ABSTRACT
Contractor Contracts are commonly used in commercial life. Regulated under article 470 of the Turkish Code of Obligations (TCO) numbered 6079, these contracts include a request from the party ordering the work, the client, to the contractor to carry out work, and the contractor’s obligation to perform and deliver the work requested in exchange for a fee determined in the contract. Under the TCO, in the event of circumstances explained below, both the contractor and the client have the right to withdraw from the contract. Furthermore, this right can also be regulated within the contract made by the parties. Whether based on the law itself or determined in the contract, the regulations on withdrawing from a contract aim to protect the balance between the two parties. As explained below, the conditions for the right to withdraw from a contractor contract are, in terms of withdrawal by the client: withdrawal due to delay in the commencement of the performance of the work or impediment of the work, withdrawal due to the contractor’s failure to perform their obligation to deliver the work and withdrawal due to defectiveness of the work, and in the case of lump-sum contracts, the contractor has the right to withdraw from the contract under exceptional circumstances or due to the client’s failure to perform the contract.
I. INTRODUCTION
A contractor contract is a type of synallagmatic contract in which the contractor undertakes an obligation to perform work while the client is obligated to pay the fee for the work as determined in the contract. Within the scope of this article, contractor contracts will be explained in general in terms of the circumstances under which the parties can withdraw from the contract according to related law, including the right to withdraw as specified in the contract, and the consequences of using the right to withdraw from a contractor contract.
II. CONTRACTOR CONTRACT IN GENERAL
A. Definition of Contractor Contracts
Regulated under article 470 and 486 of the TCO in accordance with the definition in article 470 of the TCO, a contractor contract is a contract in which the contractor undertakes the obligation to perform work while the client is obligated to pay a fee for the work as determined in the contract. It is understood from the definition in article 470 that the parties of a contractor contract are the “contractor” and the “client”. Under a contractor contract, the contractor has a primary obligation to perform work based on the work obligation; the result of this act is the submission of the work to the client1. Accordingly, within the scope of the contract, the contractor undertakes to perform the work, and to produce and deliver the work as a result of this activity. The client being the other party to the contract, undertakes to pay a fee to the contractor2.
B. Characteristics of Contractor Contracts
Contractor contracts are synallagmatic. While the contractor undertakes the responsibility to perform a work by being party to the contract, the client undertakes the obligation to render payment. It is not possible for a contract to qualify as a contractor contract if it is not determined in the contract that one party performs the work while the other party makes a payment for it3.
A contractor contract can be established by a statement of the two parties’ mutual will. Thus, the parties can form a contractor contract without any formal requirements4. According to article 2/I of the TCO, “if the parties have agreed on the primary obligations of a contract, the contract will be established even if the parties haven’t agreed upon subsidiary obligations.” The primary obligations mentioned in the article are the commitment to perform the work and the commitment to pay the agreed fee, which constitutes the core of the contract. It is not obligatory to set the exact fee when the contract is established. The promise of payment is enough to form the contract. According to article 481 of TCO; “if the cost of the work has not been decided on yet or has only been approximately designated, the cost will be set according to the value of the work at the time and place it has been performed and the cost of the contractor.” As explained above, by fulfilling the aforesaid points, a contract will be established even if any subsidiary obligations are not included in the contract.
According to article 471 of TCO, the contractor is obligated to perform the work directly by himself or under his control. However, if the contractor’s personal qualifications are not essential to performing the contract, the contractor can have the work performed by someone else. If the contractor’s personal qualifications are important but not strictly bonded to his personality, the contractor does not have to perform the work himself. The contractor can have the work performed by a third person who is under his responsibility and control. In that sense, the contractor can have the work performed by a fulfilment assistant under his responsibility and control. On the other hand, if the duty of the contractor does not hold personal character, meaning if the contractor’s personal qualifications aren’t essential for the performance of the work due to the nature of the work, the contractor can have an independent fulfilment assistant sub-contractor perform the work under a sub-contractor contract on his own behalf and under his responsibility5.
III. THE CONCEPT OF WITHDRAWAL FROM CONTRACT AND ITS CONSEQUENCES
A. Concept of Withdrawal from Contract
In Turkish law, in accordance with the freedom of contract, provided that the parties remain in line with the limits stipulated in legislation, parties can establish a contract with anyone on any issue and can also terminate such a contractual relationship. Based on the Roman Law principal “pacta sunt servanda”, the parties shall be bound by their commitments and perform their duties as promised while the parties can only terminate the contractual relationship if both parties wish to terminate the contract6. In another words, according to the principle mentioned above, it is not possible to unilaterally terminate a contractual relationship that has been established by a statement of mutual will of the two parties. However, Turkish law enables the parties to unilaterally terminate a contractual relationship through the concepts of “withdrawal from contract” and “renouncement of contract”.
Along with the right to withdraw from a contract, in synallagmatic contracts, the aim is to protect the balance and functional dependence between the reciprocal duties7.
The right in question can be reserved by the parties during the establishment of the contract as it can also arise from the law itself. The right to withdraw from a contract in law is a negative formative right which enables the parties to unilaterally terminate the contract in which the legislator allows the party who will be affected negatively from the imbalance of duties or the threat of imbalance of duties to withdraw from the contract8. The function of the right to withdraw reserved by the parties in a contract is to keep an open door in case of certain adverse situations against the binding effect of the contract. In particular, such a right is essential in terms of being released from the binding effect of a contract should the economic conditions at the time of establishment of the contract deteriorate over time.
B. Conditions Enabling Withdrawal from Contract Within the Scope of Legislation
Under article 125 of TCO, the obligee is entitled to certain alternative rights in the event of the obligor’s default, the article hereby is as follows;
“If the debtor in default does not perform his debt within the given period or if there is a situation that does not require a further period, the creditor is always entitled to claim the performance of the obligation and compensation for the delay. The creditor may also request the compensation of damages due to non-performance of the debt or withdrawal from the contract, waiving the right to claim the performance of the obligation and compensation for the delay. In the event of withdrawal from the contract, the parties shall be relieved of their mutual obligation to perform and may reclaim their previous acts. In this case, if the debtor fails to prove that he is not culpable for his default, the creditor may also request the damage suffered due to the invalidity of the contract be compensated.” In this respect, the alternative right of the obligee is to claim performance of the obligation and compensation for the delay, claim positive damages and waive their right to claim performance of the obligation, withdraw from the contract and claim negative damages.
C. Distinction between Withdrawal from Contract and Renouncement of Contract
In Turkish law, the notions of “withdrawal from contract” and “renouncement of contract” are used in cases of unilateral termination of a contract. Notions of withdrawal and renouncement are often used incorrectly since the two terms are falsely considered synonyms9.
According to the established view that the term renouncement and withdrawal have different meanings in the doctrine, renouncement is a negative formative right or process that terminates a continuous contractual relationship only “ex nunc”, in other words anticipatorily10. Withdrawal is a formative right that gives rise to an “ex tunc” or retroactive termination of the contractual relationship by one of the parties11.
In the event of renouncement, only the unfulfilled acts are terminated while performance of the contract is not affected by termination and any claims arising before the termination continue12. In the event of a withdrawal, the withdrawing party thus discards the contractual relationship and returns to the moment of establishment of the contract, eliminating the obligations that have been performed13.
In other words, the renouncement that effectively eliminates the contractual relationship allows for the demand for contractual loss (reparation) due to noncompliance with the contract. However, withdrawal from contract does not allow for further reparations since it effectively eliminates the contractual relationship as if it had never been established. The compensation to be requested upon withdrawal is for the elimination of the negative damages, that is, for the compensation of the negative damage caused by the invalidity of the contract14.
Withdrawal from the contract is possible if only there are justifiable reasons to abolish the contract. Therefore, an ordinary form of withdrawal such as ordinary denouncement is not possible15.
IV. THE CLIENT’S WITHDRAWAL FROM CONTRACT
A. The Client’s Withdrawal in General
The principal obligations of the contractor in a contractor contract are the creation of the work in a timely and non-defective manner and the delivery of the work to the client16. According to the provision of the TCO article 473/I, if, according to all estimates, it is clearly understood that the contractor will not be able to finish the work at the agreed time due to the failure of the contractor to start the work on time or to their delaying the work in breach of the provisions of the contract, the client may withdraw from the contract without having to wait for the delivery date. Pursuant to this provision, the client’s exercise of the right of withdrawal from the contract is not subject to any form.
The work submitted by the contractor should be suitable for the fulfilment of the client's interest in performance. If the work is defective and fails to fulfil the performance, the contractor’s act is considered a default of the performance obligation and is deemed to have not been fulfilled as required by the contract17. Article 475 of the TCO regulates the client’s right to withdraw and their alternative rights.
Failure of the contractor to complete the work or delay delivery will result in the contractor’s default. In this regard, the general provisions of the TCO regarding debtor default shall be applied.
B. Conditions of Withdrawal from a Contractor Contract
In cases where the contractor is responsible for a defect in the work, the alternative rights of the client are listed in article 475 of the TCO. Pursuant to this provision, alternative rights that may be exercised by the client in cases where the contractor is responsible for the defect in the work are: “1. If the work is defective to the extent that the client cannot use it or cannot be forced to accept it due to equity or if the work is contrary to the provisions of the contract, the client may 2. Retain the work and request a discount at the rate of defect, 3. Request free reparation of the work with the contractor liable for all costs unless it requires excessive costs.” Regarding the consequences of withdrawal from the contract, the legislator made the client’s withdrawal from the contract more severe than other alternative rights18. Accordingly, the client can only withdraw from the contract if the work cannot be used by the client or the client cannot accept it in good faith or if it is contrary to the conditions agreed in the contract to the same degree.
If the contractor is in default in fulfilling the delivery obligation, the client may withdraw from the contract and demand compensation for any negative damages by giving immediate notification at the end of the given period in accordance with the provisions of article 125/II-III of the TCO19.
In order for the contractor to default, the debt should become due, performance should not yet be made, there should be no fact that justifies the delay and the contractor should have been notified. Although the delivery debt may be due, default does not occur if the contractor can provide a specific defence for failure to perform20.
C. The Nature and Scope of the Client’s Claim for Compensation
Article 475 of the Turkish Code of Obligations includes regulations on compensation for the damage suffered by the client within the rights granted to the client if the work is defective21. Claims for damages due to defect can be requested with alternative rights (right of withdrawal from contract, right to request discount and repair due to defect) or singularly. The damages which are subject to compensation under the provisions of the TCO 475/II are damages caused by a defect in the work and which have a causal link with the defect of the work22. According to Turgut Öz, this kind of damages, beyond trusting that the contract will take effect, as regards the TCO article 475 (abolished CO Art. 360), directly arise from the defective delivery of the work. This prevents such damages from being considered to be negative damages in real terms23.
The possessor of the right to withdraw from the contract being the client pursuant to the provisions of TCO 473/I may also demand compensation from the contractor for negative damages if the contractor fails to prove that he is not culpable for the default24.
The negative damages that the client may demand is the loss that wouldn’t have occured had the contract never been established and which were incurred due to the loss of trust brought about by the failure of the contract to be fulfilled by the other party and the failure to fulfil it. The elements considered to be within the scope of negative damages are: expenses related to the conclusion of the contract and fees, postal expenses, notary fees and so on25.
V. CONDITIONS OF THE CONTRACTOR’S WITHDRAWAL FROM THE CONTRACT
In article 480/II of the TCO, one of the cases for the contractor's withdrawal from the contract is regulated. In this provision it is ruled that: “In the event of circumstances that are not initially foreseen or that could be foreseen but not considered by the parties hinder or make it extremely difficult to make the work with the lump sum determined by the parties, the contractor has the right to ask the judge to adapt the contract to the new conditions or to withdraw from the contract if adaptation is not possible or cannot be expected from the other party.
” The contractor can only exercise his right to renounce the contract in cases where the principle of good faith requires them to do so. If the contractor does not notify the client about any extraordinary situations that increase costs or hamper the performance of the work in terms of costs, he is in violation of the principle of good faith regulated in article 2 of the Turkish Civil Code (TCC) No. 4721. The legislator holds that under the conditions in the TCO article 480/II, by deviating from the principle of pacta sund servanda, the contract can be adapted to the current situation26. The purpose of this provision is to enable parties to alter the contract in order to ensure a balance between extremely unbalanced actions27.
The contractor can exercise the right of renouncement when the rules of good faith require. It is contrary to good faith, as stated in article 2 of the TCC, for the contractor to continue to work without notification to the client of any situation that may increase the cost or extraordinary situations that may complicate performance in terms of price28. The General Assembly on Unification of Precedent of The Court of Cassation’s decision numbered 1983/3 E.K. dated 25.01.1984, states that: “There may be situations where the exercise of the right of cancellation in article 106 in the Turkish Code of Obligations, according to article 2 of the Turkish Civil Code, may be in violation of the rules of good faith and these situations must be excluded. However, it cannot be said that the contractor faulty of not finishing the performance in time despite extra time and fixed term is in good faith. In situations like these it is evident that the fault in default and the action against good faith are intertwined. In such cases, use of right of cancellation of the contact by the client cannot be defined as contrary to the rules of good faith. No one can benefit from their own fault29.” As explained in the decision, the contactor can use its exercise of cancellation if the actions of the client cause the contractor to default.
The contractor may withdraw from the contract if the client has a liability to provide material or land and is in default in fulfilling these obligations or in the performance of the payment of the fee30. In order for the client to default on the due payment obligation, if the contract has not determined a specific day for payment, article 117/I of the TCO requires the contractor (creditor) to notify the other party in accordance with the general rules. In the event that the parties agree on a specific day for the performance of the payment, the client will be in default without a need for notification31.
VI. CONSEQUENCES OF WITHDRAWAL FROM CONTRACT
A. Classical View
According to the classical view of withdrawal, withdrawal from contract completely terminates the contractual relationship retroactively. However, there are different views on the legal basis of the reciprocal obligation arising as a result of the withdrawal32.
1. Argument of Unjust Enrichment
The provisions of unjust enrichment apply in terms of a request to return any gains. In this case, it is accepted that a contract is effectively terminated from the moment the contract was established33.
2. Argument of Statutory Debt Relation
According to proponents of the statutory debt relation view, although the contractual relationship and the debt relationship effectively ended in the past, this does not necessarily mean that the acts performed were devoid of cause34. According to this view, withdrawal from a contract does not turn the contractual relationship into an unjust enrichment relationship, but into the legal debt relationship, regulated in article 125 of the TCO35. This aims to free the creditor from the short period of limitation stipulated in the provisions of unjust enrichment36.
3. Argument of Withdrawal with Real Effect
The real effect view of withdrawal is the last of the classical views. Like the others, it acknowledges that the contractual relationship is effectively terminated by the exercise of the right to withdraw. Those who support this view argue that upon withdrawal, the casual act of disposal will also be effectively invalidated retroactively and that the return of things granted in this way may be requested by a claim based on a real right37.
B. New View of Withdrawal (Transformation)
According to the new view of withdrawal, which emerged in German law and has been frequently advocated recently in Turkish/Swedish law, withdrawal does not effectively terminate the debt relationship, either backward nor forward38. Withdrawal from a contract establishes a liquidation relationship between the parties only in terms of the acts performed by changing the content of the contract and the contract enters into a dissolution relationship39.
VII. CONCLUSION
Within the scope of this article, first the nature of the contractor contract is explained in line with the definitions and opinions in the doctrine, and then the regulations in the legislation on the right to withdraw from a contractor contract. As explained above, within the scope of the relevant legislation, in a contractor contract, which is a contract in which the contractor undertakes to perform work and the client undertakes to pay a price in return, the contractor and the client are given the right to withdraw from the contract. The right to withdraw from a contract is a right that effectively terminates the immediate debt relations and gives rise to negative formations used with a unilateral declaration of will.
However, there are cases where the client may return from the contractor contract where the contractor does not commence the work on time or delays the work, the contractor defaults in the delivery of his contractual obligation, or the work is defective. The contractor may withdraw from the contract in case of extraordinary situations in lumpsum contracts or due to the client’s default. To conclude, the conditions specified in law and explained in detail above must be fulfilled in order for the client or the contractor to withdraw from the contract.
BIBLIOGRAPHY
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MERVE AKÇA, Eser Sözleşmesinde İş Sahibinin Ayıptan Dolayı Sözleşmeden Dönme Hakkı (2012). MÜGE ÜREM, Eser Sözleşmesinde Erken Dönme, 1st edition, İstanbul, 2017.
ÖZ SEÇER, Eser Sözleşmesinde Götürü Bedelde Uyarlama (TCO art. 480/2).
RONA SEROZAN, Sözleşmeden Dönme, 2nd edition, İstanbul, 2007.
YUSUF BÜYÜKAY, Eser Sözleşmesi, 2nd Edition, Ankara, 2019.
HASAN ERMAN, İstisna Sözleşmesinde Beklenilmeyen Haller (Beklenilmeyen Haller), İstanbul, 1979.
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FOOTNOTE
1 Haluk Tandoğan, Borçlar Hukuku Özel Borç İlişkileri, Cilt II, 5th Edition, İstanbul, 2010.
2 Müge Ürem, Eser Sözleşmesinden Erken Dönme (Erken Dönme), 1st Edition, İstanbul 2017, p. 6.
3 Ürem, Erken Dönme, p. 38.
4 Yusuf Büyükay, Eser Sözleşmesi, 3rd Edition, Ankara 2019, p. 44.
5 Prof. Dr. Mustafa Alper Gümüş, Borçlar Hukuku Özel Hükümler V II.,3rd Edition, İstanbul 2014, p.11.
6 Ümit Vefa Özbay, Roma Hukukunda ve Türk Hukukunda Borçlunun Sorumlu Olmadığı Sonraki İmkansızlık, Ankara 2018.
7 Rona Serozan, Sözleşmeden Dönme (Dönme), 2nd Edition, İstanbul 2007, p. 40.
8 Serozan, Dönme, p. 3.
9 “Dönme yerine fesih deme yanlışlığına ilk parmak basan Türk yazarı Sungurbey olmuştur.” Serozan, Dönme, p.115.
10 Serozan, Dönme, p. 115.
11 Serozan, Dönme, p. 58.
12 Beklenilmeyen Haller (Beklenilmeyen Haller), p. 103.
13 Serozan, Dönme, p. 118.
14 Serozan, Dönme, p. 121.
15 Erman, Beklenilmeyen Haller, p. 105. 16 Ürem, Erken Dönme, p. 148.
17 Ayhan Uçar, İstisna Sözleşmesinde Müteahhidin Ayıba Karşı Tekeffül Borcu, Ankara 2003, p. 73.
18 Merve Akça, Eser Sözleşmesinde İş Sahibinin Ayıptan Dolayı Sözleşmeden Dönme Hakkı (Dönme Hakkı), p. 95.
19 Köksal Kocaağa, İnşaat Sözleşmesi, Ankara 2014, p. 259.
20 Kocaağa, İnşaat Sözleşmesi, p. 124.
21 Akça, from page 84 of Dönme Hakkı , Turgut Öz, İş Sahibinin Eser Sözleşmesinden Dönmesi, bayındırlık işleri şartnamesinin ilgili hükümleri ile birlikte, İstanbul, 1989, p. 293.
22 Akça, Dönme Hakkı, p.84.
23 Akça, from page 84 of Dönme Hakkı , Turgut Öz, İş Sahibinin Eser Sözleşmesinden Dönmesi, bayındırlık işleri şartnamesinin ilgili hükümleri ile birlikte, İstanbul, 1989, p. 293.
24 Ürem, Erken Dönme, p. 183.
25 Court of Cassation HGK 2010/14244 E., 2010/260 K., 12.05.2010
26 Kocaağa, İnşaat Sözleşmesi, Ankara 2014, p. 187.
27 Kocaağa, İnşaat Sözleşmesi, p. 187.
28 Öz Seçer, Eser Sözleşmesinde Götürü Bedelde Uyarlama, from article 480/2 of TCO, Kaplan, İnşaat Sözleşmelerinde Yapı Sahibinin Ücret Ödeme Borcu, p. 153.
29 Yargıtay İçtihadı Birleştirme Genel Kurulu 1983/3 E., 1984/1 K., 25.01.1984
30 Kocaağa, İnşaat Sözleşmesi, p. 261.
31 Kocaağa, İnşaat Sözleşmesi, p. 219.
32 Büyükay, Eser Sözleşmesi, p. 135.
33 Ürem, Erken Dönme, p. 159.
34 Ürem, Erken Dönme, p. 160.
35 Ürem, Erken Dönme, p. 161.
36 Aybike Tunç, İş Sahibinin İfa Zamanından Önce Sözleşmeden Dönme Hakkı (TCO art. 473/I), p. 3.
37 Akça, Dönme Hakkı, p. 63.
38 Ürem, Erken Dönme, p. 164.
39 Ürem, Erken Dönme, p. 166.
