Contractual penalty (ceza koşulu)

Legal meaning

In an alternative contractual penalty, the creditor may, as a rule, demand either performance of the obligation or the penalty. In a penalty added to performance, both performance and the penalty may be demanded under certain conditions. A rescission penalty (dönme cezası) is a different structure under which a party leaves the contract by paying the agreed amount.

Under Article 182/3 of the Turkish Code of Obligations (TBK), the judge reduces a contractual penalty regarded as excessive of its own motion. However, a debtor who is a merchant within the scope of Article 22 of the Turkish Commercial Code (TTK) cannot rely on this provision to request a reduction solely on the ground that the penalty is excessive. Review of validity under mandatory law and TBK Article 27 is a separate matter. The contractual penalty is closely connected with the validity of the principal obligation.

If damage exceeding the amount of the penalty is also claimed, the creditor must, under TBK Article 180/2, prove the debtor’s fault. In a contractual penalty relating to the time or place of performance, for the claim for the penalty to be preserved together with performance, an express waiver and the unreserved acceptance of performance are assessed separately (TBK Article 179/2).

Key elements and practical criteria

• It is tied to the principal obligation.
• It has alternative and added-to-performance types.
• The absence of damage does not in every case remove the penalty.
• Excessiveness and special commercial-law rules are examined separately.

Practical importance

Contractual penalties that are uncertain, unlimited or that overlap with more than one sanction may give rise to serious disputes. The clear definition of the breach, the amount or method of calculation, the upper limit and the relationship with other claims should be made clear in the contract.

Commonly confused concepts

• A contractual penalty is a contractual sanction; default interest is a statutory or contractual consequence tied to delay in a monetary debt.
• A withdrawal payment (cayma parası) is tied to a party’s authority to leave the contract; a contractual penalty is tied to breach of an obligation.

Practical example

If a penalty has been agreed for each day of delay in the event the delivery date is exceeded, whether it is a penalty added to performance, the reservation of rights (ihtirazi kayıt) and upper-limit provisions are examined.

Frequently asked questions

Can a contractual penalty be claimed even if no damage has arisen?

As a rule, claiming a contractual penalty does not depend on the existence of damage; however, validity, breach and special provisions are examined.

Can the court reduce the contractual penalty?

Under the general rule, the judge reduces an excessive contractual penalty of its own motion. For a debtor who is a merchant within the scope of TTK Article 22, the restriction on a reduction based solely on excessiveness applies separately.