When opening a bank account, buying household goods, hiring a vehicle or starting a new job, most of the contracts placed before us are not texts that the parties have drawn up together around a table. These texts have been prepared in advance and, more often than not, contain provisions that look to the interests of the party drafting the contract. Such stipulations, inserted into standard texts with the aim of conferring an advantage on the drafter, are known in legal language as general terms and conditions.
The Turkish Code of Obligations No. 6098 has provided for a series of protections designed to safeguard the party in the weaker position and has regulated the invalidity of general terms and conditions in detail. Below we address the criteria for identifying such terms, the conditions for their validity, the manner in which they are interpreted, the consequences of invalidity and examples frequently encountered in practice.
The Concept of General Terms and Conditions
Under Turkish law, the formation of a contract depends on the parties reaching mutual agreement on all the essential elements — that is, on their intentions coinciding with one another and on the text being drawn up in conformity with that agreement. On secondary points that are not regarded as decisive for the formation of the contract, no separate agreement between the parties is required. It is precisely on these secondary points that one of the parties is able to upset the balance in its own favour and to the detriment of the other, by presenting a standard text prepared in line with its own interests to everyone with whom it contracts. Provisions prepared before the date of the contract, intended for use in a large number of similar relationships and conferring an advantage on the drafter are regarded as general terms and conditions.
The definition of the concept appears in Article 20 of the Turkish Code of Obligations No. 6098. As the definition makes clear, in determining whether a provision constitutes a general term and condition it is of no significance whatsoever whether the stipulation is found in the main body of the contract or in an annex to it, nor do formal features such as the typeface matter. In other words, contractual provisions that serve the same purpose but have been drafted in different texts may equally be characterised as general terms and conditions.
As can be seen, even where the party drafting the contract seeks by various means to prevent its provisions from being regarded as general terms and conditions, the protective rules render that effort ineffective.
The Effect of a Clause Stating That All Provisions Have Been Accepted
In contracts of the kind described above, a clause is most often included to the effect that the signing party has accepted all the terms in the text.
The third paragraph of Article 20 of the Turkish Code of Obligations No. 6098, however, expressly limits the effect of clauses of this kind:
Turkish Code of Obligations No. 6098, Art. 20(3)
“Clauses inserted into a contract containing general terms and conditions, or into a separate contract, to the effect that each of these terms has been accepted after negotiation do not, on their own, deprive them of their character as general terms and conditions.”
Even where a clause with that content is present in the contract, it is not enough for the drafter to rely on that clause alone; it must also establish by other evidence that the terms were genuinely accepted by the other party.
Conditions for the Validity of General Terms and Conditions
The acquisition of binding force by general terms and conditions that operate in favour of the drafter and to the detriment of the other party is made subject to a two-stage process. The drafter must first expressly inform the other party of those matters which will operate to its detriment. If, following that information, the other party accepts the terms in question, the provisions become binding; otherwise the general terms and conditions are of no effect.
Alongside this two-stage scrutiny, the Act has also drawn two limits as regards content:
- Clauses conferring on only one of the parties the power unilaterally to amend a provision of the contract or to make a new stipulation are, by operation of law, deemed not to have been written.
- General terms and conditions that aggravate the other party’s obligations and place it at a disadvantage contrary to the rule of good faith and to equity are likewise regarded as invalid.
Interpretation of General Terms and Conditions
As is frequently seen in practice, contracts containing general terms and conditions are not always drafted in intelligible language. Drafters sometimes insert into the text provisions that the other party will struggle to grasp and that are capable of bearing more than one meaning.
The legislature has adopted a clear solution to this eventuality: general terms and conditions that are not clear and intelligible, or that are capable of bearing more than one meaning, are interpreted against the drafter and in favour of the other party to the contract.
Raising Invalidity
Where a contract contains a general term or condition meeting the criteria of invalidity explained above, that provision is, under Article 21 of the Turkish Code of Obligations No. 6098, deemed not to have been written; that is to say, it becomes invalid of its own accord. Accordingly, the consumer need not bring an action or make an application in order to secure the invalidity of the provision.
Where the drafter advances a claim in reliance on a term regarded as invalid, the other party to the contract may refuse performance.
Action for Damages Arising from an Invalid General Term
A person who suffers loss because an invalid term has in fact been applied may claim compensation for that loss by way of an action. Two matters must be proved in the action: that the provision is invalid, and that the loss sustained arises from the application of that provision.
The court with subject-matter jurisdiction is determined according to the content of the claim advanced. Bearing in mind that, in the case of general terms and conditions, the other party is most often in the position of a consumer, it may be said that the action will in all likelihood be heard before the consumer court. As regards territorial jurisdiction, the general rule — the court of the respondent’s place of residence — applies; in consumer actions the court of the consumer’s place of residence also has jurisdiction.
Examples of Invalid General Terms and Conditions
Provisions of the following kind are invalid of their own accord where they are incorporated into the contract without being negotiated with the consumer and without the consumer’s acceptance being obtained:
- Provisions conferring an arbitrary power of termination on the drafter without affording the same opportunity to the other party.
- Provisions granting the drafter a direct power of termination in contracts of indefinite duration, save where just cause exists, without any obligation to give notice and to allow a reasonable period.
- Provisions enabling the drafter, where it exercises the arbitrary power of termination conferred on it, to retain what it has received in return for performance it has not yet rendered.
- Provisions which, where the consumer withdraws from concluding the contract or from performance, stipulate a right of retention to the consumer’s detriment, while conferring no right to compensation in the consumer’s favour in the event that the drafter withdraws.
- Provisions stipulating that, where harm is caused to the consumer’s life or property as a result of the drafter’s negligence or of an act or conduct on its part, the drafter’s statutory liability may not be invoked or is to be limited.
- Provisions extinguishing or disproportionately restricting the consumer’s statutory rights — including the power to set off its claim against its debt — as against a drafter that fails to perform its contractual obligations at all or properly, or that renders defective performance.
- Provisions imposing, in the event of non-performance of the obligations stipulated in the contract, damages that are disproportionately high to the consumer’s detriment as compared with the drafter.
- Provisions holding the consumer bound to perform in every case, while making the drafter’s obligation to perform conditional solely upon the occurrence of certain circumstances.
- Provisions stipulating that, in the absence of just cause, the features of the goods or services forming the subject matter of the contract may be altered unilaterally by the drafter.
- Provisions allowing the rights and obligations arising from the contract to be assigned by the drafter without the consumer’s consent, in a manner capable of resulting in a reduction of the securities afforded to the consumer.
In addition to these, provisions that create an imbalance to the consumer’s detriment in the rights and obligations arising from the contract, contrary to the rule of good faith, and that are added to the contract without agreement having been reached with the consumer are characterised as unfair terms. That subject is addressed in a separate note entitled Unfair Terms in Consumer Contracts.
Independent Legal Assessment
In practice, scrutiny of general terms and conditions often begins to be debated years after the contract was signed, once enforcement of a claim or a request for compensation comes onto the agenda. Yet, since the sanction of being deemed not to have been written takes effect of its own accord, a scrutiny of the text carried out at an early stage may produce a result without even the need to bring an action.
These rules, directed at the protection of the weaker party, may arise not only in consumer relationships but also in commercial relationships established through standard texts. In a concrete dispute, the following headings should be given priority:
- Determining whether the disputed provision genuinely bears the character of a general term and condition
- Examining the evidence showing that the drafter discharged its duty to inform
- Bearing in mind that a clause stating that all the terms have been accepted cannot serve as a basis on its own
- Addressing uncertain or ambiguous wording within the framework of the rule of interpretation against the drafter
- Subjecting unilateral variation, arbitrary termination and exclusion of liability clauses to scrutiny as to content
Independent Legal provides advisory services in this field, from the drafting of standard contract texts through to the conduct of disputes based on general terms and conditions.