TYPES OF CONTRACTS
Since the principle of freedom of contract exists in our law, the parties also have the opportunity to enter into completely different contracts that are not covered by the law or to enter into mixed-type contracts by combining the obligations defined in the contracts defined by the law. It should be noted that it is not possible to regulate all types of contracts that can be established in the Turkish Code of Obligations. Each of these contracts may have many variations within themselves, and each contract has its own consequences depending on its conditions.
1-Sales Contract
The sales contract is one of the most common types of contracts. A sales contract is a type of contract where the seller undertakes to transfer ownership of a good or an economic right to the buyer in exchange for a price owed by the buyer. Upon the completion of the sale, a good or an economic right is transferred to the other party in exchange for a certain amount of money.
A sales contract can be examined under two main headings: sale of movable property or sale of immovable property. The form of the sales contract and its terms and conditions vary depending on whether the sale concerns movable or immovable property.
TBK Art. 207: A sales contract is a contract in which the seller undertakes to transfer possession and ownership of the sold item to the buyer, and the buyer undertakes to pay a price in return.
Unless otherwise agreed in the contract or unless there is a contrary custom, the seller and buyer are obligated to perform their obligations simultaneously. The price, which can be determined according to the circumstances and conditions, is deemed to be the agreed price.
The sale of movable property is the sale of items that are not considered immovable under the Turkish Civil Code and are specified as movable in other laws. Except in cases arising from the law, the requirements of the situation, or special conditions stipulated in the contract, the benefits and damages of the sold item belong to the seller until the transfer of possession in the sale of movable property and until the registration in the sale of immovable property.
In sales of movable property, if the buyer defaults on taking possession of the sold item, the benefits and risks of the sold item shall pass to the buyer as if possession had been transferred.
The validity of a sale of movable property is subject to the condition that the contract is drawn up in a formal manner. Promises to sell immovable property, repurchase agreements and purchase agreements are also invalid unless they are drawn up in a formal manner. For a pre-emption agreement to be valid, it is sufficient that it be made in writing.
2-Distance Selling Contract
With the integration of the internet and social media into our daily lives and the increase in internet usage, we have reached a point where we can meet many of our needs through the internet. Since the implementation of curfews as part of Covid-19 measures, many of us have been inclined to meet all our basic needs, including grocery shopping, online. The distance selling contract is a legal relationship established through online purchases, protecting both the buyer and the seller, and is an adaptation of the sales contract for online shopping.
The consumer is informed in a clear and understandable manner about the details specified in the regulation and the payment obligation that will arise upon confirmation of the order before accepting the distance contract or any corresponding offer made by the seller or provider.
The distance sales contract in online shopping contains detailed information about the goods and services, as well as information about return and cancellation conditions, with the aim of preventing issues that may arise during and after the transaction. The completion of a sale in e-commerce is only possible after the buyer has approved the distance sales contract, i.e., by checking the ‘I have read and agree’ section.
3-Barter (Exchange) Agreement
Barter is the exchange of one good for another. A barter agreement is a contract that imposes obligations on both parties. Both parties to the agreement are obligated to give something. A barter agreement cannot be made in cash. The subject matter of a barter contract must be goods. However, if there is a difference in value between the goods to be exchanged, the difference in value may be compensated by paying a certain amount of money to the other party.
Article 283 of the Turkish Civil Code: The provisions relating to sales contracts also apply to goods exchange contracts; accordingly, each party is a seller with respect to the thing it undertakes to deliver and a buyer with respect to the thing it undertakes to receive.
The subject matter of the barter contract may be movable or immovable property. If the subject matter of the barter contract is movable property, the contract must be executed in the form of a deed of transfer of possession of the goods; if the subject matter of the barter contract is immovable property, the barter contract must be executed in the form of a deed at the Land Registry Office.
4-Gift Agreement
A gift agreement is a contract whereby one party transfers ownership of an item to another party without compensation. The item to be gifted may be movable or immovable property or a right of economic value.
Article 286 of the Turkish Civil Code: Any person with legal capacity may make a donation, subject to the restrictions arising from the property regime between spouses or inheritance law.
If, as a result of legal proceedings initiated within one year following the donation, it is determined that the donor has been restricted due to extravagance, the donation may be revoked by the court.
A donation may be made by hand or through a donation promise contract. If the donated item is movable, the donation is completed through delivery; if the donated item is immovable, the donation is completed by registering the recipient as the owner in the land registry; if the donated item is a right, the donation is completed through the transfer of the right.
5-Lease Agreement
One of the most common types of contracts we encounter in daily life is the lease agreement. A lease agreement is a type of contract that provides the right to use a property or a right in exchange for a fee. Like the sale of a property, leasing is also a common legal transaction.
The basic elements of a lease agreement are the property or right to be leased. This property may be movable or immovable. If the right to be leased is a right, it must be a right suitable for use or for generating income. Lease agreements also have their own types, which are ordinary lease agreements and income lease agreements.
Ordinary Lease Agreement: Under an ordinary lease agreement, the lessor undertakes to allow the lessee to use a specific property in exchange for a fee. There is no formal requirement for an ordinary lease agreement, meaning it can be made in writing or orally. However, it is recommended that ordinary lease agreements be made in writing to facilitate proof in the event of a dispute.
Profit-Sharing Lease Agreement: A profit-sharing lease agreement is a lease agreement whereby the lessor undertakes to grant the lessee the use and operation of a property suitable for generating products or profits, or a certain amount of money or an economically valuable right, and to transfer the products or profits that may be obtained as a result of such use and operation to the lessee, in exchange for which the lessee undertakes to pay a fee. A revenue lease agreement may be made in writing or orally.
6-Consumption Loan Agreement
A consumption loan agreement is a contract whereby the lender transfers a certain amount of money or a consumable item to the borrower, and the borrower undertakes to return the same item in the same quality and quantity.
Whether the consumption loan agreement is a commercial agreement or not is decisive in terms of charging interest. In a non-commercial consumption loan agreement, interest cannot be charged unless agreed upon by the parties. In a commercial consumption loan agreement, however, interest may be charged even if not agreed upon by the parties.
7-Usage Loan Agreement
A usage loan agreement is a contract in which the lender grants the borrower the right to use an item free of charge, and the borrower undertakes to return the item after use.
The borrower may not use the loaned item in a manner inconsistent with the terms of the contract, or in a manner inconsistent with its nature or intended purpose if no such terms are specified in the contract. The borrower may not allow another person to use the item. If the borrower acts in violation of these provisions, they shall be liable for any damages arising from unforeseen circumstances. The borrower may be exempt from liability only if they can prove that the damage would have occurred even if they had complied with these provisions.
8-Service Contract
A service contract is a type of contract in which one party undertakes to provide services in exchange for payment. In general, a service contract is a legal relationship between a person who employs another person in exchange for payment and the person who works in exchange for payment. The person who undertakes to provide services is called the employee, and the person who employs them is called the employer.
A service contract is not subject to any special form unless otherwise provided by law. A service contract that is later found to be invalid will still produce all the provisions and consequences of a valid service contract until the service relationship is terminated.
9-Domestic Service Contract
A domestic service contract is a type of contract where the employee undertakes to perform the work assigned by the employer at their own home or another location of their choice, either personally or with the assistance of family members, in exchange for wages.
The employer informs the employee of the specific characteristics of each new task, excluding general working conditions; if necessary, the employer also informs the employee in writing of the materials to be provided by the employee, the amount to be paid for the provision of such materials, and the remuneration to be paid for the task.
10-Work Contract
A work is a tangible result created through physical or intellectual labour, using the necessary tools and materials. The person who creates the work is called the contractor, and the party obligated to pay the fee is called the client.
A work contract is a type of contract between the contractor, who undertakes to create a work in exchange for a fee, and the client, who undertakes to pay a fee in exchange for the work. A work contract is not subject to any formal requirements.
Under the heading ‘No Personal Obligation to Perform’ in Article 83 of the Turkish Code of Obligations, the circumstances under which the debtor is not required to personally perform the obligation are regulated. Based on this, it can be concluded that unless the creditor has an interest in the debtor personally performing the obligation, the debtor is not obligated to personally perform the obligation. However, if the creditor has undertaken a task where the debtor’s personal skills and experience are paramount, the debtor must personally perform the obligation.
11-Publication Agreement
A publication agreement is a contract whereby the owner or successor of a work of literature or art transfers the work to a publisher for publication, and the publisher undertakes to reproduce and publish it. It is highly beneficial to conclude contracts regarding the rights to a work before using it, as this will help resolve any disputes that may arise later. With a publication contract, the rights of the author are transferred to the publisher to the extent and for the duration required by the performance of the contract.
The validity of a publishing contract depends on it being in writing. The transfer of translation rights to the publisher depends on this being clearly stated in the contract.
12-Agency Contract
An agency contract is a contract established between the principal and the agent, whereby the agent undertakes the responsibility of performing work in accordance with the principal’s interests and intentions. Individuals may entrust the management of a business, the performance of a transaction, or the provision of a service to a person who is not bound by a service contract. The relationship between the person who entrusts the management, performance, or provision of a business to another person and the person who undertakes to perform that business is a power of attorney contract.
A power of attorney agreement is not subject to any specific form. In fact, a power of attorney agreement may be established by an express or implied declaration of intent. Even if the power of attorney agreement is not established by the express declarations of intent of the parties, a power of attorney relationship may arise between the parties if the principal does not object to the acts performed by the agent and subsequently gives their approval.
If the scope of the power of attorney is not clearly stated in the contract, it is determined according to the nature of the work to be performed. The power of attorney also includes the authority to perform the legal procedures necessary for the agent to perform the work undertaken. Unless specifically authorised, the agent cannot file a lawsuit, settle a dispute, apply to an arbitrator, file for bankruptcy, request a stay of bankruptcy or a concordat, make a promissory note, make a donation, act as a guarantor, transfer real estate, or restrict a right. If there is a contract or custom, the agent is entitled to a fee.
13-Deposit Agreement (Vedia)
A legal relationship established between the person who leaves something for safekeeping and the person who receives it is a deposit agreement. A deposit agreement is not subject to any formal requirements and may be made in writing or orally.
If a time period is agreed upon in the deposit contract, the depositary cannot return the deposit before the end of that period. However, the depositor may request the return of the deposit at any time without being bound by the time period. If the storage period is not specified in the contract, either party may terminate the contract at any time.
14-Surety Agreement
A surety agreement is a contract whereby the surety undertakes to be personally liable to the creditor for the consequences of the debtor’s failure to perform the debt. A surety agreement is a contract established to secure the payment of a debt, whereby a third party, i.e. the surety other than the principal debtor, undertakes to pay the debt when necessary. There are important elements for a surety agreement to be valid:
Firstly, the monetary debt subject to the surety must be based on a valid debt relationship. The surety must express their intention to act as surety. This expression of intent must be in writing and signed by the surety. The document signed by the guarantor must clearly state the debt for which the guarantee is provided, the identity of the debtor, and the maximum amount for which the guarantor is liable. The guarantor becomes a creditor to the principal debtor to the extent of the debt paid to the creditor, and thus the guarantor can also claim from the debtor the amounts paid to the creditor.
The special conditions agreed upon between the guarantor and the creditor are decisive in terms of the guarantor’s liability. If the guarantor’s liability is limited to certain legal transactions or actions in the guarantee agreement, the guarantor cannot be held liable for anything beyond these legal transactions and actions.
Since the scope of the guarantor’s liability is limited to the principal debt, the guarantor will not be liable for any subsequent increase in the principal debt amount. However, in some cases, the guarantor’s liability is affected by changes in the principal debt amount.
15-Credit Agreement
A credit agreement is a type of contract in which the party granting the credit undertakes to provide credit to the borrower on a continuous basis, subject to a certain limit, and receives interest and commission in return. Credit agreements are typically entered into between a bank and a merchant. Credit agreements are made in writing.
16-Exclusive Distribution Agreement
An exclusive distribution agreement is a type of contract established between a manufacturer that produces goods in series and a single distributor who agrees to continuously purchase the goods and sell them in a specific region under their own name and account. An exclusive distribution agreement is a contract under which the manufacturer of the products undertakes to send a portion or all of the products to the exclusive distributor in exchange for payment, and the exclusive distributor undertakes to sell the products in its own name and on its own account to increase the sales of the goods. An exclusive distribution agreement may be entered into for a specific period or for an indefinite period.
17-Contract for Sale by Consignment
In a contract for sale by consignment, the consignor undertakes to deliver a good to the other party for sale in their own name and on their own account in exchange for an agreed price, while the consignee undertakes to pay the agreed price and return any unsold goods.
In other words, the goods are not sold directly to someone but are left with someone for sale. The party to whom the goods are left sells as much of the goods as they can and pays the seller the agreed proportion of the proceeds from the sale, returning any remaining goods to the seller.
18-Franchising Agreement (Marketing Franchise Agreement)
Franchising, a sector that has gained prominence in recent years, refers to a business relationship established with established, well-known, and successful companies in exchange for a certain fee, covering production, marketing, and distribution processes, and providing support for the management and execution of the business. A franchising agreement is formed between the franchisor and the franchisees.
19-Brokerage Agreement
A broker is a person who brings together individuals with mutual interests and acts as an intermediary between them. Brokers receive a commission for this service.
A brokerage agreement is a contract in which the broker undertakes to facilitate the establishment of a contract between the parties or to act as an intermediary in its establishment, and is entitled to a fee upon the establishment of such a contract. In a brokerage contract, provisions relating to agency generally apply. A brokerage contract concerning immovable property is not valid unless it is in writing.
The broker is only entitled to a fee if a contract is concluded as a result of their activities. If the contract concluded as a result of the broker’s activities is subject to a condition precedent, the fee is paid upon the fulfilment of the condition.
20-Commission Agreement
Purchase or sale brokerage is a type of agreement whereby the broker undertakes to purchase or sell securities and movable property on his own behalf and on behalf of the principal in exchange for a fee. The broker is obliged to inform the principal about the work he has done and, in particular, to notify him immediately when his instructions have been carried out.
The broker may request payment of their fee upon completion of the work entrusted to them, or if the failure to perform the work is due to a reason attributable to the principal. If the broker acts in breach of the rules of good faith towards the principal, particularly by reporting a price higher than the purchase price or lower than the sale price, they lose their right to receive payment.
21-General Partnership Agreement
A general partnership agreement is a type of contract in which two or more persons undertake to combine their labour and property for a common purpose. Each partner is obligated to contribute a share to the partnership in the form of money, receivables, other property, or labour. Unless otherwise agreed in the agreement, the shares must be equal in importance and quality as required by the purpose of the partnership. The partners are obligated to share all profits belonging to the partnership among themselves.
Article 623 of the Turkish Commercial Code: Unless otherwise agreed in the contract, each partner’s share in profits and losses is equal, regardless of the value and nature of their contribution.
If one of the partners’ shares in profits or losses is specified in the contract, this specification also applies to the other partner’s share.
An agreement that a partner will participate only in profits without participating in losses is valid only for a partner who has contributed only their labour as their participation share.
22-Life Care Agreement
A life care agreement is a contract in which the care provider undertakes to care for and look after the care recipient until their death, and the care recipient undertakes to transfer certain assets or the value of certain assets to the care provider. A life care agreement is a bilateral contract. One party undertakes to provide care until death, while the other party undertakes to transfer a certain portion of their assets to the caregiver until death.
A life care contract is not valid unless it is made in the form of an inheritance contract, even if it does not include the appointment of heirs. If the contract is made by a state-appointed care institution in accordance with the conditions determined by the competent authorities, it is sufficient for it to be made in writing for it to be valid.
23-Lifetime Income Contract
A lifetime income contract is a type of contract in which the income debtor undertakes to make certain periodic payments to the income creditor for the duration of the life of one of them or a third party. Unless otherwise expressly provided, the contract is deemed to have been made for the duration of the income creditor’s life. Income that is limited to the lifetime of the income debtor or a third party passes to the income creditor’s heirs unless otherwise agreed. The validity condition of a lifetime income contract is that it must be made in writing.
TBK Art. 607: Unless otherwise expressly provided, the contract is deemed to have been made for the lifetime of the income creditor.
Income that is limited to the lifetime of the income debtor or a third party passes to the income creditor’s heirs unless otherwise agreed.
24-Land Share Construction Contract
Land share construction contracts have become a common type of contract in recent years. However, land share construction contracts are not regulated under the Turkish Code of Obligations. A land share construction contract is a contract in which the landowner delivers the land to the party that will carry out the construction in a manner suitable for construction, and the party carrying out the construction, i.e., generally the contractor, undertakes the obligation to construct on the land and deliver the portion corresponding to the land share to the landowner.
25-Factoring Contract
Factoring is a financing method applied to domestic and international trade transactions, particularly in short-term goods sales. Institutions providing factoring services are referred to as factoring companies. A factoring contract is entered into between a factoring company and a merchant, i.e., a seller, who sells goods on credit or provides services to domestic and international buyers.
