Newsletter-21

265 LAW OF OBLIGATIONS Contractual Penalty under Turkish Law* Att. Ecem Cetinyilmaz Introduction A contractual penalty, or penal clause, is used as a mechanism to force a debtor to duly fulfil its obligations under a contract. Whereas a creditor may claim its damages in accordance with the general provi- sions of the law of obligations, having a contractual penalty provision set forth under a contract eliminates the obligation to prove the dam- ages, and enables the creditor to claim a pre-determined and precise penalty amount. Contractual penalties are widely used in practice, especially in contracts with high values. The following sections of this newsletter article explain the legal characteristics and types of con- tractual penalties, as well as the amount, invalidity, and reduction of penalty. Legal Characteristic and Features of Contractual Penalty Although a contractual penalty is a type of performance obliga- tion that is subject to a dilatory condition, since it is specifically regu- lated under Turkish Code of Obligations numbered 6098 1 (“TCO”), it is primarily subject to these provisions, instead of the provisions regulating the conditions 2 . Parties to an agreement consent to a penalty in cases where the primary obligation is not fulfilled; therefore, a penal clause is not a stand-alone clause. A penalty obligation is subject to a primary obliga- tion, and can be regulated for any type of obligation, except for the ob- * Article of September 2016 1 The TCO (Official Gazette, 04.02.2011, No. 27836) entered into force on 01.07.2012. 2 Oğuzman, Öz , Law of Obligations General Provisions Volume 2, 9th Edition Updated and Extended in accordance with the New Turkish Code of Obligations No. 6098, Vedat Kitapçılık, İstanbul 2012, p. 504.