Türkçe
As the Coronavirus (Covid-19), which has started in Wuhan, China and spread to the whole world within a short time, become effective within Turkey, the Turkish Government has announced some measures to prevent the spread of the epidemic and these measures affect especially the employers in the private sector. At this point; everyone engaged in trade is wondering whether the measures taken under COVID-19 can be regarded as a force majeure event regarding the performance of obligations under contracts.
What is Force Majeure?
In accordance with pacta sunt servanda principle, the parties are obliged to fulfill their obligations under a contract signed by the same. However, this principle is not an absolute and unlimited one and several exceptions have been brought under the law. One of those exception is the “force majeure event”.
Although force majeure is accepted as one of the reasons for justified termination of the contract under Turkish law, there is no legal regulation defining force majeure or its criteria. For this reason; Supreme Court decides in each separate case whether the force majeure event, which is based on the termination or suspension of the contract, makes it impossible to perform the commitments and obligations under a contract.
Does Coronavirus (Covid-19) Epidemic Constitute a Force Majeure Event?
In order for a party to refrain from performance of its obligations under a contract due to force majeure, first of all; such force majeure event should happen and also should make it impossible for such party to perform its obligations under the contract.
Proving the existence of force majeure event may vary for each case. Currently, many circulars and decree are published under the measures taken by the government due to the Corona virus pandemic. These regulations mostly restrict the activities of certain business sectors. Companies and traders operating in these sectors will of course be able to prove existence of force majeure based on these circulars and decrees. For example; a lawyer relying on a circular stating that enforcement proceedings cannot be commenced until 30 April 2020 will be exempted from his obligation to commence an execution proceeding on behalf of his client until the date determined under the circular. This situation creates a force majeure for the lawyer.
In addition; apart from legal regulations, some administrative decisions taken by the government and defacto situations may also prove the existence of force majeure. For example, situations such as prevention of entry-exit to some cities, curfews imposed with a certain age restriction, closure of some facilities with an administrative decision or cease or stoppage of work due to illness of many of the employees may constitute a basis for the force majeure claim.
However, the existence of force majeure is not sufficient alone to refrain from the performance of the contract. As we mentioned above; the force majeure event should make it impossible to perform the obligations under the contract. For example; if a contractor undertaking an obligation for the installation of a solar power plant cannot continue its activities due to the ban on entry-exit to the province or district where the installation will be made due to the epidemic, this may constitute a force majeure event for the contractor in question. However, the Corona Virus epidemic, which constitutes a force majeure for the contractor, would not constitute a force majeure for the employer and the employer will be obliged to perform his payment obligations under the contract for the works already performed by the contractor. Although the force majeure event is existing, such force majeure event does not prevent the performance of the obligations of the employer, since the banks still work and money transfer is still possible, while the same constitute a force majeure for the contractor since it is impossible for him to fulfill his obligations.
As can be understood; existence of the pandemic within Turkey would not be considered as a force majeure alone and, due to the nature of the force majeure claims, the performance of the obligations of the party making this claim under the contract should become impossible due to this epidemic. In other words; there must be a cause-effect relationship between the force majeure event and the failure to fulfill the obligations.
For example; if all or a significant number of employees at a facility are quarantined or there is a judicial or administrative decision for the closure of the facility and therefore the company is unable to produce and deliver the products that it has undertaken under a contract, then such company may claim force majeure due to Coronavirus (Covid-19) epidemic. However, the debtor who refrains from performance of his obligations due to the declaration of a general pandemic without having any justified reason or administrative / judicial decision to stop the production at his facility, will be in default within the scope of the contract and will be liable to compensate the damages of the counter party due to such default.
Should we also Consider the Contract Provisions Regarding the Force Majeure?
Since there are no comprehensive regulations regarding force majeure under Turkish Law, this issue is generally regulated in detail under the contracts. In this case; definitely the contract provisions should also be applied regarding the force majeure claim. For example; if a certain period is imposed for notification of force majeure claim under the contract, any claim which is not notified within such period will be null and void and the party who is willing to rely on a force majeure event will lose its right to make such a claim and to refrain from the performance of its obligations under the contract even if the same proves the existence of the force majeure.
Therefore; in order not to lose any rights regarding force majeure, it is important to take into consideration of the contract provisions together with the general provisions of law.
ERKUT LAW OFFICE
For Turkish version, click here.
