Newsletter-21

269 LAW OF OBLIGATIONS gained by the debtor due to non-fulfilment of its obligation, degree of fault and the gravity of the behaviour in violation of the obligation and in accordance with the principles of justice and equity ” 5 . The court must also consider the indemnification and penalty functions of the penal clause 6 and strike a balance between the facts of the specific case and the effectiveness of the penalty amount so as to force the debtor to fulfil its obligation. The court is authorized to reduce the amount only, not to eliminate it completely, or replace it with another type of penalty. An exception to this rule is the contractual penalty agreed to against the merchant debtor in commercial agreements. Article 22 of Turkish Commercial Code numbered 6102 7 sets forth that a mer- chant debtor cannot request the court to reduce the penalty due to its excessiveness. Conclusion A contractual penalty, or penal clause, eliminates the creditor’s obligation to prove its damages, and enables it to claim a pre-deter- mined and precise penalty amount. Claiming the contractual penalty is subject to the existence of debtor’s fault, but does not require the occurrence of damages to the creditor. A penalty obligation is subject to the primary obligation, and can be regulated for any type of obliga- tion, except for the obligations that are explicitly prohibited from be- ing subject to a penalty. Similarly, any type of penalty can be regulated under a contract. In principle, in the event the obligation is not duly fulfilled, or not fulfilled at all, the creditor shall be entitled to claim either the performance of the obligation or the penalty; whereas, it can claim both at the same time in the event the obligation is not fulfilled by the determined time, or at the determined place. The parties are free to determine the penalty amount under the contract, yet the court is authorized to reduce the amount if it deems excessive. 5 Turkish Court of Cassation 13th Civil Chamber, File No. 2015/504, Decision No. 2016/5643, Date: 23.02.2016 (www.kazancı.com ). 6 Turkish Court of Cassation 6th Civil Chamber, File No. 2013/679, Decision No. 2013/12298, Date: 12.09.2013 (www.kazancı.com ). 7 The TCC (Official Gazette, 14.02.2011, No. 27846) entered into force on 01.07.2012.