Penal clause is the commitment of the contracting party to pay a certain amount of money in case of breach of its obligation. It is regulated in Article 179 of the Turkish Code of Commerce.
Types
- Optional penal clause: The creditor chooses one of the main debt or penal clause
- Penal clause that can be requested together: The creditor demands both
- Penal clause instead of performance: It replaces the principal debt
Excessive Penal Clause (TBK article 182/3)
The judge may reduce the penal condition that he finds excessive. Factors:
- The main interest of the creditor
- The severity of the debtor's violation
- The financial situation of the debtor
- The proportion between the economic situations of the parties
The Supreme Court HGK Approach
HGK states that whether the penal clause is excessive or not should be evaluated with "objective criteria", and the judge decides It accepts that it has the authority to reduce it ex officio.
Should not be confused with a fine
Penal clause is a matter of private law; Administrative fine is a public sanction.
Typical Usage
- Delay penalty in lease contracts
- Violation of non-competition in employment contracts
- Late delivery in supply contracts
- In franchise contracts
Law of obligations lawyer is recommended.