Turkish Code of Obligations Article 138, under the title "Excessive Impossibility of Performance", regulates the judicial remedy that the parties can apply in case the performance becomes extremely difficult due to extraordinary changes that were not foreseen at the time the contract was signed and are not expected to be foreseen. This provision is the reflection of the classical "clausula rebus sic stantibus" principle in Turkish law.
Article Text Summary (TBK art. 138)
If an extraordinary situation that was not foreseen and not expected to be foreseen by the parties at the time the contract was made, arises for a reason not originating from the debtor, and changes the existing facts at the time of the contract against the debtor to the extent that it would be against the rules of honesty to demand performance from him, and the debtor has not yet fulfilled his debt or has performed it by reserving his rights arising from the excessive difficulty of performance, the debtor has the right to ask the judge to adapt the contract to new conditions, and if this is not possible, to withdraw from the contract. In contracts with continuous performance, the debtor, as a rule, uses the right of termination instead of the right of revocation.
Five Conditions of Practice
1) Extraordinary Situation Unforeseen at the Time of Making the Contract
A fact that was not known and was not expected to be known by the parties at the time of signing the contract must emerge later. Classic examples:
- Devaluation, extraordinary increase in exchange rates
- High inflation (especially in foreign currency contracts)
- Pandemic (such as COVID-19)
- War, social chaos
- Radical change of legal regulations
- Unexpected tax burdens
2) Reason Not Due to the Debtor
The extraordinary situation should not be caused by the debtor's own behavior, negligence or fault.
3) Change of Existing Conditions Unfavorable to the Debtor
The extraordinary situation must have changed the terms of performance of the contract to the detriment of the debtor and to the extent that it violates the rules of honesty.
4) Performance Has Not Been Fulfilled Yet
The debtor must have not yet fulfilled his debt or must have performed it by reserving his rights. If the debt has been fully fulfilled, adaptation cannot be requested.
5) No Risk Assignment in the Contract
The debtor must not have explicitly assumed the risk of the extraordinary situation through the contract. A provision such as "all exchange rate risk belongs to the debtor" may limit the possibility of adaptation; However, if the judgment itself is against the rules of honesty, the judge may ignore it.
Authority of the Judge
According to Article 138 of the Turkish Code of Obligations, the debtor receives from the judge:
The judge primarily prefers adaptation; Terminating the contract completely is a last resort. In the adaptation decision, the judge said:
- Aims to re-establish the equivalence of the contract
- Considerates the interests of the parties equally
- Shares the impact of the emergency situation between the parties
Application in Foreign Currency Housing Loans
Due to the extraordinary exchange rate increases in 2018 and beyond, consumers who received foreign currency housing loans requested the banks to adapt the contract. General approach in the Supreme Court HGK and Chamber decisions:
- Turkish Code article 138 may be applied in consumer contracts
- However, foreseeable exchange rate fluctuations are not considered extraordinary situations
- Excessive and non-gradual exchange rate jumps approach a state of emergency
- Adjustment will be more limited if the consumer has explicitly assumed the risk of "borrowing in foreign currency"
Adaptation in Lease Agreements
In residential and roofed workplace rents, TBK Art. 344 separately regulates the rent increase limit (CPI 12-month average) and Art. 345 adaptation opportunity. At the end of 5 years, the rental fee may be redetermined according to current values in accordance with Article 344/3 of the Turkish Code of Obligations.
Due to extraordinary circumstances (e.g. COVID-19), adaptation of the lease agreement to new conditions may still be requested pursuant to Article 138 of the Turkish Code of Obligations; There are examples accepted by the court, especially in commercial leases.
In Work Contracts
In construction and work contracts, if input costs (steel, cement, foreign currency) increase excessively, the contractor/contractor may request adaptation in accordance with Article 138 of the Turkish Code of Obligations. The 15th HD Court of Appeals has established jurisprudence on this issue; However, inspection is carried out strictly with the general approach that the contractor undertakes "predictable" cost increases.
Jurisdictional and Competent Court
- Appointed: Consumer Court in consumer contracts (TKHK art. 73). Civil Court of Peace in rental disputes. Civil Court of First Instance or Commercial Court of First Instance in other debt relations.
- Authority: Place of execution of the contract (HMK article 10) or residence of the defendant (HMK article 6).
Burden of Proof and Expert Witness
Debtor in the adaptation case:
He has to prove it. Economy, finance and sector experts play a decisive role in the file.