Penal Clause: A penal clause is included if it has been agreed that, in the event the parties fail to comply with the terms of the contract or do not comply as required, the non-compliant party shall pay a specified amount of money. Unlike damages, a penal clause does not require actual loss to have occurred. This may also be claimed even if the other party suffers no actual loss. The parties may freely determine the amount of the penalty clause. Penal clauses may arise in three ways:
-Optional Penal Clause:
Pursuant to Article 179/1 of the Turkish Commercial Code: “If a penalty has been established in the event of a contract’s non-performance or improper performance, the creditor may demand either the performance of the obligation or the payment of the penalty, unless otherwise agreed in the contract.” Accordingly, unless the parties agree otherwise in the contract, the stipulated penalty clause constitutes an “optional penalty,” and the creditor entitled to the penalty may exercise either the right to demand performance of the penalty clause or the right to demand performance of the obligation as agreed in the contract.
PENALTY CLAUSE/CONDITION OF REFUND IN CASE OF IMPEDIMENT TO PERFORMANCE:
There is no true penalty clause here. This is because a penalty clause protects the creditor’s interests. However, here the debtor has the right to withdraw from the contract by paying a specified amount of money. Unlike an optional penalty clause, the creditor has no right to choose here; they cannot demand performance, but may only request the application of the penalty clause.
-Performance-Based Penalty Clause:
According to Article 179/2 of the Turkish Commercial Code: “If a penalty has been stipulated due to the failure to perform the obligation at the specified time or place, the creditor may demand both the performance of the principal obligation and the payment of the penalty, provided that the creditor has not expressly waived this right or unconditionally accepted the performance.” Under this provision, a ruling may be issued against the party that fails to perform the obligation specified in the contract on time or with a delay, requiring both the performance of the obligation and the payment of the agreed-upon penalty. If the contract contains an explicit provision on this matter, the performing party will be obligated to pay this additional amount pursuant to the penalty clause.