PENAL CLAUSE OR PENALTY CONDITION IN THE LAW OF OBLIGATIONS
(Y3HD-K.2020/3730 )
The Code of Obligations No. 818 (818 p. BK) used the concept of ‘penalty clause’ in Articles 158-161, while the Turkish Code of Obligations No. 6098 (6098 p. TBK) preferred the concept of ‘penalty condition’ instead in Articles 179-182.
A penalty clause is the performance that the debtor undertakes in advance to fulfil against the creditor in the event that the debtor fails to fulfil the principal obligation in the future, at all or as required. Therefore, a penalty clause is an accessory performance that is dependent on the principal obligation and can only arise with the breach of this obligation. If the debtor has undertaken to pay a penalty clause, the creditor will have the opportunity to obtain compensation without having to claim any damage or prove the extent of the damage. This is because a penalty clause is a pre-agreed fixed amount of compensation that must be paid in case of breach of the obligation. The nature of the principal obligation is not important for the penalty clause to be agreed; a penalty clause can be agreed in the obligations to do or not to do as well as an obligation to give (Tekinay Obligations Law General Provisions, 7th Edition, Istanbul 1993, pp. 341-343).
In addition, the penalty clause essentially has two main purposes. One of them is to force the debtor to perform and thus to guarantee the performance of the principal obligation; the other is to determine the damage arising from the non-performance of the obligation in advance and in a lump sum. Apart from these two main purposes, another purpose of the penalty clause is to enable the debtor to easily withdraw from the contract by paying the penalty clause in the case of a penalty clause that prevents performance (Penalty Clause in Turkish Private Law (Art. 158-161 of the Code), Ankara 2003, pp. 40-42). In our law, the types of penalty clause are regulated as optional penalty clause, penalty clause added to performance and penalty clause instead of performance (rescission penalty).
According to Article 179 f. I of 6098 p. TCO (818 p. BK. Article 158 f. I); ‘If a penalty is agreed for non-performance of a contract, the creditor may demand the performance of either the obligation or the penalty, unless otherwise agreed in the contract’. According to this provision, the parties may have agreed that the debtor shall either fulfil the obligation in accordance with the contract or pay the penalty. In this case, the debtor is obliged to act in accordance with the obligation. However, if the debtor fails to comply with the obligation, a sanction awaits him. This sanction is the payment of the penalty clause agreed in the contract. This provision does not give the debtor the opportunity to get rid of the obligation by breaching the obligation and thus paying the agreed penalty condition instead of the performance. If the debtor breaches the obligation, the creditor may demand performance in kind from the debtor, even if a penalty clause is agreed in the contract. For this reason, Art. 179 f. I of the TCO 6098 (Art. 158 f. I of the Code of Obligations 818) does not give the creditor the authority to get rid of the obligation by paying a penalty condition instead of the debtor’s breach of the obligation, but gives the creditor the authority to decide this. The creditor, in case of the debtor’s breach of the obligation, may demand performance in kind or may demand the payment of the penalty condition. Here, there is an optional right granted to the creditor. For this reason, this type of penalty clause is called ‘optional penalty clause’ (Law of Obligations General Provisions, 16th Edition, Ankara 2012, p. 773).
Penalty clause added to the performance; 6098 s. TCO Art. 179 f. II ‘If the penalty is agreed for non-performance of the obligation at the specified time or place, the creditor may demand the performance of the penalty together with the principal obligation, unless the creditor has expressly waived his right or accepted the performance without reservation’. According to this provision, in the event of the debtor’s breach of the obligation, the creditor may demand both performance in kind and payment of the agreed penalty. Therefore, it is possible to demand the penalty clause in addition to the performance in kind (cumulative). Unlike the optional penalty clause, the creditor is not obliged to demand either the performance in full or the penalty. Here, the creditor is authorised to demand both. If the receivable that the creditor demands in addition to the performance in case of the debtor’s breach of the obligation is a penalty condition receivable, it does not require the damage condition. The creditor may demand a penalty condition in addition to the performance even if the creditor does not suffer a loss due to the breach of debt. The penalty condition added to the performance does not require the damage condition. The creditor may demand the agreed penalty condition even if the creditor does not suffer any loss due to the debtor’s breach of the obligation.
Penalty clause (rescission penalty) instead of performance; According to Art. l79 f. III of 6098 s. TCO (818 s. BK. Art. 158 f. III), ‘The debtor reserves the right to prove that he is entitled to terminate the contract by rescission or termination by performing the agreed penalty’. As explained above, the purpose of the penalty clause is to ensure that the debtor complies with the obligation. However, here, the debtor has the opportunity to get rid of the obligation by paying the penalty clause instead of fulfilling the obligation. In other words, here, the debtor does not act in breach of the obligation, but instead of fulfilling the obligation, the debtor may withdraw from the contract by paying the penalty clause. Therefore, the penalty condition replaces the performance (KILIÇOĞLU, op. cit., pp. 775-777).
As for the delay indemnity, the delay indemnity regulated under Article 118/I of the TCO No. 6098 (818 p. BK. Art. 106/2) aims to compensate the damage suffered by the creditor due to the late performance of the debt and aims to ensure the creditor’s interest in the delayed performance of the debt. Therefore, delay indemnity may be claimed together with the performance, or it may be claimed and sued after the performance even if the performance is performed after the default and a reservation (reservation) is not put forward, and delay indemnity may be sued separately even if it is not claimed in the performance case. (M…./…, General Provisions of the Law of Obligations, C.1, Istanbul 2011, p.488) Acceptance of the contrary leads to the default to remain unsanctioned for the debtor. The defaulting debtor is obliged to ‘compensate the damage suffered by the creditor due to the late performance of the debt’. The delay compensation covers the damages within the period from the date of default until full performance (p. 692).
The damage to be compensated in delay damages is a kind of positive damage, and refers to the difference between the state of the creditor’s assets in the event of performance of the debt without default and the state of the creditor’s assets as a result of delayed performance.
In the concrete case; there is no dispute between the parties regarding the lease agreement dated 27.09.2005 and for a term of 5+5 years. Article 20 of the lease agreement states that ‘the lessee is obliged to pay the rent within five days at the latest from the date of the contract.
If he fails to pay on time, he accepts and undertakes to pay a 10% delay penalty.’ Although the plaintiff lessor, in the execution proceedings, demanded a 10% monthly delay penalty according to Article 20 of the contract until the execution proceedings, in addition to the unpaid rent receivables; Considering that the delay penalty is not clearly stated as 10% per month in the contract, it is not correct to apply a delay penalty of 10% of the rent receivable for each month, while the delay penalty should be applied annually.
You can access our other article examples and petition examples by clicking