Law of Obligations

General Provisions
Sources of Obligation Relationships

Asst.Prof.Dr.Zeynep ili

Obligation is a legal relation between two party/parties(person/persons-side) at least,

One being the creditor and the other being the debtor, conferring on the creditor the power to claim from the debtor the performance of a certain act and simultaneously obliging the debtor to comply with the claim by the creditor.*
*Szer,B.,2001,103.

There are three elements of obligation relationship;

The promise
related to give something, or to do, or not to do(refrain from) doing an act

Subject matter of the promise, may be

The Debtor(Promiser)
creditor(passive party)

has to perform his obligation in favor

of the

The Creditor(promisee)
request from the debtor, the fullfilment of his promise(active party ) (Esener,2004,5)

based on the legal relationship, has the right to

Legal Nature of Obligation Relationship

Obligation relationship forms the basis for relative rights. (the creditor can ask only his debtor to accomplish his promise, different than absolute rights which can be claimed to everybody) Exceptionally a relative right can be invoked against third persons, which is called as strengthening of a relative right makes its effects similar to an absulote right.

Claimis an authorization conferred to the creditor to request from his debtor the accomplishment of his obligation.

It is a kind of legal power based on the right derives from obligation relation, and only can be exercised when the obligation(debt) becomes due. When a claim raised by the creditor before a court, there is a lawsuit.

Obligations may arise from three different reasons;

1) A person may be under an obligation because of entering into a contractual relation, 2) He may commit a tortious act and therefore may be under an obligation to pay damages to another person, 3) He may have been unjustly enriched, and as a result, be under an obligation to pay the losses of another party, according to the general subjects regulated by Turkish Code of Obligations.

The sanction of the obligation is liability before law;

A debtor can be liable, in other words, under the commitment of giving something, or doing or not doing/refraining from an act, as a result of a given promise by contract. For instance, if there is a sales contract, while seller is under the liability of delivering the sold goods to buyer, buyer is liable to pay agreed price to seller, in return.

Liability for a tortious act is an obligation to restore the damages arise from it.
Faulty person is liable to pay the damages of the others after a traffic accident, he involved.

Liability resulting from unjust enrichment is an obligation to give or to pay back if there is not any reason to be enriched.
For example, if a person transfers an amount of money to an account of third person by mistake, instead of the counterpart of the contract he made with, third person is under a liability to give/pay it back.

An imperfect Obligation is a debt in which the performance is not secured by the power of the state(sanction)

Some obligations are imperfect at the beginning naturally; obligations arising from gaming and betting, and marriage brokeraging contracts or payments made for the fulfillment of a moral duty can not be recovered. an obligation can not be claimed by legal ways after Statutory period of limitation, the time limit determined by law, passed.

Legal event, legal action and legal transaction,

Legal event is an event that causes legal consequences(the birth of a child, attaining majority) Legal action is a human conduct to which the legal order attaches legal consequences (torts, breach of a contract) If the legal action is a declaration based on intended will of a person to obtain a legal consequence(contract)

Classification of legal transactions based on the number of participants declared wills for a legal result;

Unilateral legal transactions; (Acceptance of an offer, notice of termination given to a tenant or a worker,refusal of succession, making a testament, forming a foundation, donation) Bilateral legal trans actions; (Bilateral contracts) Multilateral legal transactions (establishment of a partnership or association)

The Code of Obligations(C.O), dated 4 October 1926, regulates these sources of obligations first in general, and then puts further provisions on special types of contracts. New Turkish Code of Obligations (numbered 6098), which will be effective at July 1, 2012, has the similar essentials with some additions and differences.

Some contract types are regulated by the Commercial Code or by special laws, such as by the Law on Consumer Protection.

Contract is a legal relation between two parties formed by the concurring declarations of their wills, and the legal infrastructure of the Commerce.
A contract is concluded when two parties declare their mutual agreements(C.O.Art.1)* *Szer,2001,104

A contract is an agreement creating legally enforceable obligations.

But every agreement is not a contract. There must be some conditions for creating legal relations, the breaking of which causes to legal sanctions.

For a contract to be valid and enforceable, there should be a valid agreement, between parties with capacity to contract.

It must have a legal cause and a legal subject matter, It must be based upon a real and genuine assent (intention), It should be made in the form required by law.

Classification of Contracts, in terms of the degree of their enforceability;

Valid

Contracts, Void Contracts, Voidable Contracts.

Valid contract has all the elements which are; a valid agreement, parties with capacity to contract, genuineness of assent, a legal cause, a legal subject matter, and legal form. Valid contracts are fully binding and enforceable.

Void (Null) Contracts

are those which have no legal effect either ;
because they are against law and morals, because of incapacity, lack of formality or impossibility.

Voidable Contracts
are those which may be binding and enforceable,
but due to the lack of one or more of the elements of a valid contract, may be rejected at the option of one or both of the parties.

Voidable Contracts
are valid until declared void.
Contracts made by mistake are generally considered voidable (article 23 of CO). The validity of a voidable contract may only be challenged by an interested party. The period during which a voidable contract may be voided is usually fixed by law.(for example article 21, 31, 226 of CO)

(The Essentials of a Valid Contract) 1) A Valid Agreement

A contract requires an exchange of assents, that is expressions of intentions, between at least two parties. There is an agreement when the parties lead each other reasonably to belive that they are of the same mind about a given transaction. (Offer+Acceptance=Agreement)

The same mind of parties about a given transaction, is reached by an offer on the one side, and the apparent acceptance of the offer on the part of the other. An offer is a declaration of intention by one party, known as the offerer, whereby he expresses his willingness to enter into a contract. An acceptance is a declaration of intention to agree to the terms of the offer given by the party to whom the offer is made.

A Valid Agreement

(The Essentials of a Valid Contract) 2) Capacity to Contract

The legal validity of a contract depends on the capacity of the person who enters into the transaction. This means capacity to act of real persons, or legal persons. (Just like incapacity of a business association in certain circumstances)

(The Essentials of a Valid Contract) 3) Genuineness of Assent

Since the basis of a contract is the exchange of assents, it is essential that the assents of the parties be genuine, that is to say that there be a genuine meeting of the minds. Unintentional differences of assent may be due to several causes such as mistake, fraud or duress.

Unintentional differences of assent;

Mistake 1)Immaterial(about the motives for entering into contract, may not be the basis for voiding a contract) 2)Material(error in object or in person, to nature of the transaction, to quantity, to the necessary state of facts of a contract) Fraud Duress

Gross Disparity (Gabin)

Evident Disproportion. Article 21 1 of the CO provides that in case of evident disproportion between the prestation promised by one of the parties and the counter-prestation of the other party, the injured party is entitled, within one year, to declare that he terminates (cancels) the contract and to take back what he has given, if the gross disparity resulted from the exploitation of his difficulty, thoughtlessness or inexperience.

Gross Disparity (Gabin)

Exploitation. It should be emphasized that a mere evident disproportion between the prestation and the counter-prestation does not constitute, as such, a situation of gross disparity ( gabin); and therefore, does not automatically provide the disadvantaged party the faculty to cancel the contract. As a rule, nothing prevents people from concluding, at their discretion, contracts benefiting to one of the parties more than the other. A gross disparity will be in question when the advantaged party has exploited the difficulty, thoughtlessness or inexperience of the other party.

Simulation

Concept. Simulation ( muvazaa) is the situation where the contracting parties have in fact agreed in advance that their contract will not be effective. Thus the parties enter into a contract only in appearance; they aim to seem as they had concluded a determined contract. However, their common intention is from the very beginning that the concerned contract will never be effective. Ordinary and Qualified Simulation. An ordinary simulation ( adi muvazaa) occurs when the parties content themselves with agreeing in advance that the contract they conclude will be ineffective. Thus, in case of an ordinary simulation the parties agree that their legal situation will remain the same.

Simulation

qualified simulation ( mevsuf muvazaa) when the parties use the simulated contract as a means to hide another contract that they effectively intend to conclude. Therefore in case of a qualified simulation there is on one hand a conspicuous contract that is ineffective and on the other hand a secret contract which is effective. For example, there is a qualified simulation when a contract of sale is only apparently concluded in order to hide a contract of gift (contract of donation). Consequence of Simulation. A simulated contract is null; since the real and common intention of the parties is that it will never be effective. However, in case of a qualified simulation only the hidden contract is valid.

(The Essentials of a Valid Contract) 4) Legal Cause

The purpose of the parties for entering into a contract is the cause of the contract. Turkish law requires every contract to have a cause. The parties must have a purpose.

(The Essentials of a Valid Contract) 5)Legality of the Subject Matter

Turkish law recognizes freedom of contract (article 48 of Constitution) This means, generally the parties have freedom to choose the type, the subject and terms of the contract. But there are some limitations of this freedom.

(The Essentials of a Valid Contract) 5)Legality of the Subject Matter

Limitation of Freedom of Contract; 1) General remarks; (Individual or Collective Employment Law rules, Law on Protection of Competition, Law on Consumer Protection, etc) 2) Specific Limitations a)Contracts againts law are void(blackmarketing, fraud against to law,etc) b)Contracts against to good morals are void c)Contracts against individual rights d)Impossibility

The subject matter of a valid contract must not be void or contrary to the limitations of law.

(The Essentials of a Valid Contract) 5) Form of Contract

Contracts are valid without any special form under Turkish Law, as a rule(article 11/I CO) This is the principle of freedom to form of contract, but a written form is necessary to prove as a means of proof. For some contracts, written form is obliged for validity of them. A simple written form enough for a guaranty, but official form is necessary for validity about sales of immovables.

ESENER (Turhan) Turkish Business Law - 1. Law of Obligations - Contracts and Torts, 2nd ed., Istanbul, Boazii University Press, 2004, 172 pp. SZER (Blent), Legal Environment of Business. A Hand Book on Turkish and International Business Law, Istanbul, Beta, 2003, 485 pp. ANSAY (Turul) and SCHNEIDER (Stephen) (eds.), Introduction to Turkish Business Law, Ankara, Turhan, 2002, xx + 225 pp. AYBAY(Rona),An Introduction to Law, Revised and Enlarged Third Edition, Bilgi University Press, 2011 Edited; T.ANSAY-D.WALLACE,Jr. Introduction to Turkish Law,Turhan Kitabevi, 2006 ADAL (Erhan), Fundamentals of Turkish Private Law, Legal Yaynlar, 2004.

References