TYPES OF CONTRACTS
As the principle of freedom of contract exists in our law, the parties also have the opportunity to enter into completely different contracts not covered by the law or to enter into mixed-type contracts by combining the obligations defined in the contracts defined by the law. Thus, it should be noted that it is not possible to regulate all types of contracts that can be established in the Turkish Code of Obligations. Each of these contracts may have many variations within itself, and each contract has its own consequences depending on its specific terms.
1-Sales Contract
The sales contract is one of the most common types of contracts. A sales contract is a type of contract whereby the seller undertakes to transfer the ownership of a good or an economically valuable right to the buyer in exchange for a price owed by the buyer. Upon completion of the sale, a good or an economically valuable right is transferred to the other party in exchange for a certain amount of money.
The sales contract can be examined under two main headings. These are the sale of movable property or the sale of immovable property. The form of the sales contract and the terms of the contract vary depending on whether the sale concerns movable or immovable property.
Article 207 of the Turkish Civil Code: A sales contract is a contract whereby the seller undertakes to transfer the possession and ownership of the goods sold to the buyer, and the buyer undertakes to pay a price in return.
Unless otherwise agreed in the contract or unless there is a contrary custom, the seller and the buyer are obliged to perform their obligations simultaneously. The price, which can be determined according to the circumstances and conditions, is deemed to be the agreed price.
The sale of movable property is the sale of items that are not considered immovable under the Turkish Civil Code and are specified as movable in other laws. Except for specific cases arising from the law, the requirements of the situation, or special conditions stipulated in the contract, the benefits and damages of the sold item belong to the seller until the transfer of possession in the sale of movable property and until the registration in the sale of immovable property.
In sales of movable property, if the buyer defaults on taking possession of the sold item, the benefit and damage of the sold item shall pass to the buyer as if the transfer of possession had taken place.
For a sale of movable property to be valid, the contract must be drawn up in a formal manner. Promises to sell immovable property, repurchase agreements and purchase agreements are also invalid unless drawn up in a formal manner. For a pre-emption agreement to be valid, it is sufficient that it be made in writing.
2-Distance Selling Agreement
With the inclusion of the internet and social media in our daily lives and the increase in internet usage, we have reached a point where we can meet many of our needs via the internet. Since the implementation of lockdown measures as part of Covid-19 precautions, many of us have been inclined to meet all our basic needs, including grocery shopping, online. The distance selling contract is a legal relationship in online shopping, protecting both the buyer and the seller, and is an adaptation of the sales contract for online shopping.
The consumer is informed in a clear and comprehensible manner about the details specified in the regulation and their payment obligation upon confirmation of the order before accepting the distance contract or any corresponding offer made by the seller or provider.
The distance selling contract for online shopping contains detailed information about the goods and services, as well as information about returns and cancellation conditions, and aims to prevent problems that may arise during and after shopping. In e-commerce on the internet, the sale is only completed when the buyer approves the distance selling contract, i.e., by ticking the ‘I have read and agree’ section.
3-Barter (Exchange) Contract
Barter is the exchange of one good for another. A barter contract is a contract that imposes obligations on both parties. Both parties to the contract are obliged to give something. It is not possible to enter into a barter contract for money. The subject matter of a barter agreement must be goods. However, if there is a difference in value between the goods to be exchanged, the difference may be compensated by paying a certain amount of money to the other party.
Article 283 of the Turkish Civil Code: The provisions relating to sales agreements also apply to goods exchange agreements; accordingly, each party is a seller in respect of the thing they undertake to give and a buyer in respect of the thing they undertake to receive.
The goods subject to barter may be movable or immovable. If the goods subject to barter are movable, the contract must be concluded by the transfer of possession of the goods; if the goods subject to barter are immovable, the barter contract must be concluded in the form of an official deed at the Land Registry Office.
4-Gift Agreement
An agreement whereby one person transfers ownership of something to another party without compensation is a gift agreement. The item to be gifted may be movable or immovable property or a right of economic value.
Article 286 of the Turkish Civil Code: Any person with legal capacity may make a donation, subject to the restrictions arising from the matrimonial property regime or inheritance law.
If, as a result of legal proceedings initiated within one year following the donation, the donor is found to be subject to restrictions due to extravagance, the donation may be annulled by the court.
A donation may be made by hand or by a promise of donation agreement. If the donated item is movable, the donation is made by delivery; if the donated item is immovable, it is made by registering the donee as the owner in the land registry; if the donated item is a right, it is made by transferring the right.
5-Lease Agreement
One of the types of agreements we frequently encounter in daily life is the lease agreement. A lease agreement is a type of agreement that provides the opportunity to use a property or a right in exchange for a fee. Like the sale of a property, leasing is also a frequently occurring legal transaction.
The fundamental elements of a lease agreement are the existence of the property or right to be leased. This property may be movable or immovable. If the right to be leased is a right, it must be a right suitable for use or for generating income. There are also different types of lease agreements, namely ordinary lease agreements and profit-sharing lease agreements.
Ordinary Lease Agreement: With an ordinary lease agreement, the lessor undertakes to allow the lessee to use a specific property in exchange for a fee. There is no formal requirement for an ordinary lease agreement, meaning it can be made in writing or verbally. However, in the event of a dispute, it is recommended that the ordinary lease agreement be made in writing for ease of proof.
Profit Lease Agreement: A profit lease agreement is a lease agreement whereby the lessor undertakes to grant the profit lessee the use and operation of a property suitable for generating products or profits, or a sum of money or an economically valuable right, and the products or profits that may be obtained as a result of such operation, in return for which the lessee undertakes to pay a fee. A revenue lease agreement may be made in writing or verbally.
6-Consumption Loan Agreement
A consumption loan agreement is an agreement whereby the lender transfers a sum of money or a consumable item to the borrower, and the borrower undertakes to return the same item in the same quality and quantity.
Whether the consumption loan agreement is a commercial agreement is decisive in terms of charging interest. In a non-commercial consumption loan agreement, interest cannot be charged unless agreed by the parties. In a commercial consumption loan agreement, however, interest may be charged even if not agreed by the parties.
7-Usufruct Agreement
A usage loan agreement is a contract whereby the lender allows the borrower to use an item free of charge and the borrower undertakes to return the item after use.
The borrower may not use the loaned item in a manner other than that agreed in the contract or, if there is no provision in the contract, in a manner contrary to its nature or intended purpose. The borrower may not allow another person to use the loaned item. If the borrower acts contrary to these provisions, they shall also be liable for damages arising from unforeseen circumstances. They may be exempt from liability only if they can prove that the damage would have occurred even if they had complied with these provisions.
8-Service Contract
A service contract is a type of contract whereby one party undertakes to provide services in exchange for payment of a fee. In general, a service contract is the legal relationship between the person who pays the fee to employ another and the person who works in exchange for the fee. The person who undertakes to provide the service is called the employee, and the person who employs them is called the employer.
Unless otherwise provided by law, a service contract is not subject to any special form. A service contract that is subsequently found to be invalid shall have all the provisions and consequences of a valid service contract until the service relationship is terminated.
9-Domestic Service Contract
A domestic service contract is a type of contract whereby the employee undertakes to perform the work given by the employer at their own home or another place they designate, either personally or with the help of family members, in exchange for remuneration.
Each time the employer assigns new work to the employee, they shall inform the employee of the specific characteristics of that work, apart from the general working conditions; if necessary, they shall also inform the employee in writing of the materials to be provided by the employee, the amount to be paid to the employee for the provision of these materials, and the remuneration to be paid for the work.
10-Contract for Work
A work is a tangible result produced by expending labour, predominantly physical or intellectual, using the necessary tools and materials. The person who produces the work is called the contractor, and the party who undertakes to pay the price is called the client.
A work contract is a type of contract between a contractor who undertakes to create a work in exchange for a fee and a client who undertakes to pay a fee in return. A work contract is not subject to any specific form.
Article 83 of the Turkish Code of Obligations, under the heading ‘Absence of Personal Performance Obligation,’ regulates the circumstances under which the debtor is not required to perform the obligation personally. Based on this, it can be concluded that unless the creditor has an interest in the debt being performed personally by the debtor, the debtor is not obliged to perform the debt personally. However, if the creditor has undertaken a task where the debtor’s personal skills and experience are paramount, the debt must be performed personally by the debtor.
11-Publication Agreement
A publication agreement is a contract whereby the owner or successor of a work of literature or art transfers the work to a publisher for publication, and the publisher undertakes to reproduce and publish it. Concluding contracts regarding the rights over a work before utilising it will be quite useful in resolving disputes that may arise later. With the publication contract, the rights of the author are transferred to the publisher to the extent and for the duration required for the performance of the contract.
The validity of the publishing contract depends on it being in writing. The transfer of translation rights to the publisher depends on this being clearly stated in the contract.
12-Agency Contract
This is a contract established between the principal and the agent, whereby the agent undertakes the responsibility of performing work aimed at achieving a result in accordance with the principal’s interests and intentions. Individuals may entrust the management of a task, the performance of an action, or the provision of a service to a person who is not bound by a service contract. The relationship between the person who entrusts the management, performance, or provision of the task to another and the person who undertakes to perform the task is a power of attorney contract.
The agency agreement is not subject to any specific form. In fact, an agency agreement may be established by an express or implied declaration of intent. Even if the agency agreement is not established by the express declarations of intent of the parties, an agency relationship may arise between the parties provided that the principal does not object to the acts performed by the agent and subsequently gives their consent.
If the scope of the power of attorney is not clearly stated in the contract, it is determined according to the nature of the work to be performed. The power of attorney also includes the authority to perform the legal procedures necessary for the agent to perform the work undertaken. Unless specifically authorised, the agent cannot file a lawsuit, settle a dispute, apply to an arbitrator, file for bankruptcy, request a stay of bankruptcy or a composition, make a bill of exchange, make a donation, act as a guarantor, transfer immovable property, or restrict a right. If there is a contract or custom, the agent is entitled to a fee.
13-Deposit Agreement (Vedia)
The legal relationship established between the person who leaves something for safekeeping and the person who receives it is a deposit agreement. A deposit agreement is not subject to any specific form and may be made in writing or orally.
If a period is agreed in the bailment contract, the bailee cannot return the bailment before the end of that period. However, the bailor may request the return of the bailment at any time without being bound by this period. If the storage period is not specified in the contract, either party may terminate the contract at any time.
14-Surety Agreement
A surety agreement is a contract whereby the surety undertakes to be personally liable to the creditor for the consequences of the debtor’s failure to fulfil their debt. A surety agreement is a contract established to guarantee the payment of a debt, whereby a third party, i.e. the surety, undertakes to pay the debt if necessary, in addition to the principal debtor. There are important elements for a surety agreement to be valid:
Firstly, the monetary debt subject to the surety must be based on a valid debt relationship. The surety must declare their intention to act as surety. This declaration of intent must be in writing and signed by the surety. The document signed by the guarantor must clearly state the debt for which the guarantee is provided, the identity of the debtor, and the maximum amount for which the guarantor is liable. The guarantor becomes a creditor to the principal debtor for the amount of the debt paid to the creditor, thus enabling the guarantor to claim from the debtor the amounts paid to the creditor.
The specific conditions agreed between the guarantor and the creditor are decisive in terms of the guarantor’s liability. If the guarantor’s liability in the guarantee agreement is limited to certain legal transactions or actions, the guarantor cannot be held liable for anything beyond these legal transactions and actions.
Since the scope of the guarantor’s liability is limited to the principal debt, the guarantor shall not be liable for any subsequent increase in the amount of the principal debt. However, in some cases, the guarantor’s liability is affected by changes in the amount of the principal debt.
15-Credit Agreement
A credit agreement is a type of contract whereby the party granting credit undertakes to provide credit to the borrower on a continuous basis, subject to a certain limit, and receives interest and commission in return. Credit agreements are generally made between a bank and a trader. Credit agreements are made in writing.
16-Sole Agency Agreement
A sole agency agreement is a type of contract established between a manufacturer producing goods in series and a sole agent who agrees to continuously purchase the goods and sell them in their own name and on their own account in a specific region. An exclusive distribution agreement is a contract whereby the manufacturer of the goods undertakes to send part or all of the goods to the sole distributor in exchange for payment, so that the sole distributor may sell them with exclusive rights in a specific region, and the sole distributor undertakes to sell the goods in their own name and on their own account and to engage in activities to increase the sales of the goods. An exclusive distribution agreement may be concluded for a fixed term or for an indefinite term.
17-Contract for Sale by Consignment
In a contract for sale by consignment, the consignor undertakes to deliver goods to the other party for sale in their own name and on their own account in exchange for an agreed price, while the consignee undertakes to pay the agreed price and return any unsold goods.
In other words, goods are not sold directly to someone but are left with someone for sale. The person to whom the goods are left sells as much of the goods as they can and pays the seller the agreed proportion of the proceeds from the sale, returning any remaining goods to the seller.
18-Franchising Agreement (Marketing Concession Agreement)
Franchising, a sector that has become increasingly prominent in recent years, is a business relationship established with proven, well-known, successful companies in exchange for a certain fee, covering production, marketing, and distribution processes and providing support for the management and execution of the business. A franchising agreement is formed between the franchisor and the franchisees.
19-Brokerage Agreement
A broker is a person who brings together individuals with mutual interests and acts as an intermediary for them. Brokers receive a commission for this work.
A brokerage agreement is a contract whereby the broker undertakes to prepare the possibility of establishing a contract between the parties or to act as an intermediary in its establishment, and is entitled to a fee if the contract is established. As a rule, provisions relating to agency apply to brokerage contracts. A brokerage contract concerning immovable property is not valid unless made in writing.
The broker is only entitled to a fee if a contract is concluded as a result of their activities. If the contract concluded as a result of the broker’s activities is subject to a condition precedent, the fee is payable upon the fulfilment of that condition.
20-Commission Contract
Purchase or sale commission is a type of contract whereby the commission agent undertakes, in return for a fee, to purchase or sell securities and movable property in their own name and on behalf of the principal. The commission agent is obliged to inform the principal about the work they have done and, in particular, to notify them immediately when their instructions have been carried out.
The commission agent may request payment of their fee upon completion of the task assigned to them, or if the task is not completed due to a reason attributable to the principal. If the commission agent acts in breach of the rules of good faith towards the principal, particularly if they report a price higher than the purchase price or lower than the sale price, they forfeit their right to receive payment.
21-General Partnership Agreement
A general partnership agreement is a type of contract whereby two or more persons undertake to combine their labour and assets for a common purpose. Each partner is obliged to contribute a share to the partnership in the form of money, receivables, other assets, or labour. Unless otherwise agreed in the agreement, the participation shares must be of equal importance and quality as required by the purpose of the partnership. The partners are obliged to share all profits belonging to the partnership among themselves.
Article 623 of the Turkish Civil Code: Unless otherwise agreed in the contract, each partner’s share in the profits and losses shall be equal, regardless of the value and nature of their participation share.
If the contract specifies the participation share of one partner in profits or losses, this specification also applies to the other partner’s share.
An agreement that a partner will participate only in profits without participating in losses is valid only for a partner who has contributed only their labour as their participation share.
22-Life Care Agreement
A life care agreement is a contract whereby the care provider undertakes to care for and look after the care recipient until death, and the care recipient undertakes to transfer an asset or certain assets to the care provider. A life care agreement is a bilateral contract. One party undertakes to provide care until death, while the other party undertakes to transfer a specified portion of their assets to the caregiver until their death.
Even if it does not involve the appointment of heirs, a contract for care until death is not valid unless it is made in the form of an inheritance contract. If the contract is made by a care institution appointed by the State in accordance with the conditions determined by the competent authorities, it is sufficient for it to be made in writing to be valid.
23-Lifetime Income Contract
A lifetime income contract is a type of contract whereby the income debtor undertakes to make certain periodic payments to the income creditor for the lifetime of one of them or a third person. Unless otherwise expressly provided, the contract is deemed to have been made for the lifetime of the income creditor. The income bound by the lifetime of the income debtor or a third party passes to the income creditor’s heirs unless otherwise agreed. The validity condition of a life annuity contract is that it must be made in writing.
Article 607 of the Turkish Civil Code: Unless otherwise expressly stipulated, the contract shall be deemed to have been concluded for the lifetime of the income creditor.
Income limited to the lifetime of the income debtor or a third party shall pass to the heirs of the income creditor unless otherwise agreed.
24-Land Share Construction Contract
Land share construction contracts are a type of contract that has become increasingly common in recent years. However, land share construction contracts are not regulated in the Turkish Code of Obligations. A land share construction contract is a contract whereby the landowner delivers the land to the party undertaking the construction in a manner suitable for construction, and the party undertaking the construction, generally the contractor, undertakes the obligation to construct on the land and deliver the portion corresponding to the land share to the landowner.
25-Factoring Agreement
Factoring is a financing method used in domestic and foreign trade transactions, particularly in short-term goods sales. Institutions providing factoring services are called Factoring Companies. The factoring agreement is concluded between the Factoring Company and the merchant, i.e. the seller, who sells goods on credit or provides services to buyers within and outside the country.