeure appears as a reason with more obvious consequences in the context of liability law.
iii. COVID-19 as a Force Majeure and Impact on Contractual Performances Under Turkish Law
As mentioned above, the Turkish Code of Obligations No. 6098 does not contain a detailed analysis of force majeure implicitly due to take place in the form of commentaries so called interpretation of COVID-19 to be considered as force majeure. However, the fact that the events that will constitute a force majeure are not counted one by one is due to the fact that it is not known how the probable situations will be realised by law. Although the force majeure includes the unforeseen and unpredictable situations by the parties, the COVID-19 pandemic is an unpredictable event and by the World Health Organization's decision dated 12.03.2020, stated that COVID-19 is a global pandemic.
On March 22nd, 2020; The Presidency of Republic of Turkey published 2279 No. decree in the 31076 No. Official Gazette and stated that; In accordance with the Article 330 of the Enforcement and Bankruptcy Law, enforcement proceedings were suspended until April 30, 2020. In additionally, The Union of Turkish Bar Association has announced that no new enforcement proceedings will be opened until 30.04.2020. The Ministry of Transport and Infrastructure, restricted and implemented couple of rules as well in which some of them are; preventing entrance clearance for foreign citizens, banning entrance and exit to and from Turkey. Given these considerations, taking extraordinary measures by the Republic of Turkey and countries of the world due to the global epidemic Covidien-19 is trying to prevent further increase. This supports force majeure cases.
Although there is an opinion of the International Chamber of Commerce ("ICC") in the precedent decision of the SARS virus in the contracts that caused bilateral performance obligations in the past, there are different evaluations in terms of concrete situation.
In contrast, in China, where the epidemic disease first appeared; The Chinese government has started to issue force majeure certificates to companies that have failed to meet their contractual obligations in order to prevent some uncertainties and protect the contract parties from violating their terms. It should be considered that the mentioned COVID-19 pandemic will have many more economic effects due to the stagnation of the world economy by expressing the commercial relations in China, where the economic power is the highest. It is believed that the legal basis for requesting the intervention of judges in all commercial contracts, lease contracts and other private law contracts throughout our country by reason of force majeure can only be evaluated within the scope of "Hardship" in Article 138 of the Turkish Code of Obligations.
However, it can be thought that the provisions of the "Impossibility of Performance" in Article 136 of the Turkish Code of Obligations may find application in some cases. According to this provision, it is foreseen that if the performance of the debt becomes impossible due to the reasons that the debtor cannot be held responsible, the debt will end. As an example, a commodity that an importer company in our country undertakes to bring products from Italy in March cannot be obtained because the borders are closed. In this case, the debtor will be freed from his debt and will be obliged to return the action they received to the other party in accordance with the provisions of the enrichment without reason.
It is observed that in the case-law of the Supreme Court on this matter, every case investigated separately, and different judgments are given for each event related to force majeure. In the decision of the 13th Civil Chamber of the Supreme Court dated 26.11.1982 and numbered 1982/6186; “In order for the contract to be revised, the economic balance in the contract has been disrupted due to the changes caused by an event that has not been seen before, outside of the person and business of the debtor and the limit of danger that must be imposed on one of the parties of the contract must be exceeded objectively. The price of gold, which was decided as a lease money, collapsed from the basis of the transaction due to its extraordinary increase and the contract should be adapted to new situations.”
As the COVID-19 pandemic is on the agenda of the whole world, it is a fairly new issue and there is no clear interpretation as to whether it can be considered as a force majeure in contracts law in the current situation, either in Turkish Law or in the world. However, it is possible to say that the course of the COVID-19 pandemic should be assessed in more broad and international aspects compared to other epidemic diseases that are the subject of previous judicial decisions. The Turkish Code of Obligations No. 6098 does not contain a detailed analysis of force majeure implicitly due to take place in the form of commentaries so called interpretation of COVID-19 to be considered as force majeure. However, the fact that the events that will constitute a force majeure are not counted one by one is due to the fact that it is not known how the probable situations will be realised by law.
In this context, one of the judgments in Turkish law accepted epidemic diseases as one of the force majeure conditions. The Supreme Court Assembly of Civil Chambers judgment in the relating case of 2017 /11-90 and 2018/1259 judgment number dated 27.06.2018 states; “Force majeure is an extraordinary incident that occurs outside the activity and operation of the responsible debtor, which leads to the violation of a general norm of behaviour or debt in an absolute and inevitable manner, which cannot be foreseen and resisted. Natural disasters such as earthquake, flood, fire and epidemic diseases are considered as force majeure.”
When we take into an account that the COVID-19 pandemic with its statement in the form of the World Health Organisation, as a global epidemic, it can be envisaged that it will be considered as a force majeure in the law of contracts. However, it should be noted that the content and statement of the force majeure provision included in the contract are important for possible disputes and the content of the dispute in the concrete event is important. For more detailed information, you can contact us via the following information.
By Dilara Nihal Tunc, Associate, Guden