Coronavirus outbreak is a reality that shows its effects all over the world as well as in Turkey. This epidemic will inevitably affect commercial and legal relations as it is affecting our daily lives. The effect of this epidemic on commercial contracts, which are an indispensable element of commercial life, is one of the most curious issues in recent days. Therefore, it is useful to mention the effect of the outbreak on commercial contracts.
Under the principle of "pacta sunt servanda" in the law of contracts, the parties must fulfill the actions they have foreseen mutually. However, the parties sometimes fail to fulfill their obligations due to conditions developing out of their will. Force majeure is an unpredictable and irresistible extraordinary event that can cause the debtor to fail to perform the debt, suspend the performance or terminate the contract. The parties will not be responsible for their debts in case of force majeure. Commercial agreements generally include force majeure provisions. In some cases, cases that can lead to force majeure are restricted or counted in numerus clausus. For this reason, the terms of the contract should be considered first. Moreover, the law to be applied in disputes that may arise in international commercial contracts may be determined in advance. Apart from that, the rules of conflict of laws may also require the application of the rules of another country in resolving disputes arising from the contract. Apart from that, the rules of conflict of laws may also require the application of the rules of another country in resolving disputes arising from the contract. These issues should be taken into consideration first and then the terms of the contract should be examined.
If the contract does not include these provisions, the general provisions of the Code of Obligations (TCO) will be applied. The force majeure is not clearly defined in the Turkish Code of Obligations. In this regard, case law is used. The decisions of the Supreme Court have drawn the necessary framework for an event to be accepted as a force majeure. Therefore, the event to be accepted as force majeure must have the following elements; (1) It is unpredictable on the date of signature of the contract, (2) It appears after the contract is signed (3) It makes it impossible to perform the performance envisaged in the contract, and (4) It occurs out of the control of the Parties. The Supreme Court interprets whether an incident constitutes a force majeure for each concrete case. As of now, there is no Supreme Court decision regarding coronavirus being a force majeure, but considering the decisions of the Supreme Court regarding the outbreaks that occurred in previous years, it can be stated that there is a possibility of coronavirus epidemic to be a force majeure provided that the characteristics of each concrete event are also taken into consideration. The effective lien of causality between the epidemic and the impossibility of the performance will be decisive in the examination of the concrete event.
In accordance with Article 136 of the TCO; If it becomes impossible for the obligor to fulfill all obligations under the contract for reasons that the obligor cannot be held responsible for, the borrower will be relieved of fulfilling these obligations. However, the obligor should inform the obligee without delay considering the impossibility of performance and take the necessary measures to prevent the damage from increasing. To illustrate, if travel, export, or import restrictions are imposed by the government where the epidemic is prevalent, it may become literally impossible to fulfill obligations related to certain goods or services, or the debtor may not be able to perform due to the effects of the outbreak only on the debtor. Therefore, there may be a force majeure situation especially for companies and individuals who have commercial relations with countries affected by the epidemic such as China, Iran, and Italy. If the impossibility of performance is temporary, the debtor will be in default and will not have to compensate for the damages caused by this delay. However, the debtor must execute his debt after the state that caused the impossibility to disappear.
On the other hand, if the debtor's performance only has become more onerous or expensive due to the epidemic, the debtor cannot claim force majeure. In this case, it may be possible to adapt the contract to changing conditions in accordance with Article 138 of the TCO. The parties can request the adaptation of the contract from the judge if they have not agreed with the contract provision on how the contract will be adapted in advance. If it is not possible to adapt the contract, the interested party has the right to terminate the contract. For the implementation of this rule, there must have been a significant disruption of the performance due to the epidemic in the concrete event.
The explanations in this article are based on the Turkish Code of Obligations.
Tuba Kızılkaya / Lawyer
Güneş & Güneş Law Firm
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