Law of Obligations-Contracts

8/3/2019 Law of Obligations-Contracts

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Law of ObligationsLaw of ObligationsGeneral Provisions General Provisions

Sources of Obligation Relationships Sources of Obligation Relationships

Asst.Prof.Dr.Zeynep Şişli Asst.Prof.Dr.Zeynep Şişli



Obligation is a legal relation betweenObligation is a legal relation between

two party/parties(person/persons-side)two party/parties(person/persons-side)

at least,at least,

One beingOne being “the creditor” “the creditor” and the otherand the otherbeingbeing “the debtor “the debtor”, conferring on the”, conferring on the

creditor the power to claim from thecreditor the power to claim from thedebtor the performance of a certain actdebtor the performance of a certain actand simultaneously obliging the debtor toand simultaneously obliging the debtor to

comply with the claim by the creditor.*comply with the claim by the creditor.*

*Sözer,B.,2001,103.*Sözer,B.,2001,103.



There are three elements of obligationThere are three elements of obligation

relationship;relationship;

The promiseThe promise

“ “ Subject matter of the promise, may be Subject matter of the promise, may be related to related to

give something, or to do, or not to do(refrain from) give something, or to do, or not to do(refrain from)

doing an act” doing an act” The Debtor(Promiser)The Debtor(Promiser)

“ “ has to perform his obligation in favor has to perform his obligation in favor of the of the

creditor(passive party) creditor(passive party)

The Creditor(promisee)The Creditor(promisee)

“ “ based on the legal relationship, has the right to based on the legal relationship, has the right to

request from the debtor, the fullfilment of his request from the debtor, the fullfilment of his

promise(active party )” (Esener,2004,5) promise(active party )” (Esener,2004,5)



Legal Nature of “ObligationLegal Nature of “Obligation

Relationship”Relationship”

Obligation relationship forms the basis forObligation relationship forms the basis forrelative rights.relative rights.

(the creditor can ask only his debtor(the creditor can ask only his debtorto accomplish his promise,to accomplish his promise,different than absolute rightsdifferent than absolute rights

which can be claimed to everybody)which can be claimed to everybody)

Exceptionally a relative right can be invokedExceptionally a relative right can be invokedagainst third persons, which is called asagainst third persons, which is called as

“strengthening of a relative right” makes “strengthening of a relative right” makesits effects similar to an absulote ri ht.its effects similar to an absulote right.



““Claim”is an authorization conferred toClaim”is an authorization conferred to

the creditor to request from his debtor the creditor to request from his debtor the accomplishment of his obligation.the accomplishment of his obligation.

It is a kind of “legal power” based on theIt is a kind of “legal power” based on the

right derives from “obligation relation”,right derives from “obligation relation”,and only can be exercised when theand only can be exercised when theobligation(debt) becomes due.obligation(debt) becomes due.

When a claim raised by the creditor beforeWhen a claim raised by the creditor beforea court, there is a lawsuit.a court, there is a lawsuit.



Obligations may arise from threeObligations may arise from three

different reasons;different reasons;

1) A person may be under an obligation because of 1) A person may be under an obligation because of entering intoentering into a contractual relationa contractual relation,,

2) He may commit2) He may commit a tortious acta tortious act and thereforeand therefore

may be under an obligation to pay damages tomay be under an obligation to pay damages toanother person,another person,3) He may have been3) He may have been unjustly enriched

unjustly enriched, and as a, and as aresult, be under an obligation to pay the lossesresult, be under an obligation to pay the losses

of another party,of another party,according to the general subjectsaccording to the general subjectsregulated by Turkish Code of Obligations.regulated by Turkish Code of Obligations.



The sanction of the obligation isThe sanction of the obligation is

“liability” before law;“liability” before law;

A debtor can be liable, in other words, A debtor can be liable, in other words,under the commitment of givingunder the commitment of givingsomething, or doing or notsomething, or doing or notdoing/refraining from an act,doing/refraining from an act,

as a result of a given promise by contract.as a result of a given promise by contract.

For instance, if there is a sales contract,For instance, if there is a sales contract,

while “seller” is under the liability of while “seller” is under the liability of

delivering the sold goods to buyer,delivering the sold goods to buyer,

“buyer” is liable to pay agreed price to “buyer” is liable to pay agreed price to

seller, in return.seller, in return.



Liability for a tortious act is anLiability for a tortious act is an

obligation to restore theobligation to restore the

damages arise from it.damages arise from it.

Faulty person is liable to pay the Faulty person is liable to pay the

damages of the others damages of the others

after a traffic accident,after a traffic accident,

he involved.he involved.



Liability resulting from unjust enrichmentLiability resulting from unjust enrichment

is an obligation to give or to pay back if is an obligation to give or to pay back if

there is not any reason to be enriched.there is not any reason to be enriched.

For example, if a person transfers an For example, if a person transfers an amount of money to an account of amount of money to an account of

third person by mistake,third person by mistake,

instead of the instead of the counterpart of the counterpart of the

contract he made with,contract he made with,

third person is under a liability to third person is under a liability to

give/pay it back.give/pay it back.



An “imperfect Obligation” is a debt in An “imperfect Obligation” is a debt in

which the performance is not secured bywhich the performance is not secured by

the power of the state(sanction)the power of the state(sanction) Some obligations are “imperfect” at theSome obligations are “imperfect” at the

beginning naturally; obligations arisingbeginning naturally; obligations arising

from gaming and betting, and marriagefrom gaming and betting, and marriagebrokeraging contracts or payments madebrokeraging contracts or payments madefor the fulfillment of a moral duty can notfor the fulfillment of a moral duty can notbe recovered.be recovered.

an obligation can not be claimed by legalan obligation can not be claimed by legalways after “Statutory period of limitation”,ways after “Statutory period of limitation”,

the time limit determined by law, passed.the time limit determined by law, passed.



Legal event, legal action andLegal event, legal action and

legal transaction,legal transaction, Legal event is an event that causes legalLegal event is an event that causes legal

consequences(the birth of a child, attainingconsequences(the birth of a child, attainingmajority)majority)

Legal action is a human conduct to whichLegal action is a human conduct to whichthe legal order attaches legal consequencesthe legal order attaches legal consequences(torts, breach of a contract)(torts, breach of a contract)

If the legal action is a declaration based onIf the legal action is a declaration based onintended will of a person to obtain a legalintended will of a person to obtain a legalconsequence(contract)consequence(contract)



Classification of legal transactionsClassification of legal transactions

based on the number of participantsbased on the number of participants

declared wills for a legal result;declared wills for a legal result; Unilateral legal transactions;Unilateral legal transactions;

(Acceptance of an offer, notice of termination(Acceptance of an offer, notice of termination

given to a tenant or a worker,refusal of given to a tenant or a worker,refusal of succession, making a testament, forming asuccession, making a testament, forming afoundation, donation)foundation, donation)

Bilateral legal trans actions;Bilateral legal trans actions;

(Bilateral contracts)(Bilateral contracts) Multilateral legal transactionsMultilateral legal transactions

(establishment of a partnership or association)(establishment of a partnership or association)



The Code of Obligations(C.O), dated 4The Code of Obligations(C.O), dated 4

October 1926, regulates these sourcesOctober 1926, regulates these sources

of obligations first in general, and thenof obligations first in general, and then

puts further provisions on special typesputs further provisions on special types

of contracts.of contracts.

New Turkish Code of ObligationsNew Turkish Code of Obligations

(numbered 6098), which will be effective(numbered 6098), which will be effective

at July 1, 2012, has the similar at July 1, 2012, has the similar essentials with some additions andessentials with some additions and

differences.differences.



Some contract types areSome contract types are

regulated by the Commercialregulated by the Commercial

Code or by special laws, suchCode or by special laws, suchas by the Law on Consumer as by the Law on Consumer

Protection.Protection.



A contract is concluded when two A contract is concluded when two

parties declare their mutualparties declare their mutualagreements(C.O.Art.1)*agreements(C.O.Art.1)***Sözer,2001,104Sözer,2001,104

Contract is a legal relation betweenContract is a legal relation between

two parties formed by thetwo parties formed by the

concurring declarations of their concurring declarations of their

wills,wills,

and the legal infrastructure of theand the legal infrastructure of theCommerce.Commerce.



A contract is an agreement A contract is an agreementcreating legally enforceablecreating legally enforceable

obligations.obligations.But every agreement is not a contract.But every agreement is not a contract.

There must be some conditions for There must be some conditions for

creating legal relations, the breaking of creating legal relations, the breaking of which causes to legal sanctions.which causes to legal sanctions.



For a contract to be valid andFor a contract to be valid and

enforceable, there should beenforceable, there should be

a valid agreement,a valid agreement,between parties withbetween parties with

capacity to contractcapacity to contract..

It must haveIt must have a legal causea legal cause andand a legala legalsubject matter,subject matter,

It must be based upon a real andIt must be based upon a real and genuinegenuineassent (intention),assent (intention), It should be made inIt should be made in the form required bythe form required by

law.law.



Classification of Contracts,Classification of Contracts,

in terms of the degree of in terms of the degree of their enforceability;their enforceability;

Valid Contracts, Valid Contracts, Void Contracts, Void Contracts, Voidable Contracts. Voidable Contracts.



Valid contract has all the elementsValid contract has all the elements

which are;which are;

a valid agreement,a valid agreement,parties with capacity to contractparties with capacity to contract,,

genuineness of assent,genuineness of assent,a legal cause,a legal cause,

a legal subject matter,a legal subject matter,

andand legal form.legal form.Valid contracts are fully binding Valid contracts are fully binding

and enforceable.and enforceable.



Void (Null) ContractsVoid (Null) Contracts

are those which have no legalare those which have no legaleffect eithereffect either ;;

because they are against law and morals,because they are against law and morals,because of incapacity,because of incapacity,

lack of formality or impossibility.lack of formality or impossibility.



Voidable ContractsVoidable Contracts

are those which may be binding andare those which may be binding and

enforceableenforceable,,but due to the lack of one or more of thebut due to the lack of one or more of theelements of a valid contract,elements of a valid contract,

may be rejected at the option of one ormay be rejected at the option of one orboth of the parties.both of the parties.



Voidable ContractsVoidable Contracts

are valid until declared void.are valid until declared void.Contracts made by mistake are generallyContracts made by mistake are generally

considered voidable (article 23 of CO).considered voidable (article 23 of CO).

The validity of a voidable contract may onlyThe validity of a voidable contract may onlybe challenged by an interested party.be challenged by an interested party.

The period during which a voidable contractThe period during which a voidable contract

may be voided is usually fixed by law.(formay be voided is usually fixed by law.(forexample article 21, 31, 226 of CO)example article 21, 31, 226 of CO)

(Th E i l f V lid C )(Th E ti l f V lid C t t)



(The Essentials of a Valid Contract)(The Essentials of a Valid Contract)

1)1) A Valid Agreement A Valid Agreement

A contract requires an exchange of assents, A contract requires an exchange of assents,that is expressions of intentions, betweenthat is expressions of intentions, betweenat least two parties.at least two parties.

There is an agreement when the partiesThere is an agreement when the partieslead each other reasonably to belive thatlead each other reasonably to belive thatthey are of the same mind about a giventhey are of the same mind about a given

transaction.transaction.(Offer+Acceptance=Agreement)(Offer+Acceptance=Agreement)



A Valid Agreement A Valid AgreementThe same mind of parties about a givenThe same mind of parties about a given

transaction, is reached bytransaction, is reached by an offeran offer on theon theone side, and the apparentone side, and the apparent acceptanceacceptance of of the offer on the part of the other.the offer on the part of the other.

An offer An offer is a declaration of intention by oneis a declaration of intention by oneparty, known as the offerer, whereby heparty, known as the offerer, whereby heexpresses his willingness to enter into aexpresses his willingness to enter into acontract.contract.

An acceptance An acceptance is a declaration of intentionis a declaration of intentionto agree to the terms of the offer given byto agree to the terms of the offer given bythe party to whom the offer is made.the party to whom the offer is made.




2) Capacity to Contract2) Capacity to ContractThe legal validity of a contract depends onThe legal validity of a contract depends on

the capacity of the person who enters intothe capacity of the person who enters intothe transaction.the transaction.

This means “capacity to act” of real persons,This means “capacity to act” of real persons,or legal persons.or legal persons.

(Just like incapacity of a business(Just like incapacity of a businessassociation in certain circumstances)association in certain circumstances)




3) Genuineness of Assent3) Genuineness of Assent

Since the basis of a contract is the exchangeSince the basis of a contract is the exchangeof assents, it is essential that the assentsof assents, it is essential that the assentsof the parties be genuine, that is to sayof the parties be genuine, that is to say

that there be a genuine meeting of thethat there be a genuine meeting of theminds.minds.

Unintentional differences of assent may beUnintentional differences of assent may be

due to several causes such as mistake,due to several causes such as mistake,fraud or duress.fraud or duress.



Unintentional differences of assent;Unintentional differences of assent;

MistakeMistake1)Immaterial(about the motives for1)Immaterial(about the motives forentering into contract, may not be theentering into contract, may not be the

basis for voiding a contract)basis for voiding a contract)2)Material(error in object or in person, to2)Material(error in object or in person, tonature of the transaction, to quantity, tonature of the transaction, to quantity, to

the necessary state of facts of a contract)the necessary state of facts of a contract) FraudFraud DuressDuress



“ “ Gross Disparity” (Gabin)Gross Disparity” (Gabin)

Ev i den t D i sp r opo r t io n . —v i den t D i sp rop o r t ion . — Article 21 § 1rticle 21 § 1 of of the CO provides that in case of evidentthe CO provides that in case of evidentdisproportion between the prestation promiseddisproportion between the prestation promised

by one of the parties and the counter-prestationby one of the parties and the counter-prestationof the other party, the injured party is entitled,of the other party, the injured party is entitled,within one year, to declare that he terminateswithin one year, to declare that he terminates(cancels) the contract and to take back what he(cancels) the contract and to take back what he

has given, if the gross disparity resulted from thehas given, if the gross disparity resulted from theexploitation of his difficulty, thoughtlessness orexploitation of his difficulty, thoughtlessness orinexperience.inexperience.



“ “ Gross Disparity” (Gabin)Gross Disparity” (Gabin)

Exp lo i t a t ion . —xp lo i t a t ion . — It should be emphasized that a mereIt should be emphasized that a mereevident disproportion between the prestation and theevident disproportion between the prestation and thecounter-prestation does not constitute, as such, acounter-prestation does not constitute, as such, asituation of “gross disparity” situation of “gross disparity” (gabin gabin );; and therefore, doesand therefore, does

not automatically provide the disadvantaged party thenot automatically provide the disadvantaged party thefaculty to cancel the contract. As a rule, nothing preventsfaculty to cancel the contract. As a rule, nothing preventspeople from concluding, at their discretion, contractspeople from concluding, at their discretion, contractsbenefiting to one of the parties more than the other. Abenefiting to one of the parties more than the other. A

“gross disparity” will be in question when the advantaged “gross disparity” will be in question when the advantagedparty hasparty has exploited exploited the difficulty, thoughtlessness orthe difficulty, thoughtlessness orinexperience of the other party.inexperience of the other party.



SimulationSimulation Concep t . —oncep t . — SimulationSimulation (muvazaa muvazaa ) is the situationis the situation

where the contracting parties have in fact agreed inwhere the contracting parties have in fact agreed inadvance that their contract will not be effective. Thus theadvance that their contract will not be effective. Thus theparties enter into a contract only in appearance; they aimparties enter into a contract only in appearance; they aimto seem as they had concluded a determined contract.to seem as they had concluded a determined contract.

However, their common intention is from the veryHowever, their common intention is from the verybeginning that the concerned contract will never bebeginning that the concerned contract will never beeffective.effective.

Ord i na ry and Qua l i f ie d S imu l a t ion . —rd i na ry and Qua l i f ie d S imu l a t ion . — An An o rd i na ryrd i na r y

s imu la t i onimu la t i on (adi muvazaa adi muvazaa ) occurs when the partiesoccurs when the partiescontent themselves with agreeing in advance that thecontent themselves with agreeing in advance that thecontract they conclude will be ineffective. Thus, in case of contract they conclude will be ineffective. Thus, in case of anan ordinary simulation ordinary simulation the parties agree that their legalthe parties agree that their legalsituation will remain the same.situation will remain the same.



SimulationSimulation

qua l if i ed s imu la t i onua l i f ied s im u la t i on (mevsuf muvazaa mevsuf muvazaa ) when thewhen theparties use the simulated contract as a means to hideparties use the simulated contract as a means to hideanother contract that they effectively intend to conclude.another contract that they effectively intend to conclude.Therefore in case of a qualified simulation there is on oneTherefore in case of a qualified simulation there is on one

hand a conspicuous contract that is ineffective and on thehand a conspicuous contract that is ineffective and on theother hand a secret contract which is effective. Forother hand a secret contract which is effective. Forexample, there is a qualified simulation when aexample, there is a qualified simulation when a contractontract

of salef sale is only apparently concluded in order to hide ais only apparently concluded in order to hide a

contract of giftontract of gift (contract of donation).(contract of donation). Consequ ence o f S imu l a t i on . —onsequ ence o f S imu l a t ion . — A simulated contract A simulated contract

isis null null ; since the real and common intention of the parties; since the real and common intention of the partiesis that it will never be effective. However, in case of ais that it will never be effective. However, in case of a

qualified simulation only the hidden contract is valid.qualified simulation only the hidden contract is valid.




4) Legal Cause4) Legal Cause

The purpose of the parties for enteringThe purpose of the parties for enteringinto a contract is the cause of theinto a contract is the cause of thecontract.contract.

Turkish law requires every contract toTurkish law requires every contract tohave a cause. The parties must have ahave a cause. The parties must have apurposepurpose..




5)Legality of the Subject Matter 5)Legality of the Subject Matter

Turkish law recognizes freedom of contractTurkish law recognizes freedom of contract

(article 48 of Constitution)(article 48 of Constitution)This means, generally the parties haveThis means, generally the parties have

freedom to choose the type, the subjectfreedom to choose the type, the subject

and terms of the contract.and terms of the contract.But there are some limitations of thisBut there are some limitations of thisfreedom.freedom.




5)Legality of the Subject Matter 5)Legality of the Subject Matter

Limitation of Freedom of Contract;Limitation of Freedom of Contract;1) General remarks;1) General remarks;

(Individual or Collective Employment Law rules,(Individual or Collective Employment Law rules,

Law on Protection of Competition, Law onLaw on Protection of Competition, Law onConsumer Protection, etc)Consumer Protection, etc)

2) Specific Limitations2) Specific Limitations

a)Contracts againts law are void(black-a)Contracts againts law are void(black-marketing,marketing, fraud against to law,etcfraud against to law,etc))b)Contracts against to good morals are voidb)Contracts against to good morals are void

c)Contracts against individual rightsc)Contracts against individual rights

d)Impossibilityd)Impossibility



The subject matter of a validThe subject matter of a valid

contract must not be void or contract must not be void or

contrary to the limitations of law.contrary to the limitations of law.




5) Form of Contract5) Form of Contract

Contracts are valid without any special formContracts are valid without any special formunder Turkish Law, as a rule(article 11/I CO)under Turkish Law, as a rule(article 11/I CO)

This is “the principle of freedom to form of This is “the principle of freedom to form of contract”,contract”, but a written form is necessary tobut a written form is necessary toprove as a means of proof.prove as a means of proof.

For some contracts, written form is obliged forFor some contracts, written form is obliged forvalidity of them. A simple written formvalidity of them. A simple written formenough for a guaranty, but official form isenough for a guaranty, but official form isnecessary for validity about sales of necessary for validity about sales of

immovables.immovables.



ReferencesReferences EESENER (SENER (TurhanTurhan)) Turkish Business Law - 1. Law of Turkish Business Law - 1. Law of

Obligations - Contracts and Torts Obligations - Contracts and Torts , 2, 2ndnd ed., Istanbul, Boğaziçied., Istanbul, Boğaziçi

University Press, 2004, 172 pp.University Press, 2004, 172 pp. SÖZER (Bülent),SÖZER (Bülent), Legal Environment of Business. A Hand - Legal Environment of Business. A Hand -

Book on Turkish and International Business Law Book on Turkish and International Business Law , Istanbul,, Istanbul,Beta, 2003, 485 pp.Beta, 2003, 485 pp.

ANSAY (Tuğrul) and SCHNEIDER (Stephen) (eds.), ANSAY (Tuğrul) and SCHNEIDER (Stephen) (eds.),Introduction to Turkish Business Law Introduction to Turkish Business Law , Ankara, Turhan, 2002,, Ankara, Turhan, 2002,xx + 225 pp.xx + 225 pp.

AYBAY(Rona), AYBAY(Rona), An Introduction to Law An Introduction to Law , Revised and Enlarged, Revised and Enlarged

ThirdThird Edition,Edition, BilgiBilgi University Press,University Press, 20112011 Edited; T.ANSAY-D.WALLACE,Jr.Edited; T.ANSAY-D.WALLACE,Jr. Introduction to Turkish Introduction to Turkish

Law Law ,Turhan Kitabevi, 2006,Turhan Kitabevi, 2006 ADAL (Erhan), ADAL (Erhan), Fundamentals of Turkish Private Law Fundamentals of Turkish Private Law ,, LegalLegal

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