A significant proportion of the purchases consumers make today are made in instalments. Because paying the price in a single sum is difficult for most households, and because campaigns offering interest-free instalments have become widespread, this method of payment has become attractive from the consumer’s point of view. Taking account of that prevalence, the legislation also regulates the right of withdrawal separately for contracts concluded on an instalment basis, with the aim of protecting the consumer. Below we examine how the right of withdrawal operates in instalment sales.
The main body of the provisions protecting consumers is found in the Consumer Protection Act No. 6502. The instalment sale contract and withdrawal from that contract are regulated in the same Act; there is, however, also a dedicated instrument on the subject, the Regulation on Instalment Sale Contracts. The explanations below are made having regard to the rules in both texts together.
The Concept of an Instalment Sale Contract
The Act defines the instalment sale contract as a contract in which the seller or supplier undertakes the obligation to deliver the goods or perform the service, while the consumer pays the price in parts. What distinguishes this type of contract from the others is that the price is paid in parts.
The Act also lays down a condition of validity for these contracts: instalment sale contracts that are not concluded in writing are not treated as valid.
The practical consequence is this: in an instalment sale relationship that has not been drawn up in writing, the seller is not obliged to supply the goods or the service, nor is the consumer obliged to pay the price. That said, a seller who has collected the sale price cannot subsequently avoid performing his obligation by asserting that the contract was not made in writing.
The General Framework of the Right of Withdrawal
Withdrawal from a contract is, put at its simplest, the bringing to an end of the contractual relationship by the unilateral will of one of the parties. Under the general law, termination also imposes certain obligations on the party effecting it.
Indeed, a party who brings the contract to an end without justification may be required to pay damages to the other party; it may also be necessary for that party to make good the loss the other has suffered as a result.
Withdrawal in consumer contracts, by contrast, rests on a different rationale. Since this power conferred by the Act may be exercised without giving any reason, it is an institution distinct from termination of a contract in the classical sense.
The Procedure for Exercising the Right of Withdrawal and the Seven-Day Period
The consumer party to the contract may withdraw from the instalment sale relationship within a period of seven days, without having to give reasons and without paying a contractual penalty.
The starting point of this seven-day period varies according to the subject matter of the contract. In contracts for the performance of a service, the period begins to run on the day the contract is concluded. In contracts whose subject is the delivery of goods, the starting point is the day on which the goods are taken into possession by the consumer or by a third party designated by him. If the goods have not yet reached the consumer, the right of withdrawal may also be exercised during the period up to delivery.
The right is exercised by a notice expressing the intention to withdraw being conveyed to the seller. For the notice to be regarded as lawful, it is sufficient that it is directed to the seller or supplier in writing or by means of a durable medium within the withdrawal period.
Cases in Which the Right of Withdrawal Cannot Be Exercised
It was noted above that the consumer may exercise this right by notifying the seller of the intention to withdraw without giving reasons. The legislation has, however, also expressly provided for certain situations in which the right of withdrawal cannot be invoked.
Foremost among these is the ordinary use of the goods; if the consumer has subjected the goods to ordinary use, he may no longer withdraw from the instalment purchase contract. Put differently, the protection of the right of withdrawal depends on the goods received being used only to the extent required by an ordinary inspection.
Two further situations are listed alongside this: the right of withdrawal cannot be exercised in service contracts whose performance has begun with the consumer’s consent before the withdrawal period has expired, or in financial leasing transactions in which the consumer himself has found the seller.
The Consequences of Exercising the Right of Withdrawal
When the consumer exercises the right of withdrawal, a period of seven days begins to run from the moment the notice reaches the seller or supplier. Within that period the price collected and all documents placing the consumer under an obligation must be returned; no expense may be imposed on the consumer on account of the return.
The consumer who exercises the right of withdrawal also has an obligation: he must return the goods forming the subject of the contract to the seller within seven days of the date on which he exercised the right. If this is not done, the right of withdrawal is deemed not to have been exercised. The expenses arising from the return of the goods also remain with the consumer.
The right of withdrawal is an institution introduced entirely for the protection of the consumer. For that reason, a seller’s failure to recognise a notice of withdrawal that has been given in due form constitutes an unlawful act.
Nor does it alter the outcome for the seller to assert that there is an agreement between the parties to the effect that no return may be made and that the request therefore cannot be met; a clause of that content will amount to an unfair term and is accordingly treated as invalid. For a detailed assessment of the matter, reference may be made to our note entitled Invalidity of Standard Contract Terms Operating Against the Consumer.
The Competent Forum and Territorial Jurisdiction in the Event of a Dispute
Where a dispute arises out of withdrawal from an instalment sale contract, the forum with subject-matter and territorial jurisdiction is determined in accordance with the legislation.
The following distinction must be drawn first: if the monetary value of the dispute falls below the threshold for application to a consumer arbitration committee, the body that resolves it is the consumer arbitration committee. According to the rules published in the Official Gazette, that threshold was set at TRY 15,430.00 for 2022.
If the dispute exceeds that threshold, subject-matter jurisdiction passes to the consumer courts. Before an action is brought in the consumer court, the mediation stage must be completed; on this point our note entitled Mandatory Mediation in Consumer Actions may be of assistance.
If the mediation meetings end without agreement, the consumer may apply to the consumer court and claim the rights arising from withdrawal from the instalment sale contract.
As to territorial jurisdiction, under the general rule of jurisdiction in the Code of Civil Procedure No. 6100 the court of the respondent’s place of residence has jurisdiction. In addition, by virtue of a provision introduced in the consumer’s favour, the court of the place where the consumer is located is also accepted as having jurisdiction.
The Consumer Act contains provisions in the consumer’s favour under many headings, and similar facilities are provided in respect of court fees in any action brought. Our note entitled Litigation Costs and Fees in Consumer Actions may be examined on this point.
The Independent Legal Assessment
In disputes concerning the right of withdrawal, the argument is usually focused not on the existence of the right but on whether it was exercised in time and in due form. Because the starting point of the seven-day period varies according to the type of contract, a separate assessment is required in mixed transactions where the delivery of goods and the performance of a service are combined.
The second critical heading is proof. Being able to show that the notice reached the seller within the period is decisive for the protection of the right. Retaining the records of notices given through a durable medium is important for this reason.
The points to be borne in mind in practice are as follows:
- Checking at the outset whether the contract was concluded in writing
- Establishing on the facts of the particular case the date on which the seven-day period began to run
- Conveying the notice of withdrawal in writing or through a durable medium so that it is placed on record
- Avoiding any use of the goods that goes beyond the limits of an ordinary inspection
- Returning the goods to the seller within seven days of withdrawal
- Assessing clauses in the contract amounting to a prohibition on return from the standpoint of unfair terms
Independent Legal advises on and handles withdrawal and return disputes arising from instalment sale contracts, from applications to the arbitration committee through to the court stage.