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BUSINESS LAW (BLAW 202) – Lecture Notes law and other social rules and conventions 2 I Law as Social Order 2 A) Relationship between law and morality 3 B) Law As A Cultural Construct 4 II Sources of Law 4 Legal Sources of Turkish Law 4 III) LEGAL SYSTEMS 8 A) Common Law & Civıl Law 8 Differences between common law and civil law 9 B) Islamic Law 11 C) Socialist law 12 Private law and public law 13 I) In general 13 III) Areas of Public Law 17 A) Constitutional law 17 B) Administrative law 20 C) Criminal Law 21 II) Areas of Private Law 23 A) CIVIL LAW 23 B) Law of Obligations 30 Contract and TORT 32 I) Law of contracts 32 A) Principle of Freedom of Contract 32 B) Formation of Contracts 33 C) Representation (Temsil) 35 D) Classification of Contracts, in terms of the degree of their enforceability 35 E) Termination of Contracts 36 II) Tort 36 A) Elements of an action in tort 37 B) Strict liability 38 SECURITY CONTRACTS 39 I) Personal Securities 39 A) Suretyship (Kefalet) 39 B) Guarantees (Garanti) 43 C Bills of Exchange Guarantees (Avals) 43 II) Real Securities 44 A) Real Security over Immovable Property 44 B) Real Security over Movables 46 LAW OF SALES CONTRACTS 47 I) Sales contracts ın general 47 II) United Nations Convention on Contracts for the International Sale of Goods (CISG) 48

BUSINESS LAW (BLAW 202) – Lecture Notes LAW-lecture notes week... · BUSINESSLAW(BLAW202)–’LectureNotes’! law’and’other’socialrules’and’conventions’ 2! ... Real!Security!over!Immovable!Property!

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BUSINESS  LAW  (BLAW  202)  –  Lecture  Notes    

law  and  other  social  rules  and  conventions   2  I-­‐  Law  as  Social  Order   2  A)  Relationship  between  law  and  morality   3  B)  Law  As  A  Cultural  Construct   4  

II-­‐  Sources  of  Law   4  Legal  Sources  of  Turkish  Law   4  

III)  LEGAL  SYSTEMS   8  A)  Common  Law  &  Civıl  Law   8  Differences  between  common  law  and  civil  law   9  B)  Islamic  Law   11  C)  Socialist  law   12  

Private  law  and  public  law   13  I)  In  general   13  III)  Areas  of  Public  Law   17  A)  Constitutional  law   17  B)  Administrative  law   20  C)  Criminal  Law   21  

II)  Areas  of  Private  Law   23  A)  CIVIL  LAW   23  B)  Law  of  Obligations   30  

Contract  and  TORT   32  I)  Law  of  contracts   32  A)  Principle  of  Freedom  of  Contract   32  B)  Formation  of  Contracts   33  C)  Representation  (Temsil)   35  D)  Classification  of  Contracts,  in  terms  of  the  degree  of  their  enforceability   35  E)  Termination  of  Contracts   36  

II)  Tort   36  A)  Elements  of  an  action  in  tort   37  B)  Strict  liability   38  

SECURITY  CONTRACTS   39  I)   Personal  Securities   39  A)   Suretyship  (Kefalet)   39  B)  Guarantees  (Garanti)   43  C-­‐  Bills  of  Exchange  Guarantees  (Avals)   43  

II)  Real  Securities   44  A)   Real  Security  over  Immovable  Property   44  B)  Real  Security  over  Movables   46  

LAW  OF  SALES  CONTRACTS   47  I)   Sales  contracts  ın  general   47  II)   United  Nations  Convention  on  Contracts  for  the  International  Sale  of  Goods  (CISG)   48  

A)  In  general   48  B)  Sphere  of  Application  and  General  Provisions  (Articles  1-­‐13)   50  B)  Formation  of  the  Contract  (Articles  14–24)   54  C)  Sale  of  Goods  (Articles  25–88)   55  

III)   BASIC  ELEMENTS  OF  AN  INTERNATIONAL  SALES  CONTRACT   62  A)   Preamble    &  Recital   62  B)  The  delivery  method-­‐  Incoterms   63  

IV)   ICC  MODEL  SALES  CONTRACT   71  Gaps  in  the  Model  Contract   88  

   WEEK  1-­‐2    LEARNING OUTCOME ¢Distinguish between law and other social rules and conventions ¢ Distinguish between civil law and common law  

LAW AND OTHER SOCIAL RULES AND CONVENTIONS  LAW:  Oxford  English  Dictionary  The   body   of   rules,  whether   formally   enacted   or   customary,  which   a   particular  State   or   community   recognizes   as   governing   the   action   of   its   subjects   or   its  members  and  which  it  may  enforce  by  imposing  sanctions.      I-­‐  LAW  AS  SOCIAL  ORDER  

One   of   the   prominent   characteristics   of   every   social   structure   is   that,  some  degree  of  order   is  needed   in  order   to   enable   individuals   to   interact     and  organize   their   relationships.   In   today’s  modern   society   law  plays   an   important  role  in  establishing  and  maintenance  of  social  order.  However  law  is  not  the  only  means  to  institute  order  in  human  relations.    

           

         

• You shall not make for yourself an idol • You shall not kill  • You shall not commit adultery  • You shall not steal  • You shall not bear false witness against your

neighbor  • You shall not covet anything that belongs to your

neighbor.   from the “Ten Commandments”  

Legal  rule,  moral  rule,  religious  rule  and  social  conventions  altogether  make  up  the   social   order.   Difference   is:   Failure   to   adhere   to   legal   rules   may   result   in  sanctions   imposed   by   the   state.   Law   and   power   are   closely   connected.   In   a  lawless   society,   power   will   reign   supreme,   while   in   a   society   of   rule   of   law,  power  is  reigned  by  the  law.    

To   sum   up:   Laws   are   –enforceable-­‐   rules   regulating   the   activities   of  societies   and   a   set   of   such   rules   regulating   a   particular   society   at   a   particular  time   is   called   a   legal   system.   “Law”   means   objective   rules,   but   “Right”   is   a  subjective  authority  given  to  a  person  for  use  of  the  rules  of  Law.    

 Some  examples  of  non-­‐binding  social  rules,  which  still  design  the  social  structure  and  social  interactions:      -­‐-­‐Religious  Rules  (Dini  Kurallar)  -­‐-­‐  Moral  Rules  (Ahlak  Kuralları)  -­‐-­‐Customary  Practices  (Örf  ve  Adet)  -­‐-­‐Rules  of  Conduct-­‐Etiquette  (Davranış  Kuralları)    A)  RELATIONSHIP  BETWEEN  LAW  AND  MORALITY  

 -­‐ Morality  and   law  are  not   identical  and  do  not   coincide.  The  proof   is   the  

existence  of  unjust  laws,  such  as  those  enforcing  slavery.  For  example,  the  issue  of  same  sex  marriage  creates  some  tension  between  moral  rules  and  constitutional  right  of  personal  freedom.    

-­‐ Law   and   morality   have   a   strong   tendency   to   overlap.   The   existence   of  laws   that  serve   to  defend  basic  values-­‐-­‐such  as   laws  against  murder…  -­‐-­‐prove   that   the   two  can  work   together.  Morality  can   influence   the   law   in  the   sense   that   it   can   provide   the   reason   for   making   certain   groups   of  immoral  actions  illegal.  

 -­‐ Law   and   morality   are   different   in   the   manner   that   each   achieves  

obedience.   For   laws,   people   obey   “at   least   partly   through   fear   of  punishment” 1  whereas   with   morality,   people   obey   because   what   is  morally   correct   is   “habit-­‐like   or   second   nature.   Social   norms   are   the  motley   of   informal,   often   unspoken   rules,   guides   and   standards   of  behavior  the  authority  for  which  is  vague  if  not  diffuse,  and  the  communal  sanction   for   which   can   be   swift   and   cutting.   These   nonlegal   rules   and  

                                                                                                               1  Garrett,  J.  Basic  Observations  on  Law  and  Morality.  http://www.wku.edu/~jan.garrett/320/320lawmo.htm  

obligations   are   followed   and   fulfilled   in   part   because   failure   to   do   so  brings  upon  the  transgressor  such  social  sanctions  as  induced  feelings  of  guilt,  shame  or  threat  of  condemnation  from  the  society.2  

   B)  LAW  AS  A  CULTURAL  CONSTRUCT    

Each   society   develops   and   implements   a   system   of   justice   based   upon,  and   reflective   of,   the   perceived   values   and   needs   at   a   given   time.   Law   is   a  reflection   of   the   cultural   beliefs   of   dominant   groups   within   society,   with   the  administration   of   justice   and   the   application   of   law   as   a   function   of   the  worldview  of  a  community  in  time  and  place.  Subsequently,  the  approach  of  one  cultural  group  toward  legal  and  justice  issues  may  be  very  different  from  that  of  another.   In   any   society,   something   is   an   offence   under   law   only   because   the  society  has  deemed  it  to  be  so.  

   

 II-­‐  SOURCES  OF  LAW    

 The  sources  of  Turkish  domestic  law,  in  descending  order  of  importance,  are  • The  Constitution  of  Turkey  (Anayasa)  • Laws  (Codes  or  Statutes)  (Kanun)  • International  treaties  (Milletlerarası  Anlaşmalar)  • Decree  Laws  (statutory  decrees)  (Kanun  Hükmünde  Kararname)  • Regulations  (Tüzük)  • By-­‐laws  (Yönetmelik)    LEGAL  SOURCES  OF  TURKISH  LAW    The  primary  sources  of  Turkish  law  are  the  constitution,  laws,  statutory  decrees,  international  treaties,  regulations,  and  by-­‐laws.    

 

1-­‐The  Constitution      The  highest  source  of  Turkish  legal  order  is  the  constitution.  According  to  Article  11  of  the  Constitution:    

“The   provisions   of   the   Constitution   are   fundamental   legal   rules  binding   upon   legislative,   executive   and   judicial   organs,   and  

                                                                                                               2  Patrick  S.  O’Donnell,  Social  Norms  &  Law:  An  Introduction  

administrative   authorities   and   other   institutions   and  individuals.    Laws  shall  not  be  in  conflict  with  the  Constitution.”      

2-­‐Statutes    The   Turkish   Grand   National   Assembly   holds   the   power   to   make,   amend,   and  abrogate   laws   as   authorized   by   article   87   of   the   Constitution.   Article   88   holds  that  legislative  bills  shall  be  proposed  by  the  Council  of  Ministers  and  individual  deputies.   Such   bills   are   debated   and   adopted   by   the   Parliament   in   its   plenary  session   with   a   simple   majority   as   regards   with   ordinary   bills.   According   to  Article  96  of  the  Constitution:      

“Unless  otherwise   stipulated   in   the  Constitution,   the  Turkish  Grand  National  Assembly  shall  convene  with  at  least,  one-­‐third  of  the  total  number  of  members  and  shall  take  decisions  by  an  absolute  majority  of   those   present;   however,   the   quorum   for   decisions   can,   under   no  circumstances,  be  less  than  a  quarter  plus  one  of  the  total  number  of  members.    

Members  of  the  Council  of  Ministers  may  delegate  a  minister  to   vote   on   their   behalf   in   sessions   of   the   Turkish   Grand   National  Assembly  which  they  are  unable  to  attend.  However,  a  minister  shall  not  cast  more  than  two  votes  including  his  or  her  own.”    

   According  to  article  89  of  the  Constitution,  legislative  bills  adopted  by  the  Grand  National  Assembly  shall  be  submitted  to  the  President  of  the  Republic   for  their  promulgation.   He   shall,   within   the   same   period,   refer   to   the   Turkish   Grand  National  Assembly  for  further  consideration,   laws  which  he  deems  wholly  or  in  part  or  unsuitable  for  promulgation,  together  with  a  statement  of  his  reasons.  In  the   event   of   being   deemed   unsuitable   by   the   President,   the   Turkish   Grand  National  Assembly  may  only  discuss   those  articles  deemed   to  be  unsuitable  by  the  President.  After  that  if  the  Grand  National  Assembly  readopts  the  bill  without  a   change,   the   bill   shall   be   promulgated   by   the   President.   Due   to   time  considerations  bills  concerning  the  budget  are  excluded  from  this  scrutiny  of  the  President.  Laws  are  only  enacted  by  publication  in  the  Official  Gazette.      

3.  Statutory  Decrees    The   Turkish   Grand   National   Assembly  may   empower   the   Council   of   Ministers  with   a   legislation   to   issue   decrees   having   the   force   of   law.   However,   the  fundamental  rights,  individual  rights  and  duties  included  in  the  First  and  Second  Chapter  of  the  Second  Part  of  the  Constitution  and  the  political  rights  and  duties  

listed   in   the   Fourth   Chapter,   cannot   be   regulated   by   decrees   except   during  periods  of  martial  law  and  states  of  emergency.  In  addition  to  that;  the  purpose,  scope,principles   and   operative   period   of   the   decree   shall   be   defined   in   the  empowering  legislation.      Such  statutory  decrees  have  the  same  legal  effects  as  laws.  As  mentioned  above  the   1982   Constitution   makes   a   distinction   between   the   two   categories   of  statutory   decrees:   decrees   adopted   under   normal   circumstances   as   stated   in  Article   91;   and   those   adopted   under   circumstances   of   state   of   emergency   and  martial  law.      

4-­‐International  Treaties    According   to   Article   90   of   the   Constitution,   international   treaties   are   another  source  of  Turkish  law.    

“The   ratification   of   treaties   concluded   with   foreign   states   and  international  organizations  on  behalf  of  the  Republic  of  Turkey,  shall  be  subject  to  adoption  by  the  Turkish  Grand  National  Assembly  by  a  law  approving  the  ratification.    

Agreements   regulating   economic,   commercial   and   technical  relations,  and  covering  a  period  of  no  more   than  one  year,  may  be  put   into   effect   through   promulgation,   provided   they   do   not   entail  any   financial   commitment   by   the   state,   and   provided   they   do   not  infringe  upon  the  status  of  individuals  or  upon  the  property  rights  of  Turkish   citizens   abroad.   In   such   cases,   these   agreements   shall   be  submitted   to   the  Turkish  Grand  National  Assembly   for   information  within  two  months  of  their  promulgation.  

Agreements   in   connection   with   the   implementation   of   an  international   treaty,   and   economic,   commercial,   technical,   or  administrative   agreements   which   are   concluded   depending   on   the  authorization  as  stated  in  the  law  shall  not  require  the  approval  of  the   Turkish   Grand   National   Assembly.   However,   agreements  concluded   under   the   provision   of   this   paragraph   and   affecting  economic   or   commercial   relations   and   the   private   rights   of  individuals  shall  not  be  put  into  effect  unless  promulgated.  

Agreements  resulting  in  amendments  to  Turkish  laws  shall  be  subject  to  the  provisions  of  the  first  paragraph.  

International  treaties  which  are  duly  put  into  effect  have  the  same  effect  as  domestic  laws.  No  appeal  to  the  Constitutional  Court  shall  be  made  with  regard  to  these  agreements,  on  the  grounds  that  they  are  unconstitutional.  In  case  of  conflicts  between  international  agreements  duly  put  into  effect  regarding  basic  rights  and  freedoms  

and  domestic  laws,  due  to  different  provisions  on  the  same  issue,  the  provisions  of  international  treaties  shall  be  prevail.”  

   As  seen  in  the  last  paragraph  of  article  90,  in  case  of  a  conflict  between  domestic  law  and  an   international   treaty   regarding   issues  on  basic   rights   and   freedoms;  the  provisions  of  the  relevant  international  treaty  will  be  applied.  Thus,  it  is  not  wrong  to  say  that  the  status  of  such  treaties  (treaties  regarding  basic  rights  and  freedom)  is  somewhere  between  the  Constitution  and  ordinary  domestic  law.      

 5-­‐Regulations    Regulations  are  written  explanations  of  a  particular  law  on  how  the  law  will  be  interpreted,  applied  or  enforced.  The  article  115  of   the  Constitution  authorizes  the  Council  of  Ministers  to  issue  regulations  in  accordance  with  the  constitution  and  laws:      

“The  Council  of  Ministers  may  issue  regulations  governing  the  mode  of   implementation   of   laws   or   designating  matters   ordered   by   law,  provided   that   they   do   not   conflict   with   existing   laws   and   are  examined  by  the  Council  of  State.    Regulations  shall  be  signed  by  the  President   of   the  Republic   and  promulgated   in   the   same  manner  as  laws.”    

   As  seen  in  the  article  regulations  are  subject  to  the  examination  of  the  Council  of  State  and  cannot  be  contrary  to  the  law  itself.  They  are  also  subject  to  the  legality  review  of  the  administrative  courts  as  stated  in  the  Article  125.      

6-­‐By-­‐laws    By-­‐laws   are   written   instructions   regarding   relevant   laws   and   regulations.   By-­‐laws  are  regulated  in  the  Article  124  of  the  Constitution:      

“The  Prime  Ministry,  the  ministries,  and  public  corporate  bodies  may  issue   by-­‐laws   in   order   to   ensure   the   application   of   laws   and  regulations  relating  to  their  particular  fields  of  operation,  provided  that   they   are   not   contrary   to   these   laws   and   regulations.     The   law  shall   designate   which   by-­‐laws   are   to   be   published   in   the   Official  Gazette.”  

   

7-­‐Jurisprudence  (Hukuk  Öğretisi)    

The  Constitution  grants  the  Grand  National  Assembly  the  sole  authority  to  make  law   and   prohibits   the   delegation   of   legislative   power   to   any   governmental  agency.  However,   judicial  decisions  are  not  entirely  without  a  binding  effect   in  Turkish   law.   Decisions   of   the   supreme   courts   have   a   binding   effect   on   the  decisions  of  lower  courts  within  their  jurisdiction.        

The  prominent   legal   traditions   in  the  contemporary  world  are:  civil   law,  common  law,  Islamic  law  and  socialist  law  .    A  legal  tradition  is  a  set  of  deeply  rooted,  historically  conditioned  attitudes  about  the  nature  of   law,  about   the  role  of   law   in   the  society  and  the  polity,  about   the  proper  organization  and  operation  of  a  legal  system,  and  about  the  way  law  is  or  should  be  made,  applied,  studied,  perfected,  and  taught.3    III)  LEGAL  SYSTEMS      A)  COMMON  LAW  &  CIVıL  LAW  The  term  ‘common  law’  refers  to  legal  systems  which  have  adopted  the  historic  English  legal  system.  Amongst  these  is,  the  United  States  (except  from  Louisiana)  together  with  many  other  Commonwealth  and  former  Commonwealth  countries  such  as  India,  Pakistan,  Malaysia  or  Jamaica.    Common   law   tradition   evolved   in   England   from   the   11th   Century   onwards.  William   the   Conqueror   arrived   in   1066   and   combined   the   best   of   the   Anglo-­‐Saxon  law  (the  law  of  the  Britons,  Angles  and  Saxons)  with  Norman  law,  which  resulted   in   the   English   common   law,   much   of   which   was   by   custom   and  precedent   rather   than   by   written   code.   The   American   colonies   followed   the  English  Common  Law  with  minor  variations,  and  the  four-­‐volume  Commentaries  on  the  Laws  of  England  by  Sir  William  Blackstone  (completed  in  1769)  was  the  legal  "bible"  for  all  American  frontier  lawyers  and  influenced  the  development  of  state   codes  of   law.  Today   to  a  great   extent,   common   law  has  been   replaced  by  written   statutes,   and   a   gigantic   body   of   such   statutes   have   been   enacted   by  federal  and  state   legislatures  supposedly   in  response   to   the  greater  complexity  of   modern   life.   The   same   can   be   said   about   the   Common   Law   in   England.  Common   Law   is   still   the   basis   of   modern   English   Law   and   although   it   is  constantly   developing   by   means   of   the   doctrine   of   precedent   (which   can   be  described   roughly   as   judge-­‐made   law),   with   the   parliament   developing   in  strength   legislation   gradually   overtook   judicial   law-­‐making.   There   is   a   strong  tendency  in  English  Law,  especially  starting  from  70s,  to  introduce  bills  and  acts  

                                                                                                               3  Prof.  William  Tetley,  Q.C  Mixed  Jurisdictions:  Common  Law  vs.  Civil  Law  (Codified  and  Uncodified)  

which   hindered   the   judges’   ability   to   innovate   and   confined   their   activities   in  certain  areas.    The   term   ‘civil   law’   refers   to   those  other   jurisdictions  which  have   adopted   the  European  continental  system  of  law  derived  essentially  from  ancient  Roman  law,  but  owing  much  to  the  Germanic  tradition.  Civil  law  has  its  origin  in  Roman  law,  as  codified  in  the  Corpus  Juris  Civilis  of  Justinian*,  and  as  subsequently  developed  mainly  in  Continental  Europe.    The  civil  law  legal  tradition  can  be  categorized  the  Romanic   laws,   influenced   by   French   law4,   and   the   Germanic   family   of   laws,  dominated   by   German   jurisprudence.   In   civil   law   systems,   law   is   principally  codified  and    premised  on  general  principles,  which  are  systemised  in  a  written  regulation.      Reality  is  that  it  is  increasingly  difficult  to  identify  countries  with  solely  one  legal  tradition   or   the   other.   The   cross-­‐pollination   between   these   legal   cultures   has  enriched   both   traditions,   creating   a   global   legal   mosaic.   The   conceptual  distinctions   between   Civil   Law   and   Common   Law   systems   are   noteworthy   in  certain  areas,  but  at  the  same  time,  there  appears  to  be  growing  agreement  that  the  substantive  differences  are  becoming  increasingly  less  significant.5  

 DIFFERENCES  BETWEEN  COMMON  LAW  AND  CIVIL  LAW    Prior   to   the  19th  century,  There  was  no  sharp  distinction  between  Continental  law   and   the   common   law.   Common   law   and   civil   law   legal   traditions   share  similar  social  objectives  (individualism,  liberalism  and  personal  rights)  and  they  have  in  fact  been  joined  in  one  single  family,  the  Western  law  family,  because  of  this  functional  similarity.    Civil   law   is   the  dominant   legal   tradition   today   in  most  of  Europe,  all  of  Central  and  South  America,  parts  of  Asia  and  Africa,  and  even  some  discrete  areas  of  the  common-­‐law  world  (e.g.,  Louisiana,  Quebec,  and  Puerto  Rico).    

1)    The  role  of  the  legislator  :    French  civil  law  adopts  Montesquieu’s  theory  of  separation  of  powers  (kuvvetler  ayrılığı),  whereby  the  function  of  the  legislator  is  to  legislate,  and  the  function  of  the  courts   is   to  apply   the   law.  Common   law,  on   the  other  hand,   finds   in   judge-­‐made  precedent  (İçtihat)  the  core  of  its  law.    

                                                                                                               4  French  Code  Civil  from  1804  (Code  Napoleon)  5  INTRO  TO  CIVIL  LAW  LEGAL  SYSTEMS,  INPROL  Consolidated  Response  (09-­‐002),  May  2009  

 

2)  Source  of  law  is  another  distinguishing  feature:      Civil  law  codes  provide  the  core  of  the  law  -­‐  general  principles  are  systematically  and  exhaustively  exposed  in  codes  and  particular  statutes.  Common  law  statutes,  on   the   other,   complete   the   case   law,  which   latter   contains   the   core   of   the   law  expressed   through   specific   rules   applying   to   specific   facts.Ω   Case   law,  which   is  commonly  referred  to  as  common  law,  is  based  on  decisions  made  by  judges  in  court   trials.   These   decisions   by   courts   that   are   used   for   guidance   are   called  precedent.6    To  sum  up,  it  is  clear  that  in  both  legal  traditions  codes  do  exist  and  are  applied  by  practitioners,  but  that  these  codes  differ   in  their  style:  While  civil   law  codes  and   statutes   are   mostly   concise   and   do   not   provide   definitions   but   state  principles   in   broad,   general   phrases,   common   law   codifying   statutes   provide  detailed   definitions   and   each   rule   sets   out   lengthy   enumerations   of   specific  applications  or  exceptions    

3)  Legal  effect  of  earlier  judgments      Principle  of  precedents  and  doctrine  of  stare  decisis  is  the  the  method  of  common  law   to   analyze   previous   court   decisions,   to   find   a   general   principle   in   each   of  them   and   to   transfer   these   principles   to   a   current   dispute   that   needs   to   be  decided.  Common  law  judges  are  subject  to  the  so  called  doctrine  of  stare  decisis  and  thus  in  the  first  instance  are  bound  by  precedents  rendered  by  higher  courts.  A  precedent  is  binding  until  it  is  overruled  by  a  decision  of  a  higher  court  or  until  it   is   overridden   through   a   statute.     A   higher   court   can   also   reconsider   and  overrule  its  own  previous  decision.    Civil   law   judges  are  be  primarily  bound  to  codes  and  reason.  However   it   is  not  entirely   correct   to   assume   that   common   law   judges   are   strictly   bound   to   the  authority   of   higher   courts  while   civil   law   judges   are   only   bound   to   codes   and  reason.  The  civil  law  focuses  rather  on  legal  principles.  Judge  traces  their  history,  identifies   their   function,   determines   their   domain   of   application,   and   explains  their  effects  in  terms  of  rights  and  obligations.  In  civil  law  jurisdictions,  the  first  step   in   interpreting   an   ambiguous   law   is   to   discover   the   intention   of   the  

                                                                                                               Ω  English  word  “law”  means  all  legal  rules  whatever  their  sources,  while  the  French  word  “loi”  refers  only  to  written  statutory  rules.    The  word  “droit”  in  the  French  civil  law  is  the  equivalent  of  “law”  in  English  common  law.  6  Ha  Nguyen  &  Megan  Gatley,  Chapter  1a:  Introduction  to  Law  

legislator   by   examining   the   legislation   as   a   whole,   including   the   “travaux  préparatoires”,  as  well  as  the  provisions.        

4)  Appointment  /  selection  of  judges    Judges  in  the  common  law  countries,  particularly  judges  of  the  higher  courts,  are  typically   selected   and   appointed   only   from   among   experienced   practicing  lawyers.   It   is   quite   usual   in   civil   law   to   appoint   young   highly   skilled   but  inexperienced  graduates  to  judgeships.    

5)  Procedural  differences  –  adversarial  vs.  inquisitorial/proceedings    Court  proceedings  in  common  law  may  be  described  –  at  least  in  private  law  –  as  strictly  adversarial  where  parties  in  a  dispute  have  the  responsibility  for  finding  and   presenting   evidence.   In   this   system   the   attorneys   are   responsible   for  presenting  the   facts  of   the  case,   the  positions  of  each  party  and  the   legal  views  including  all   relevant  precedents.   In  an   ideal  common   law  procedure   the   judge  has   the   function  only   to  manage   the  proceeding,   to   review  all   facts  of   the   case  and  legal  views  presented  to  him  and  finally  to  decide  the  case  on  that  basis,  or  when  the  case  is  tried  by  a  judge  and  jury,  to  sum  up  the  evidence  and  the  legal  principles  for  the  assistance  of  the  jury.    In   proceedings   of   civil   law,   judges   have   a  much  more   active   part   to   play   than  judges  in  common  law.  That  is  why  civil  law  proceedings  –  apart  from  public  and  criminal   proceedings   –   may   be   described   as   inquisitorial   in   contrast   with  common   law  proceedings.  Thus   civil   law   judges  have  many   functions  which   in  common   law   the   attorneys   are   responsible.   In   civil   law,   judge   is   generally  responsible  for  the  oral  questioning  of  the  witnesses  in  taking  evidence.  Thereby  the  judge  asks  the  witnesses  about  the  factual  issues  of  the  case,      In  common  law,  each  party  can  bring  forward  and  question  its  ‘own’  expert  and  the  judge  only  has  to  decide  which  expert  is  more  convincing,  in  civil  law  it  is  the  judge   who   in   most   cases   appoints   the   expert,   often   a   sole   witness,   and   then  accepts  his  opinion.        B)  ISLAMIC  LAW    

As  to  Islamic  Law  (Shari’a)  the  sources  of  law  are  very  different  compared  with  the  other   legal   families.   Islamic   law   is  primarily  a  religious   law.  All   the  schools  and  sects  of  Islam  accept  that  the  two  main  sources  of  the  Shari’a  are  the  Qur’an  and  the  Sunna.      C)  SOCIALIST  LAW    Socialist  law  is  the  official  name  of  the  legal  system  used  in  Communist  states.  It  is   based   on   the   civil   law   system,  with  major  modifications   and   additions   from  Marxist-­‐Leninist  ideology.  Marxists  explain  that  law  and  human  rights  arise  from  the  interactions  of  human  beings  within  social  structures  that  contain  economic  class   distinctions.   Class   divisions   within   societies   create   conflict   and   disorder  and  therefore  law  (and  the  state)  comes  into  existence  to  deal  with  this  conflict.  According   to  Engels,   “In   order   that   these   .   .   .   classes  with   conflicting   economic  interests,   may   not   annihilate   themselves   and   society   in   a   useless   struggle,   a  power   becomes   necessary   that   stands   apparently   above   society   and   has   the  function  of  keeping  down  the  conflicts  and  maintaining  ‘order.’    Lenin   explains,   “The   State   is   an   organ   of   class   domination,   an   organ   of  oppression   of   one   class   by   another;   its   aim   is   the   creation   of   ‘order’   which  legalizes  and  perpetuates  this  oppression  by  moderating  the  collisions  between  the  classes.”  Laws  are  thus  imposed  by  the  state  to  quell  these  disturbances.  Howard  Selsem  explains,  “Marxism,  which  has  been  so  often  accused  of  seeking  to   eliminate   moral   considerations   from   human   life   and   history   emphasizes  rather   the  moral   issues   involved   in  every  situation.   It  does  so,  however,  not  by  standing  on  a   false  platform  of  absolute  right,  but  by   identifying   itself  with   the  real  needs  and  interests  of  the  workers  and  farmers.7        

                                                                                                               7  http://www.allaboutworldview.org/marxist-­‐law.htm    

WEEK  3-­‐4   ¢Explain the difference between public and private law ¢Explain branches of public and private law ¢ Explain the sub-branches of Civil Law ¢Explain the three categories of capacity  

PRIVATE LAW AND PUBLIC LAW  Law   can   be   divided   into   different   types,   depending   on   the   purpose   of   the  classification:  

♦ DOMESTIC  LAW  (İç  Hukuk)  § only  applies  within  the  territory  of  a  sovereign  state  § established  and  enforced  by  the  governing  authorities  of  the  sovereign  

state  ♦ INTERNATIONAL  LAW  (Uluslararası  Hukuk)  

§ applies  in  more  than  one  sovereign  state  § established   by   treaty,   i.e.,   written   agreement   among   two   states,   i.e.,  

Bilateral  Treaties    or  more  than  two  states,  i.e.,  Multilateral  Treaties      

♦ PUBLIC  LAW  (Kamu  Hukuku)  § regulates  the  relationship  between  states,  governmental  agencies  and  

private  individuals  and  entities,  e.g.,  criminal  law  ♦ PRIVATE  LAW(Özel  Hukuk)  

§ regulates   the   relationship   between   private   individuals   and   entities,  e.g.,  contract  law  

♦ MIXED  LAW  (Karma  Hukuk)  contains  elements  of  public  and  private  law,  e.g.,  labor  law,  social  security  law  

 

I)  IN  GENERAL  Private   law   is   usually   defined   as   the   law   which   governs   relationships   between  citizens/individuals  as  opposed  to  public  law,  which  is  the  law  which  deals  with  the  relationships  between  citizens  and  the  state,  or  among  state  institutions.      Continental  European  law  in  the  Roman-­‐Germanic  tradition  is  heavily  influenced  by   the   sharp   distinction   between   private   law   and   public   law. 8  Romans  

                                                                                                               8  Andre  an  der  Walt,,  "Private  Law,  Public  Law,  Civil  Law"  Paper  presented  at  the  annual  meeting  of  the  The  Law  and  Society  Association,  Chicago,  Illinois,  May  27,  2004  

categorised   law   in   terms   of   relationships   between   person   and   person,   person  and   a   thing   and   person   and   the   state. 9  Relationship   between   a   statutory  authority   and   an   individual   should   be   approached   as   a   relationship   existing  between  the  state  and  the  individual  rather  than  an  individual  and  an  individual.  On  the  other  hand,  within  the  English  legal  system  there  has  never  been  a  strong  tradition  of  distinguishing  private  law  and  public  law.    Private   Law   is   the   body   of   rules  which   recognize   and  provide   enforcement   of  individual   (private)   rights.   Private   Law   affects   matters   between   individuals  (whether   people,   groups   of   people   or   companies).   Examples   of   this   would   be  commercial  codes  and  civil  codes.      Most  civil  codes  in  Europe  were  conceived  in  the  19th  Century  when  the  Liberal  laissez-­‐faire   ideology  was  dominant  in  Europe.  In  the  first  wave  of  codifications  most   continental   European   legal   systems   adopted   both   a   civil   code   and   a  commercial   code.   Main   pillars   of   private   law   have   been   absolute   property,  binding  force  and  freedom  of  contract  and  fault-­‐based  liability  in  tort.  However,  the  main   institutions   of   the   19th   century   private   law   construction  were   never  undermined  as   such.  Rather,   the  desire   for   change  was   internalized  within   the  system.  New  institutions  were  added  in  order  to  moderate  their  effect.  Abuse  of  right,  good  faith,  strict  liability,  and  unjust  enrichment  operated  as  safety  valves  that  removed  the  pressure  on  the  system.    Private   law   consists   of   Default   and   Mandatory   Rules   as   a   result   of   party  autonomy.  A  free  market  mainly  needs  rules  on  contacts  and  that  the  basic  rule  of  contract  law  (and  indeed  the  basic  prerequisite  of  a  well  functioning  market)  is   freedom   of   contract.   However,   the  market  must   be   regulated   and   therefore  mandatory  rules  are  also  needed.  Mandatory  rules  are  the  rules  that  the  parties  cannot  contract  around.10    Public   Law:   norms   that   regulate   the   organization   and   function   of   public  authorities  and  the  relationship  between  public  agencies  and  individual  citizens.  Public  Law  deals  with  the  relationships  between  government  organisations  and  ordinary   citizens   and   also   between   different   government   organisations.   Public  law  consists  of  various  statutes,  —Constitutional  law:  e.g.  role  and  power  of  the  institutions  within  the  state  

                                                                                                               9  G  Samuel,  ‘Public  and  Private  Law:  A  Private  Lawyer’s  Response’  (1983)  46  The  Modern  Law   Review   at   558   ;   Anne   Deegan,   The   Public/Private   Law   Dichotomy   And   Its  Relationship  With   The   Policy/Operational   Factors   Distinction   In   Tort   Law,   Vol   1   No   2  QUTLJJ  .    10  Martijn  W.  Hesselink,  The  Structure  Of  The  New  European  Private  Law,  http://www.ejcl.org/64/art64-­‐2.html  

—Administrative  law:  e.g.  regulates  public  authorities,  their  accountability    —Criminal  law:  state  responsible  for  prosecution  of  crimes    -­‐-­‐-­‐-­‐   International   law   :International   law   relates   to   issues   that   arise   between  nations,  international  or  intergovernmental  organisations.                      PRIVATE  LAW             PUBLIC  LAW  *  Civil  Law               *  Constitutional  Law  -­‐Law  of  Persons             *  Administrative  Law  -­‐  Family  Law               *  Criminal  Law  -­‐Law  of  Inheritance             *  International  Law  -­‐Law  of  Property             *  Law  of  Taxation    -­‐  Law  of  Obligations   *Law  of  Civil  Procedure*     *Law   of   Enforcement  

&Bankruptcy  *  Commercial  Law    *  International  Private  Law      However,  this  clear-­‐cut  distinction  between  private  and  public  law  does  give  rise  to   some   doubt.   In  many   countries   the   cases   where   the   state   acts   as   a   private  person   are   problematic.   Classical   examples   include   the   case   where   a  municipality  buys  new  office  equipment.  Law  of  Property    The   proper   classification   of   other   areas   is   often   disputed.   Civil   procedure,   for  example,   is   treated  as  public   in   some  countries  and  as  private   in  others.  Labor  law,   social   security,   and   various   topics   of   government   regulation(competition  law)  are  often  referred  to  as  “mixed”  public  and  private  areas.      Even  more  problematic   in   this  respect   is   that,   in  many  countries  private   law   is  rapidly  disintegrating  into  functional  fields  of  law.  Usually,  these  functional  fields  are   the   most   dynamic   branches   of   the   law:   labour   law,   medical   law,  environmental   law,   information   law,   and   construction   law,   to   name   but   a   few.  Their   main   characteristic,   apart   from   their   functional,   pragmatic   and   non-­‐dogmatic  approach,  is  that  they  usually  contain  a  mix  between  private  and  public  law  aspects.  11  

                                                                                                               11  ibid.    

 As   said,   private   law   is   usually   defined   as   the   law,  which   governs   relationships  between  citizens  as  opposed  to  public   law,  which  is  the  law  that  deals  with  the  relationships   between   citizens   and   the   state,   or   among   state   institutions.   This  definition  is  quite  descriptive.  However,  there  is  another  recurrent  definition  of  private  law  which  is  much  more  political.  In  this  definition  private  law  is  the  law  relating   to   the  private   area,  which   is   free   from  State   intervention.   In   the   latter  view  the  only  function  of  private  law  is  allocation.  In  that  view  private  law  has  an  internal   logic  of   its  own  which   is  politically  neutral  and   is  only  concerned  with  giving  every  person  what  she  or  he  is  entitled  to.12  Especially,  private  law  in  that  view  has  neither  distributionist  nor  any  other  paternalistic  function:  rather  it  is  held  that  private  law  should  not  be  instrumentalised  for  political  aims.      

                                                                                                               12  ibid.  

                     III)  AREAS  OF  PUBLIC  LAW      A)  CONSTITUTIONAL  LAW    Constitutional  law  defines  the  rules  and  code  of  conduct  for  the  government  and  its   various   departments   as  well   as   the   governmental   system   of   the   country.   It  also  states  the  most  basic  rights  of  the  individuals.  These  rights  such  as  freedom  of   speech,   are   guaranteed   to   all   citizens   and   or   residents   of   that   country.  Constitution   also   provides   the   framework   for   the   government   system   of   a  country    

Government   systems:   Parliamentary   (Parlamenter   Sistemi)   and  Presidential  (Başkanlık  Sistemi)Systems    In   the   system   of   parliamentary   governance,   the   parliament   is   a   political   body  that   includes  government.   In    parliamentary  democracies   the  executive  derives  its  mandate   from   and   is   politically   responsible   to   the   legislature.   This   implies  that  who  forms  the  government  is  not  determined  by  an  election  alone,  but  is  the  outcome   of   a   bargaining   process   among   the   parties   represented   in   the  parliament.13    The   executive   governance   is   divided   between   the   head   of   the   government,  cabinet,  i.e.  prime  minister,  chancellor  and  head  of  state.  Head  of  state,  president  or   a   king,   approves   the   head   of   government.   Concerning   the   structure,   the  government   or   English   cabinet,   is   a   «collective   body»   in   which   the   prime  minister  is  the  «first  among  equals»  (Primus  inter  pares)(Eşler  arası  birinci).14    In   the   system   of   parliamentary   governance,   the   head   of   the   government,  (chancellor,  prime  minister)  and  the  government  as  a  whole,  rest  on  the  trust  of  the   legislative  body,   i.e.  «they  rely  on   the   trust  of   the   legislative  body  and   they  can  be  dismissed  by  voting  or  by  giving  a  vote  of  unconfidence  from  the  part  of  the  legislative  body.    European  countries  have  adopted  versions  of  the  English  parliamentary  system,  which   made   use   of   both   a   prime   minister   responsible   to   parliament   and   a                                                                                                                  13  Daniel   Diermeier,   Hülya   Eraslan,   Antonio   Merlo,   A   Structural   Model   of   Government  Formation,  Econometrica,  Vol.  71,  No.  1  (Jan.,  2003),  pp.  27-­‐70    http://www.jstor.org/stable/3082040  .  14  Anđelko  Milardović,  Presidentialism  or  Parlamentarism  in  Central  and  Eastern  Europe  in  the  Age  of  Globalisation?,  http://www.cpi.hr/download/links/en/6638.pdf    

ceremonial  head  of   state   (who  might  be  either  a  hereditary  monarch,  as   in   the  Scandinavian   countries,   the   Netherlands,   and   Spain,   or   a   president   chosen   by  parliament   or   by   another   body   convoked   specially   for   the   purpose).   A   notable  exception  is  France,  which  in  its  fifth  constitution,  adopted  in  1958,  combined  its  parliamentary  system  with  a  presidential  one.      The  origin  of  the  presidential  system  is  visible  from  the  theory  of  separation  of  powers   in   the   18th   century.   The   executive   power   is   undivided,   while   «in   the  presidential   system   the   head   of   government   becomes   a   head   of   state».   The  systems  of  parliamentary  governance  rest  on  the  «collective  or  plural  executive  power,   while   the   presidential   systems   rest   on   «uncollective   executive   power  consisting  of  one  person»  concerning  the  heads  of  ministries,  they  are  appointed  by  the  president,  to  whom  they  are  directly  subordinated.  There  is  no  merging  of  the  executive  and  the  legislative  power,  as  it  is  the  case  in  parliamentarism.  The  presidential   system   rests   on   the   election   of   the   president   with   constitutional  powers  of  presidentialism,  for  a  fixed  period  of  time.  He  cannot  be  superseded  or  revoked  by  the  legislative  power.      

-­‐ Critique  of  systems  :    

In  presidential  systems,  both  presidents  and  Assembly  members  are  chosen  by  popular  vote  and  they  are  not  dependent  on  each  other.  This  creates  a  problem  of   governance   in   presidential   systems   especially   when   there   are   problems  between   the   President   and   the   Assembly.   The   party   of   the   president  may   not  constitute  the  majority  in  the  Parliament.  However,  in  parliamentary  systems  the  prime  minister  is  a  member  of  the  parliament  and  the  parliament  has  the  right  to  change  the  prime  minister  by  giving  no  confidence  vote.  Secondly  in  presidential  systems,  the  fixed  term  of  the  president’s  office  is  critisized  for  its  rigidity,  which  is   less   favorable   to   democracy.   President   is   elected   and   should   stay   in   power  during  his  term;  the  Assembly  does  not  have  the  power  to  remove  the  president.  The   presidentialism  means   the   identification   of   the   entire   nation   and   national  interest  with  a  man.  By  many  thinkers  this  is  found  not  to  be  in  conformity  with  the   idea  of  democracy  and  in  addition,   the  president  may  act  more  intolerantly  towards   the   opposition   in   this   kind   of   a   system.   Because   of   the   loose   ties  between  political  parties  and  presidents,  presidents  may  govern  the  country  in  a  populist,  anti-­‐institutionalist  fashion  in  presidential  systems.  15    Thinkers   who   are   critical   of   parliamentarism   assert   that   parliamentary  governments  do  not  necessarily  produce  majority  governments.  Moreover,  they  claim   that   due   to   the   high   party   discipline   in   parliamentary   system,   many  

                                                                                                               15  Ozan   Örmeci,   PRESIDENTIAL   VERSUS   PARLIAMENTARY   DEMOCRACY,  http://ydemokrat.blogspot.com/2010/11/presidential-­‐versus-­‐parliamentary.html    

decisions   are   taken   from   the   party   center   and   deputies   are   expected   to   give  consent   to   these   decisions.   They   think   that   dual   legitimacy   exists   in   many  parliamentary   systems   too   and   crises   take   place   between   upper   and   lower  houses   of   a   bicameral   legislature.   Moreover,   they   assert   that   prime   minister  using  their  decree  powers  do  not  have  less  autonomy  than  presidents.  16    

-­‐ Semi  presidential  Systems    

There   is     also   third   hybrid   regime,   which   is   called   semipresedential   system.   A  semipresidential   regime  has   three  basic  characteristics:   the  popular  election  of  the   president,   presidential   constitutional   powers,   and   the   separate   office   of   a  prime  minister.    

Founding  principles  of  Turkish  Constitution17      The  Constitution  asserts   that  Turkey   is  a  secular  and  democratic     republic   that  derives   its   sovereignty   from   Turkish   Nation,   who   delegates   its   exercise   to   an  elected  unicameral  parliament,  the  Turkish  Grand  National  Assembly.  Part   Two   of   the   constitution   is   the   bill   of   rights.   Article   Twelve   guarantees  "fundamental  rights  and  freedoms",  which  are  defined  as  including  the:  Article  17:  Personal   Inviolability,  Material  and  Spiritual  Entity  of   the   Individual  (right  to  life)  Article  18:  Prohibition  of  Forced  Labour  Article  19:  Personal  Liberty  and  Security  (security  of  person)  Article  20:  Privacy  of  Individual  Life  Article  21:  Inviolability  of  the  Domicile  Article  22:  Freedom  of  Communication  Article  23:  Freedom  of  Residence  and  Movement  Article  24:  Freedom  of  Religion  and  Conscience  Article  25:  Freedom  of  Thought  and  Opinion  Article  26:  Freedom  of  Expression  and  Dissemination  of  Thought  Article  27:  Freedom  of  Science  and  the  Arts  Article  35:  Right  to  property    Part  Three  deals  with  fundamental  organs  of  the  state.  With  regard  to  Legislative  Power,     Articles   75-­‐100   sets   the   rules   for   the   election   and   functioning   of   the  Turkish   Grand   National   Assembly   as   the   legislative   organ,   as   well   as   the  conditions   of   eligibility,   parliamentary   immunity   and   general   legislative  procedures  to  be  followed.  Per  Articles  87  and  88,  both  the  government  and  the  

                                                                                                               16  ibid.    17  This  part  is  taken  from  Vikipedia  

parliament  can  propose  statutes,  however  it   is  only  the  parliament  that  has  the  power  to  enact  laws.      B)  ADMINISTRATIVE  LAW    Administrative  law  exists  as    a  separate  branch  in  civilian  law  tradition.  It  defines  the   structural   position   of   administrative   agencies   within   the   governmental  system,   specifies   the   decisional   procedures   those   agencies   must   follow,   and  determines   the   availability   and   scope   of   review   of   their   actions   by   the  independent  judiciary.  The  traditional  core  of  administrative  law  has  focused  on  securing  the  rule  of   law  and  protecting  liberty  by  ensuring  that  agencies  follow  fair  and  impartial  decisional  procedures,  act  within  the  bounds  of  the  statutory  authority  delegated  by  the  legislature,  and  respect  private  rights.18    The  legitimating  principles  of  any  Western  administrative  law  system  are  found  in  the  twin  ideals  of  democracy  and  the  rule  of  law  (hukuk  devleti  ilkesi).  The  rule  of  law  ideal  forms  the  central  background  theory  against  which  the  principles  of  administrative   law   operate,   while   at   the   same   time   acting   as   a   governing  principle.   Administrative   law   is   the   law   relating   to   the   control   of  governmental  power.  The  primary  purpose  of  administrative  law  is  to  keep  the  powers   of   government   within   their   legal   bounds,   so   as   to   protect   the   citizen  against  their  abuse.        It  gives  rise  to  a  further  set  of  principles,  which  form  the  body  of  administrative  law.  The  primary   function  of  administrative   law   is   the  control  of  public  power.  Administrative   law   established   itself   during   the   19th   century,   usually   in   the  context  of  constitutions  that  placed  much  emphasis  on   functional  separation  of  powers.   Administrative   law   has   played   an   important   part   in   the   struggle   for  limited  government,  which  established  judicial  control  over  ministerial  actions.      Throughout  the  common  law  world,  administrative  law  has  evolved  as  part  of  a  system   of   ‘checks   and   balances’.   Administrative   law   requires   government   and  administration   to   stay   within   the   boundaries   of   legality   or,   in   American  administrative   law   in   particular,   not   to   exceed   their   powers   as   delegates.  Administration  must  act  within  the  powers  vested  by  the  law.19      The  Rule  of  Law      

                                                                                                               18  RICHARD  B.  STEWART,  ADMINISTRATIVE  LAW  IN  THE  TWENTY-­‐FIRST  CENTURY,  78  N.Y.U.  L.  Rev.  437  2003  19  Carol   Harlow,   Global   Administrative   Law:   The   Quest   for   Principles   and   Values   ,   The  European  Journal  of  International  Law  Vol.  17  no.1  ©  EJIL  2006  

 The   rule   of   law   normally   requires   that   the   government   acts   always  within   its  powers;  follows  the  proper  procedures;  and  provides  equality  of  access  to  courts  and  other  machinery  for  adjudication.    The  key  requirement  of  the  rule  of  law  is  a  legal  order  with  fixed  and  stable  general  principles,  together  with  formal  rights  of  access  to  courts  for  the  resolution  of  disputes.      C)  CRIMINAL  LAW    Criminal   law,   also   known   as   Penal   law,   is   the   law   under   which   the   state  prosecutes   individuals   for   committing   a   crime.   Criminal   law   is   used   to   punish  individuals   for   their   acts,   which   are   deemed   to   be   anti-­‐social   by   law.   Certain  criminal  offences  may  also  be  committed  by  legal  persons.    An   act   of   crime   must   be   expressly   described   and     certain   “penalty”   must   be  provided  for  it  by  a  statute  .20    There   can  be  no  crime   and  no  punishment    without   law/statute”   (kanunsuz  suç  ve   ceza  olmaz,  Nulla  poena  sine  puts)è   for   the   stability  +  and   for  avoiding  arbitrary  accusation  and  punishment.  Parliament/TBMM  must  define  in  detail  è  every  crime  and  the  relevant  penalty  in  the  statutory  law21  è  Interpretation  by  analogy  is  prohibited.    German  Criminal  Law  of  28  June  1935  (RGBl.  I  838)  reads  as  :  “One  punishes,  who  commits  an  act,  which  the  law  for  punishable  avowedly  or  which  earns  punishment  after  the  basic  idea  of  the  penal  law  and  after  healthy  people  feeling.  If  no  certain  penal   law  applies  direct  to  the  act,  then  the  act  is  punished  after   the   law,  whose  basic  idea  to  it  best  applies  “1    Analogical  interpretation  is  permitted  if  it  is  in  favor  of  the  defendant.  However,  expanding  the  scope  of  the  criminal  statutes  by  way  of   interpretation  to  fill   the  loopholes  of  law  is  not  permitted.        Categories  of  crimes:    In  Turkish  Criminal  Law  there  exist  two  categories  of  criminal  offences:  felonies  (cürüm)  and  misdemeanors  (kabahat).  

                                                                                                               20  Kudret  Özersay,  Criminal  Law,  www.emu.edu.tr    21  TCK  MADDE  2.  -­‐  (1)  Kanunun  açıkça  suç  saymadığı  bir  fiil  için  kimseye  ceza  verilemez  ve  güvenlik  tedbiri  uygulanamaz.  Kanunda  yazılı  cezalardan  ve  güvenlik  tedbirlerinden  başka  bir  ceza  ve  güvenlik  tedbirine  hükmolunamaz.  (2)  İdarenin  düzenleyici  işlemleriyle  suç  ve  ceza  konulamaz.    (3)  Kanunların  suç  ve  ceza  içeren  hükümlerinin  uygulanmasında  kıyas  yapılamaz.  Suç  ve  ceza  içeren  hükümler,  kıyasa  yol  açacak  biçimde  geniş  yorumlanamaz.  

   

     II)  AREAS  OF  PRIVATE  LAW    

 Introduction  of  Western  Law  in  Turkey22      Mustafa  Kemal  and  the  founders  of  the  Turkish  Republic  regarded  secularization  as   an  uncompromising  principle.   In  1926  Turkish  government   introduced  new  civil   and   criminal   codes   in   Turkey,   which   were   based   on   Western   models.  Western   thought  had  earlier   influenced,  19th  century  Ottoman   law,   first   in   the  mixed  commercial  courts  and  later  in  criminal  codes.  But  Western  jurisprudence  had   hardly   challenged   the   Shari'a-­‐-­‐the   sacred   body   of   the   Islamic   law-­‐   in   its  control   of   betrothal,   marriage,   divorce,   inheritance,   and   adoption.   Thus,   when  the   Shari'a   courts   were   abolished   in   1924   and   the   entire   court   system   was  transferred   to   the   Ministry   of   Justice,   the   whole   judiciary   became   legally  independent   of   religious   control   for   the   first   time   in   Turkish   history.   The  replacement   of   the   Shari'a   by   the   Swiss   civil   code   in   1926   abolished   the  jurisdiction  of  Islamic  law  in  its  sacred  sphere  of  family  relations  and  brought  all  legal   aspects   of   family   life   under   the   domain   of   secular   law.   In   addition   to   the  new  civil  and  criminal  codes  of  1926,  committees  of  jurists  produced  new  codes  of  obligation,  commerce,  maritime  law,  and  civil  and  criminal  procedure.    A)  CIVIL  LAW    Civil   law   covers   a   vast   area   of   relations   such   as   personality,   family   relations,  rules  of   succession(inheritance)  property   rights,   and   law  of  obligations   ,  which  are  all  sub-­‐branches  of  civil  law.23  Civil  law  in  Turkey  is  regulated  under  Turkish  Civil  Code24.            

                                                                                                               22  June  Starr  and  Jonathan  Pool,  The  Impact  of  a  Legal  Revolution  in  Rural  Turkey  Law  &  Society  Review,  Vol.  8,  No.  4  (Summer,  1974),  pp.  533-­‐560  http://www.jstor.org/stable/3052883  .    23  Zeynep  Şişli,  Branches  Of  Private  Law,  http://homes.ieu.edu.tr/~zsisli/BA100/Fundamentals%20of%20Law(4)-­‐2010.pdf    24  A  code  is  presumed  to  be  coherent  in  the  sense  that  there  is  no  contradiction  between  the  rules  contained  in  it,  that  each  rule  has  one  true  meaning,  and  that  it  provides  only  one  right  answer  to  each  legal  question.  Other  characteristics  of  a  classical  code  include  its  systematic  character  and  its  use  of  abstract  rules  and  concepts.  

1) Law  of  Persons    a)  Person    The  word   ‘‘person’’   is   derived   from   the  Latin  word   ‘‘persona’’  which  originally  referred   to  a  mask  worn  by  a  human  who  was  conveying  a  particular  role   in  a  play.   With   the   era   of   enlightenment,   and   the   rise   of   liberal   individualism   in  Western  societies,  legal  system  has  abandoned  clan  or  family  responsibility,  and  individuals  are  seen  as  primary  agents,  where  the  class  of  persons  coincide  with  the  class  of  human  beings.25    Person   may   be   defined   as   any   being   that   can   be   subject   of   legal   relations.  Personality   is   the   aptitude   to   become   a   subject   of   rights   and   obligations.  Personality,  however,  is  not  a  right  (subjective),  but  a  juridical  quality,  one  that  constitutes   the   prerequisite   for   all   rights   and   duties;   it   is   equivalent   to   ‘legal  capacity’.    The  subdivision  of  the  category  “persons”  into  the  two  sub-­‐categories  of  “human  beings”   and   “associations   of   human   beings”   is   a   nearly   universal   feature   of  modern  civil-­‐law  doctrine.26    b)  Real  (Natural)  Persons  (Gerçek  Kişiler)  :    

 The  ‘natural  person,’  sometimes  called  a  physical  person  (or  a  man  –  or  woman  –,  a  human  entity,  a  human  being).  Every  real  person  is  the  holder  of  personality  rights,   such   as   the   right   to   life,   the   right   to   own   property,   the   right   to   bodily  integrity,  the  right  to  the  inviolability  and  integrity  of  personhood,  and  the  right  to  the  respect  of  his  name,  reputation  and  privacy.  These  rights  are  inalienable.                                                                                                                      25  David  J.  Calverley,  Imagining  a  non-­‐biological  machine  as  a  legal  person,  AI  &  Soc  (2008)  22:523–537  DOI  10.1007/s00146-­‐007-­‐0092-­‐7.  The  international  “Great  Ape  Project”  seeks  to  imbue  non-­‐human  primates  with  attributes  of  legal  personhood—specifically  “protections  of  the  right  to  life,  the  freedom  from  arbitrary  deprivation  of  liberty,  and  protection  from  torture.”  The  Defense  Advanced  Research  Projects  Agency  (DARPA)  is  pushing  the  limits  of  human-­‐machine  interfaces  in  an  attempt  to  create  better  persons,  or  even  replacement  “persons”  that  can  perform  jobs  in  lieu  of  human  beings.  One  might  easily  imagine  the  creation  or  discovery,  in  the  near  future,  of  an  entity  that  is  of  equal  moral  status  with  human  beings,  but  not  genetically  human.  Bkz.    Jessica  Berg,  Of  Elephants  and  Embryos:  A  Proposed  Framework  for  Legal  Personhood,  HASTINGS  LAW  JOURNAL,Vol.  59 26  J.-­‐R.  Trahan,  http://faculty.law.lsu.edu/jrtrahan/Persons/Supp/course_outline-­‐IV-­‐rev.pdf    

     i)  Legal  Capacity  (Hak  ehliyeti):      Every   person   has   legal   capacity   to   acquire   rights   and   assume   obligations.   The  legal   capacity   of   a   person   commences   from   the   moment   of   live   birth   and  terminates  at  death.  Such  capacity  is  inherent  in  every  natural  person.      ii)  Capacity  to  Act  (Fiil  ehliyeti)  :      Capacity   to   Act   determines   whether   a   real   person   may   conclude   binding  amendments  to  his/her  rights,  duties  and  obligations,  such  as  getting  married  or  merging,   entering   into  contracts,  making  gifts,  or  writing  a  valid  will.  A  person  who   has   full   capacity   to   act   has   the   capacity   to   create   rights   and   obligations  through  his/her  actions.  Capacity  to  act  does  not  arise  with  birth,  but  will  unfold  in   a   progressive   manner.   For   this   reason,   the   legal   system   has   established  distinctive   norms   for   the   adult   and   the   juvenile.   The   law   distinguishes  majors  and  minors  in  this  way  on  the  basis  of  eighteen  (18)  years.    -­‐  Full   Capacity   (Tam  ehliyet):   A   person  who   is   at   the   age   of  majority   and   has  capacity  to  consent  (power  of  discernment)    has  the  full  capacity  to  act  as  long  as  he/she   is     not   interdicted   by   court.   A   person   is   at   the   age   of   majority   when  he/she  has  reached  the  age  of  18.    -­‐   Limited   Incapacity   (Limited   interdiction)   (Sınırlı   Ehliyetsiz):   Minors   or  wards   of   court   with   the   capacity   to   consent   are   regarded   as   having   limited  incapacity.  Persons  who  are  at   the  age  of  majority  may  be  made  ward  of  court  and   accordingly   become   interdicted.   Interdiction   is   the   procedure   under   Civil  Law  by  which  a  judge  appoints  a  guardian  to  handle  some  or  all  of  the  affairs  of  a  person.   The   grounds   for   interdiction   are:  mental   illness,   infirmity,   prodigality,  imprisonment  exceeding  1  year.  The  rule  applicable  to  persons  with  limited  incapacity  is  that  a  contract  signed  by  those  is  voidable  at  the  instance  of  the  legal  representative  of,  although  it  is  binding  on  the  other  party.  They  may  assume  obligations  by  their  own  acts  only  with  the  consent  of  their  legal  representatives.  Without  such  consent,  they  may  acquire  only  benefits  which  are  free  of  charge.  They  are  liable  in  damages  for  the  torts  they  commit.    Where  one  of  the  parties  is  incapable    of    giving    consent    to    a    contract,    the    contract  becomes  voidable  or  annullable  even  though  there  was  no  damage  to  the  contracting  party.  The  

contracting  party  cannot  allege  the  incapacity  of  the  minor  with  whom  he/she  contracted.    -­‐  Full   Incapacity  (Tam  ehliyetsiz):  A  person   lacking  capacity   to  consent  cannot  create  legal  effect  by  his  or  her  actions.  A  person  who  does  not  have  the  mental  capacity   to   understand   the   consequences   of   a   transaction   to   be   entered   are  regarded  as  totally  incapacitated.      c)  Legal  Persons  (Tüzel  Kişiler)        In  contrast  to  “natural  person,”   the  designation  “juridical/legal  person”   is  used  to   refer   to   an   entity   that   is   not   a   human  being,   but   for  which   the   legal   system  chooses   to   afford   some   of   the   same   legal   protections   and   rights   as   accorded  natural  persons.27  Legal  system  accords  legal  capacity  to  acquire  rights  to  certain  organizations,  deeming   them  to  be  subjects  of   the   law  as   “legal”  persons.  Legal  person   is   separate   and   distinct   in   law   from   its  members.   It   is   an   independent  legal   entity   with   the   capacity   to   act   and   can   thus   acquire   rights   and   create  obligations  with  binding  effect.  In  reality,  the  legal  person  is  not  a  separate  entity  besides  ‘its’  duties  and  rights,  but  only  their  personified  unity.28      A  legal  person  is  either  an  organization  of  persons(e.g.:  associations,  companies)  or   special-­‐purpose   fund   (e.g.   a   foundation)   that   is   recognized  by   law  as  having  legal   personality.   It   differs   from   other   organisations   in   that   it   possesses   legal  capacity  and  can  appear  before  the  courts  as  plaintiff  or  defendant.  (i.e.  capacity  to   be   a   party   in   court).29     Legislature   has   broad   discretion   to   designate   legal  persons    and  to  define  the  extent  of  their  powers  under  the  law.    In  order  for  a  group  of  natural  persons  to  be  considered  as  a  legal  person,  some  prerequisites  are:  organization  (a   legal  person  shall  be  organized   in  organs   for  the   realization   of   its   purpose.   e.g.,   board   of   directors.   In   Turkish   Law   an  association   needs   to   form   its   board   of   directors   and   general   assembly   to   be  considered  as   a   legal  person.    The   foundations   are  only   required   to   form   their  board   of   directors   and   thus   they   assume   legal   personality);  Perpetual   purpose  (legal   persons   are   required   to   have   a   perpetual   purpose;   a   group   of   natural  persons   targeting   a   one-­‐time   purpose   cannot   assume   personality);   Legal  permission   (The   legislator   decides   which   group   of   natural   persons   will   be  granted  a  legal  personality).      The   legal   person   acts   through   its   organs   and   legal   representatives.  The   acts   of  the  representative  –  provided  that   they  have  been  executed   in   the  name  of   the  

                                                                                                               27  Jessica  Berg,  a.g.e.  28  Hans  Kelsen,  GENERAL  THEORY  OF  LAW  &  STATE  (Anders  Wedberg  tr.  1945)  29  http://www.eurofound.europa.eu/emire/GERMANY/LEGALPERSON-­‐DE.htm    

legal  person  and  within   the  power  of   representation  –  give   rights  and  obligate  the  legal  person.        i)  Public  law  legal  persons:      In   public   law,   the   essential   legal   person   is   the   state.   According   to   the   Turkish  Constitution  (art.  123)  a  public  law  legal  person  can  only  be  established  by  law  or  by  the  authority  vested  by  law.  Local  administrative  bodies  (const.  art.  127),  professional  organizations  (const.  art.  135)  such  as  Bar  association,  Chamber  of  Commerce  and  Industry  are  public  law  persons  TRT  is  an  ‘impartial’  public  law  person   (const.   art.   133)   and   universities   are   ‘scientifically   autonomous’   public  law  legal  persons  (const.  art.  130).  In   international   law,   various   organizations   possess   legal   personality   including  inter-­‐governmental   organizations   such   as   United   Nations,   World   Bank,  International  Monetary  Fund,  European  Council  etc.    ii)  Private  law  legal  persons  :    Both  foundations  and  associations  are  non-­‐profit  legal  persons  regulated  under  the  Civil  Code.  Provisions  contained  in  the  Civil  Code  establish  the  general  framework  for  associations  (dernek)  and  in  broader  terms  for  all  private  law  legal  persons.  Some  associations  such  as  political  parties,  trade  unions  and  sports  clubs,  have  been  subject  to  separate  legislation  due  to  their  special  field  of  activity.  

Foundation  (Vakıf)  is  the  other  private  law  legal  person  regulated  under  Civil  Code  and  it  is  regarded  as  a  fund  established  and  maintained  for  charitable,  educational,  religious,  research,  or  other  benevolent  purposes.    

Both  in  foundations  and  associations,  the  purpose  must  not  be  contrary  to  law,  public  policy  and  public  morals;  it  must  not  be  impossible  to  obtain.  

Companies   are   profit   seeking   private   legal   persons   regulated   under   the  Commercial   Code.   According   to   Turkish   law   all   companies   regulated   under  Commercial  Code  have  legal  personality  however  that  may  not  be  the  case  for  all  jurisdictions.   In   some   countries   only   certain   types   of   companies   are   vested   in  with   legal   personality.   In   Turkey,   Companies   acquire   legal   personality   upon  registration  in  the  commercial  register.      In  common  law  tradition  the  legal  personality  of  a  corporation  includes  five  legal  rights:  the  right  to  a  common  treasury  or  chest  (  which  includes  the  right  to  own  

property)the  right  to  a  corporate  seal  (grants  the  legal  person  the  right  to  make  and   sign   contracts)   the   right   to   sue   and   be   sued     the   right   to   hire   agents  (employees)    the  right  to  make  by-­‐laws  (the  right  to  self-­‐governance,  a  display  of  autonomy).   In  common   law,  a  corporation  sole   is  a  corporation  consisting  only  one   single  member:   e.g.     The   Crown   in   commonwealth   realms.     A   corporation  aggregate,  on  the  other  hand,  is  a  corporation  consisting  more  than  one  member.    

 iii)  Effects  of  legal  personality    

-­‐ Distinct  patrimony    -­‐ Procedural  capacity  

 

d)  Differences  between  Natural  and  Legal  Persons    i) Political   rights   (such   as   voting   or   holding   an   office)   are   possible   only   for  natural   persons.   The   majority   of   civic   rights   (such   as   the   right   to   marry,  divorce  or  the  right  to   legal   inheritance-­‐with  the  exception  of  the  State-­‐)  are  also   only   applicable   to   natural   persons.   The   only   way   a   legal   person   can  inherit  is  by  a  will.  

ii) The   right   to   usufruct   (intifa   hakkı)   also   differs   between   natural   and   legal  persons.  While  natural  persons  may  enjoy  that  right  till  their  death-­‐provided  a  shorter   term   for   enjoyment   is   not   agreed   upon-­‐,   for   legal   persons   the   time  limit  for  enjoyment  is  set  at  100  years.    

 

2)  Law  of  Property    Objects,  which  cannot  be  moved  from  one  place  to  another  and  are  fixed  in  their  location,   such   as   land   and   independent   apartments   subject   to   Condominium30  are   regarded   as   immovable   property.   Other   tangible   property   falls   under   the  category  of  movables.  Rights  on  movables  and   immovable  are  referred  as   “real  rights”  and  regulated  in  the  4th  book  of  Civil  Code.      a)  Property  right  /  Ownership  (Mülkiyet)    

                                                                                                               30  Condominium  (Kat  mülkiyeti):  Each  of  the  individual  apartments  or  houses  in  a  building  or  complex  containing  a  number  of  individually  owned  units.        

The   best   known   real   right   is   the   property   right   that   refers   to   ownership   of  objects.   The   transfer   of   ownership   is   different   for   movables   and   immovables.  Transfer  of  a  movable  property  requires    the  agreement  of  the  parties  and  the  delivery  of  the  item  to  the  transferee.  The  transfer  may  be  based  on  sale,  donation  or  performance  of  another  contract.    The  transfer   of   a  movable   property   requires   the  mutual   intention   of   the   parties   to  transfer  property  (and,  in  addition,  the  physical  transfer  of  the  goods).    In  Turkish,  Swiss  and  German  law  the  contract  of  sale  does  not  transfer  movable  property  but,  obliges  the  seller  to  physically  transfer  the  object  at  a  later  stage  as  the  performance  of  the  contractual  duty.  The  same  is  true  for  contracts  such  as  one  obliging  the  creation  of  a  pledge.    The   transfer   of   an   immovable   may   be   only   made   through   an   official   contract  before  the  land  register  authorities  and  the  entry  into  the  register.  Registration  is  a  prerequisite  of  the  transfer  and  any  sort  of  contract  whatsoever  cannot  provide  the  transfer  of  ownership  if  registration  is  not  completed.    

 b)  Pledge  (rehin)    /  Mortgage  (ipotek)    Pledge  or  mortgage  establishes  a   real   right   in   the  property   in  order   to  provide  security  for  the  performance  of  an  existing  or  future  debt.      In   addition   to   a   agreement   between   the   parties,   pledge   of   a  movable   property  requires  the  delivery  of  the  item  to  the  pledgee  until  the  owed  amount  is  paid.      For   immovables,   the   term   “mortgage”   is   used.  An   immovable  property  may  be  mortgaged   only   with   registration   in   the   land   register.   The   procedure   is   no  different  than  transfer  of  ownership  and  upon  the  agreement  of  the  parties  the  owner  provides  a  right  of  mortgage  by  way  of  registration.          

 B)  LAW  OF  OBLIGATIONS    The  law  of  obligations  is  a  concept  that  is  traditionally  associated  with  civil  law.  Under  Turkish  Civil  Code,  the  Law  of  Obligations  (Borçlar  Hukuku/Schuldrecht)  constitutes   the   5th     of   the   five   Books,   codified   under     a   separate   legislation  namely  the  Turkish  Code  of  Obligations.  

1)  The  Term  “Obligation”    

“An  obligation  is  a  legal  tie  which  binds  us  to  the  necessity  of  making  some  performance  in  accordance  with  the  laws  of  our  state.”  (Inst.  3.13.pr)    “The  essence  of  obligation  does  not  consist   in  that   it  makes  some  property  or   a   servitude   ours,   but   that   binds   another   person   to   give,   do   or   perform  something  for  us.”  Paul.  Inst.  Book  II  (D.44.7.3pr.)  

 These   two   definitions   from   classical   Roman   law   emphasize   two   aspects   of   an  obligation.  Firstly,  the  obligation  is  a  legal   tie  (vinculum  iuris)  between  creditor  and  debtor  and   is   regarded  as  creating  a  relationship  between  the  parties.  The  legal  effect  of  this  tie  concerns  only  the  parties  of  the  obligation  (obligor-­‐obligee)  and   is  not   extended   to   third  parties   (although   there  are   few  exceptions   to   this  principle:  e.g.  contracts  concluded  for  the  benefit  of  a  3rd  person).    An  obligation  has  twofold  consequences;  a  duty  arises  on  the  part  of  the  person  incurring  the  obligation,  and  there  is  a  corresponding  right  in  the  other  person  to  enforce   that   duty   by   legal   action.   By   virtue   of   the   obligation   the   obligee   is  entitled  to  demand  performance  from  the  obligor.  Performance  may  also  consist  in  refraining  from  doing  something.    

2)  The  Source  of  Obligations    

• Contract  (Sözleşme)  • Tort  (Haksız  Fiil)  • Unjust  enrichment  (Sebepsiz  Zenginleşme)  

 The  Turkish  Code  of  Obligations  cites  three  main  sources  for  obligations:    1-­‐Obligations  arising  from  contracts    2-­‐Obligations  arising  from  delict/tort    3-­‐Obligations  arising  from  unjust  enrichment  (which  is  actually  a  quasi-­‐contract-­‐sözleşme  benzeri).  

Code  of  Obligations  (CO),  as  a  supplementary  part  of  the  Civil  Code,  provides  the  main  legal  framework  for  contracts  and  torts.    Provisions  of  CO  are  divided  into  two  parts:  General  Part  which  regulates  general  principles   of   contracts   and   torts.   Special   Part   deals   with   specific   types   of  contracts  e.g.:  sale  contract,  rental  contract,  service  contract.      

WEEK  5    ¢Explain contract and tort as sources of obligations  

CONTRACT AND TORT  

I)  LAW  OF  CONTRACTS  ”The  law  of  contract  is  to  a  large  extent  the  same  worldwide.  Certainly  the  rules  governing   contracts   in   the   English-­‐speaking   world   differ   considerably   from  those   of   the   Civil   Law   countries.”31  The   contract   law   is,   as   in   all   areas   of   the  continental  Civil  Law,  based  mainly  on  the  tradition  of  Roman  Law.32    A   contract   is   an   agreement   creating   legally   enforceable   obligations.   A   contract  may  be  in  written,  oral  or  implied  form  unless  a  special  legal  form  is  required  by  law.   However   verbal   agreements   can   turn   out   to   be   problematic   when   their  proof  is  required.    A)  PRINCIPLE  OF  FREEDOM  OF  CONTRACT    The  economic  system  of  the  market  economy  rests  on  the  assumption  that  every  citizen   is  best  qualified   to  determine   for  himself  whether  he  needs   supplies  or  wishes  to  sell,  who  will  best  serve  his  needs  and  on  what  conditions.  If  all  these  three   decisions   are   to   be   made   by   every   individual   for   himself,   he   must   be  granted  freedom  of  contract  as  to  whether  at  all,  with  whom  and  on  what  terms  he  wishes  to  contract.33  Contract  law  is  based  on  the  principle  of  freedom  of  contract  as  developed  in  the  seventeenth  and  eighteenth  centuries.  The  main  aspects  are:  i)  Freedom  to  conclude  or  not   to  conclude  a  contract  and   freedom  of  choice  of  the  partner.  There   is   no   obligation   to   enter   into   a   contract   unless   a   special   legal   provision  prescribes   the   formation   of   a   contract   (as   may   be   the   case   for   public  transportation  and  other  public  services  or  in  the  context  of  antitrust  law).34  ii)  Freedom  to  establish  the  content  of  the  contractual  provisions.                                                                                                                  31  Eugen  Bucher, Law  of  Contracts;   in:  "Introduction  to  Swiss  Law",  Edited  by  F.  Dessemontet   &   T.   Ansay,   Second   Revised   Edition,   The   Hague   etc.  (Kluwer/Schulthess)  1995,  S.  103-­‐124  32  ibid.  33  Ulrich  Drobnig,  General  Principles  of  European  Contract  Law,  Petar  Sarcevic  &  Paul   Volken   eds.,   International   Sale   of   Goods:   Dubrovnik   Lectures,   Oceana  (1986),  Ch.  9,  305-­‐332.  34  Eugen  Bucher,  a.g.e.  

Parties  are  free  to  establish  the  conditions  of  the  contract.  This  refers  not  only  to  the  possibility  of  the  parties  determining  their  mutual  obligations  but  also  to  the  consequences  of  non-­‐performance  (e.g.  conditions  and  effects  of  breach,  etc.).    iii)  Freedom  to  depart  from  the  types  of  contract  as  presented  in  the  special  part  of  the  Code  of  Obligations.35  

 B)  FORMATION  OF  CONTRACTS    For  a  contract  to  be  valid,  certain  requisites  must  be  fulfilled.      

1)Valid  agreement        The  well-­‐known  mechanism  of  offer  (icap)  and  acceptance  (kabul)  is  recognized  everywhere   in  Europe. A  contract   requires   a  mutual   agreement  of   the  parties.  This   agreement   may   be   either   explicit   (açık)   or   implicit   (örtülü).   There   is   an  agreement  when  the  parties  lead  each  other  reasonably  to  believe  that  they  are  of   the   same   mind   about   a   given   transaction   (Offer+Acceptance=Agreement-­‐Consensus).  The  same  mind  of  parties  about  a  given  transaction,  is  reached  by  an  offer  on  the  one  side,  and  the  apparent  acceptance  of  the  offer  on  the  part  of  the  other.   The   offer   and   acceptance   formula,   developed   in   the   19th   century,  identifies  a  moment  of  formation  when  the  parties  are  of  one  mind.  An  offer  as  "an   expression   of   willingness   to   contract   on   certain   terms,   made   with   the  intention  that  it  shall  become  binding  as  soon  as  it  is  accepted  by  the  person  to  whom  it  is  addressed",  the  "offeree".36      An  offer  is  a  statement  of  the  terms  on  which  the  offeror  is  willing  to  be  bound.  It  is   the   contractual   intent   to   be   bound   by   a   contract   with   definite   and   certain  terms   communicated   to   the   offeree.   The   communication   between   the   parties  may   take   different   forms,   such   as   a   letter,   newspaper,   fax,   email   and   even  conduct,  as  long  as  it  communicates  the  basis  on  which  the  offeror  is  prepared  to  contract.37  For  an  offer  to  be  capable  of  becoming  binding  on  acceptance  must  be  definite,  clear,  and  final.  If  it  is  a  nearly  preliminary  move  into  negotiation  which  may  lead  to  a  contract,  it  is  not  an  offer  but  an  invitation  to  treat/offer.  An  offeror  may   revoke   an   offer   before   it   has   been   accepted,   but   the   revocation   must   be  communicated  to  the  offeree.  The  acceptance  must  be  communicated.  Exception  to  this  rule  is  unilaterally  obliging  contracts  where  the  assent  of  the  non-­‐obliging  party  may  be  deemed  to  exist.  An  offer  can  only  be  accepted  by  the  offeree,  that  

                                                                                                               35  İbid.  36  G.H.  Treitel,  The  Law  of  Contract,  10th  edn,    37  http://en.wikipedia.org/wiki/Offer_and_acceptance    

is,   the   person   to   whom   the   offer   is   made.   An   offer   must   be   accepted   exactly,  without  modifications;  any  change  the  offer  in  any  way,  is  a  counter-­‐offer.  38      Since   the   basis   of   a   contract   is   the   exchange   of   assents,   it   is   essential   that   the  assents  of  the  parties  be  genuine,  that  is  to  say  that  there  be  a  genuine  meeting  of  the  minds.  Unintentional  differences  of  assent  may  be  due  to  several  causes  such  as,  mistake(hata),    fraud(hile)  or  duress(tehdit).  Two  types  of  Mistake  :  -­‐   Immaterial(about  the  motives  for  entering  into  contract,  may  not  be  the  basis  for  voiding  a  contract)(saik  hatası)  -­‐  Material(error  in  object  or  in  person,  to  nature  of  the  transaction,  to  quantity,  to  the  necessary  state  of  facts  of  a  contract).    

 

2)  Capacity  to  contract      

The   legal   validity   of   a   contract   depends   on   the   full   capacity   of   the   real   person  who  enters  into  the  transaction.  This  means  “capacity  to  act”  of  real  persons  or  legal   persons.     Contracts   concluded   by   real   persons   of   full   incapacity   are   void  with   no   legal   effect.     Contracts   made   by   real   persons   of   limited   capacity   are  voidable.      

3)  Legality  of  the  subject  matter        If   the   subject   matter   of   the   contract   is   illegal   or   against   morals;   a   valid,  enforceable   contract   does   not   exist.   For   example,   if   a   person   offers   to   pay  another  person  money  for  illegal  drugs,  and  an  acceptance  is  made  by  a  promise  to  deliver  the  illegal  drugs  this  is  nevertheless  a  void  contract.    

4)    Legal  form  (if  required  by  law)    

As  a  general  rule,  the  formation  of  a  contract  does  not  presuppose  formalities  of  any  kind.  With  a   few  specific   exceptions,   contracts  may  be   concluded  orally  or  even  without  any  verbal  expression  of  assent,   for   instance,  by  actions   implying  viz.  showing  the  intention  to  enter  into  a  contract.    The  main  exceptions  to  this  rule  of  absence  of  formal  requirements  are:      -­‐     an  assignment  of  a  receivable  requires  a  written  document,  signed  by  the  assignor  and  delivered  to  assignee                                                                                                                  38  http://en.wikipedia.org/wiki/Invitation_to_treat    

-­‐   the  contract   for   the  sale  of   land,  contracts   to   transfer  real   rights   in   land  requires  official  form  to  be  concluded  before  land  register  authorities.    -­‐   the  contract  of  suretyship  should  be  made  in  writing.      -­‐     sale  of  motor  vehicles  requires  official  form  before  the  notary.      The  reasons  for  which  the  law  requires  them  are  various,  such  as  for  example,  to  warn   the   parties   of   the   seriousness   and   importance   of   their   action   or   of   the  consequences  of  the  contract.    If  a  formal  requirement  as  established  by  legislation  has  not  been  complied,  the  contract  is  void.      C)  REPRESENTATION  (TEMSIL)    Under   Civil   law,   the   basis   of   the   source   of   representative   authority,   may   be  categorized  as  statutory  representation  and  contractual  representation(agency).  In   statutory   representation,   representative   authority   delegated   by   law:   e.g.  Guardian,   Parent   of   a   minor.   In   case   contractual   representation(agency),   the  principal   and   the   agent   enter   into   a   contract   and   this   contract   determines   the  scope  of  contractual  representation.        In  general  modern  civil   law   fully  admits   the  possibility  of   concluding  contracts  by  an  agent  or  a  statutory  representative.    A  contract  concluded  by  a  person  in  the  name  of  another  is  valid,  if  the  latter  has  authorized  the  acting  person  to  do  so.  An  'agency  by  appearance'  can  only  be  admitted  under  special  circumstances,  i.e.   if   the   represented  person  himself   has   created   said   appearance  or   tolerated  others   creating   it.   A   subsequent   ratification   of   the   conclusion   of   the   contract  equals  a  preliminary  authorization.      In   the   absence   of   a   preliminary   authorization   or   subsequent   ratification   the  contract   is   void   and   the   person   wrongly   alleging   to   be   authorized   is   liable   in  damages  to  the  other  contracting  party.    The  power  of   representation  given   to   the  contractual  agent  may  be  revoked  at  any  moment,  and  an  obligation  not  to  retract  authorization  would  not  be  valid.    D)  CLASSIFICATION  OF  CONTRACTS,  IN  TERMS  OF  THE  DEGREE  OF  THEIR  ENFORCEABILITY    

-­‐ Valid  Contracts,  -­‐ Void  Contracts,  -­‐ Voidable  Contracts.  

 

1)  Void  (Null)  contracts      

Void   contracts   are   those   which   have   no   legal   effect   either;   because   they   are  against  law  and  morals,  because  of  incapacity,  lack  of  formality  or  impossibility.    

2) Voidable  contracts    Voidable   contracts  may  be   rejected  at   the  option  of  one  or  both  of   the  parties,  due   to   the   lack   of   one   or   more   of   the   elements   of   a   valid   contract.   Voidable  contracts  are  valid  until  declared  void.  Contracts  made  by  mistake  are  generally  considered  voidable  according  to  Code  of  Obligations.  The  validity  of  a  voidable  contract  may  only  be  challenged  by  an  interested  party.      E)  TERMINATION  OF  CONTRACTS    

-­‐ By  fulfillment  of  the  obligations  of  the  parties  to  each  other.  Performance  (ifa)  can  be  either  specific  (aynen  ifa)  or  as  a  compensation  (nakdi  ifa).  

-­‐ By  an  agreement,  (release  or  novation-­‐tecdit).  

-­‐ By  becoming  impossible  of  the  subject  matter  due  to  the  circumstances  beyond  the  control  of  the  parties.  .  

-­‐ By  statute  of  limitations.(zaman  aşımı)  

-­‐ Due  to  the  breach  of  a  party  for  the  reason  that,  the  other  party  fails  to  fulfill  his  obligation  properly.  

 

II)  TORT    A   tort   [haksız   fiil]   is   a   civil   wrong   that   causes   injury   to   another   person   or  his/her/its  property.  It  is  a  negligent  or  intentional  harmful  act,  which  does  not  arise  out  of  a  contract  or  statute.  For  example,  when  someone  commits  a  crime,  e.g.,  assault,  he  or  she  is  punishable  under  criminal  law,  but  the  victim  may  also  seek  financial  compensation  from  the  tortfeasor,  i.e.,  the  one  who  committed  the  tort,  for  the  injury  suffered.39    General   Part   of   CoO   provides   the   general   framework   for   tortious   liability.  However   specific   legislation   exists   in   different   areas,   dealing   with   particular  types  of  damages.  :e.g.  Motor  Vehicle  Act.                                                                                                                    39  Vivek  Pande,  BLAW  Course  Outline  

 A)  ELEMENTS  OF  AN  ACTION  IN  TORT      Under   Turkish   Code   of   Obligations,   in   an   action   in   tort   the   Plaintiff   must  establish  that;      

1) Unlawful  act    

The  act  may  also  be  in  the  from  of  an  an  omission,  e.g.,  a  driver  who  causes  an  accident  by  not  paying  attention  to  the  road.  A  tortfeasor  may  raise  certain  defences  which  cure  the  illegality  of  the  act:  

§ the  consent  of  the  injured  victim,  e.g.,  a  patient’s  consent  to  surgery,  boxing  game  

§ legitimate  self-­‐defense  [meşru  müdafaa],  e.g.,  hitting  an  attacker  § necessity  (ızrar  hali),  e.g.,  to  avoid  striking  a  child,  a  motorist  crashes  

through  a  fence  § fulfillment  of  a  duty  imposed  by  law,  e.g.,  surgeon  operates  on  an  

unconscious  accident  victim,  arrest  of  a  person  upon  court  order.    

2) Negligence  of  the  tortfeasor    

Negligence  may  be  be  proved  by  showing  that  the  tortfeasor;  § acted  with  intent  [kasıt],  i.e.,  deliberately  and  not  by  mistake  § acted  with  negligence  [ihmal],  i.e.,  failed  to  exercise  reasonable  care  

contributory  fault  is  a  full  or  partial  defense  to  negligence,  e.g.,  tortfeasor  hits  a  pedestrian  who  is  sleepwalking  on  a  dark  road.    

3) Damages    

The  tortfeasor’s  unlawful  act  should    result  in  damages  [zarar]  Damages  may  include  § actual  losses  (damnum  emergens-­‐  fiili  zarar)  § lost  profits  and  earnings  (lucrum  cessans-­‐  mahrum  kalınan  kar)  § pain,  suffering,  grief,  emotional  distress,  etc.  (manevi  zarar)    Vicarious  Liability  [vekalet  nitelikli  sorumluluk]  may  be  imposed,  i.e.,  damages  are  also  sought  from  someone  other  than  the  tortfeasor,  e.g.,  employers  are  usually  liable  for  the  torts  of  their  employees  committed  during  the  scope  of  their  employment.    

joint  and  several  liability  [müteselsil  sorumluluk]:    may  be  imposed,  i.e.,  damages  are  sought  from  many  tortfeasors  who  collaborate  to  commit  the  act.  are    at  fault  § the  victim  may  choose  to  recover  the  entire  amount  of  damages  from  

some  or  all  of  the  tortfeasors  § any  tortfeasor  who  pays  damages  has  the  right  to  seek  proportional  

reimbursement  from  non-­‐paying  tortfeasors    

4) Proximate  Causation    

The  damages  must  be  CAUSED,  i.e.,  resulted  from,  the  tortfeasor’s  unlawful  act.  There  must  be  Proximate  Causation  [uygun  illiyet  bağı],  i.e.,  a  logical  relationship  between  the  unlawful  act  and  the  damages,  taking  into  consideration  the  ordinary  course  of  events  and  life  experiences  § adequate  causation  does  not  exist  if  there  is  an  Intervening  Cause,  

i.e.,  some  other  act  or  condition  that  causes  injury  to  the  victim  after  the  tort  has  been  committed  

   B)  STRICT  LIABILITY    The  law  of  non-­‐contractual  liability  is  founded  on  individual  wrongful  behaviour.  Thus  general  principle  is  the  Negligence  liability.      

• Negligence  liability  (İhmal-­‐Kusur  Sorumluluğu)  –  a  duty  to  compensate  if  the  damage  was  caused  through  a  negligent  behaviour    Strict  liability  (Kusursuz  Sorumluluk)  –  compensation  duty  for  all  damages  caused  without  need  to  prove  negligence.  Strict  liability  regimes  may  be  stipulated  in  different  specific  legislation  (for  instance  environmental  damages).  Strict  liability  entails  that  the  defendant  must  pay  for  damages  resulting  for  the  activity  for  which  he/she  is  strictly  liable,  i.e.:  nuclear  plant  or  ,  liability  imposed  on  a  business  for  manufacturing  a  defective  product  that  causes  injury.  

           

WEEK  6    ¢Explain difference between personal and real security ¢Explain types of personal and real security  

SECURITY CONTRACTS  

The   main   problem   that   can   arise   from   an   obligation   on   behalf   of   the  creditor  is  the  debtor’s  failure  to  perform  his/her  duty.  The  creditor’s  historical  need  for  a  security  against  this  probability  of  non-­‐performance  is  the  idea  behind  the   introduction   of   the   legal   institution   of   security.   Where   someone   incurs   a  contractual   obligation   towards   another,   it   is   only   natural   that   he  will   often   be  asked  by  his  new  creditor  to  promise  some  kind  of  penalty  or  guarantee  in  case  of  non-­‐fullfillment.  The  creditor  will  normally  try  to  minimize  the  risk  of   losing  out  in  one  of  two  ways:  he  can  either  ask  to  be  allocated  a  specific  item  belonging  to   the   debtor   (or   a   third   party)   from  which   he  will,   in   case   of   default   or   non-­‐performance,   be   able   to   obtain   satisfaction;   or   he   may   ask   another   party   (or  parties)  to  guarantee  fulfillment  of  the  principal  obligation.  In  another  words,  he  will   try  to  secure  his  position  either  by  way  of  a  real  right  (ownership,  right  of  pledge,   mortgage)   or   by   actions   in   personam   against   one   or   more   additional  debtors  (personal  security).  Thus;   starting   from  the  ancient   times  of  Roman   law,  we  can  observe   two  main  types  of   securities:   in  personam-­‐personal   (şahsi)  and   in  rem-­‐real   (ayni).    The   in  personam  securities   creates   rights  which   can   only   be   asserted   against   persons  while   in   rem  securities   creates   rights  which   can   be   asserted   against   any   third  person.    

I) PERSONAL  SECURITIES    A   personal   security   can   be   given   in   the   type   of   suretyship   (kefalet),   guarantee  (garanti)or  by  assuming  the  obligation  as  a  co-­‐debtor.    A) SURETYSHİP  (KEFALET)    

 Traditionally   the   most   important   type   of   personal   security   is   the   contract   of  suretyship  where  the  surety  (kefil)  binds  himself  to  the  creditor  of  a  third  party  to  be  responsible  for  the  fullfilment  of  the  obligation  of  that  third  party.    

n Suretyship  is  a  unilateral  contract  (tek  taraflı  sözleşme)   in  the  sense  that  only   the   surety   promises   to   perform   without   receiving   any   promise   of  performance  of  the  other  party.  

n The   parties   of   the   suretyship   contract   are   the   creditor   and   the   surety  (kefil).  The  principal  debtor  is  not  a  party;  furthermore,  his  consent  is  not  even  necessary  for  the  conclusion  of  a  suretyship  contract.  

n However,   notwithstanding   the   fact   that   the   suretyship   contract   is   a  surety’s  own  separate  contract  with  the  creditor,  its  validity  is  still  tied  to  the   validity   of   the   principal   obligation   that   the   surety   is   backing   up.   In  another   words;   the   extent   of   the   principal   obligation   at   any   time  determines   the   obligation   of   the   surety.   This   is   the   indication   of   the  ‘accessory   nature’   of   the   suretyship   contract.   The   fate   of   a   suretyship  contract  is  dependant  to  the  primary  obligation’s  fate  meaning  that  when  the   primary   obligation   is   extinguished   (for   whatever   reason),   the  accessory  obligation  (suretyship)  is  also  extinguished  with  it.  

n Another   effect   of   the   ‘accesory   nature’   (feri   niteliği)   of   the   surety’s  obligation   is   that   its   performance   cannot   be   requested   unless   the  principal  obligation  has  become  mature  or  enforceable.  

 

1)  Requisites  for  a  Valid  Suretyship    

  a)  A  Primary  Obligation       A  legally  valid  suretyship  requires  the  existence  of  a  principal  obligation  although   it   is   not   essential   that   the   principal   obligation   should   exist  when   the  contract   is   formed.   The   payment   of   a   future   or   conditional   debt   may   also   be  undertaken  by  the  surety.     As  mentioned  earlier,  the  fate  of  the  surety  contract  hinges  upon  the  fate  of  the  primary  obligation,  therefore,  if  the  principal  obligation  is  a)void  because  of   the   fact   that   the   contract   it   derives   from   contain   provisions   that   are  impossible,   illegal   or   contrary   to   public   morals   or   b)void   by   reason   of   the  incapacity   of   the   principal   debtor   or   c)voidable   by   reason   of   mistake-­‐duress-­‐fraud  in  the  formation  of  the  contract  it  derives  from  and  the  debtor  rescinds  the  contract,  then  the    suretyship  is  unenforceable  as  well.  The  only  exception  to  this  rule  is  the  case  where  the  surety  undertakes  an  obligation  knowing  that  it  arises  from   a   contract   which   is   void   against   the   principal   debtor   due   to   mistake   or  incapacity.  In  such  a  case,  the  surety  will  be  held  liable  regardless.    

b)  Capacity  of  the  Surety     Persons  who  have  a  full  contractual  capacity  are  able  to  give  securities  by  entering   into   contracts   of   surety.   An   appointed   representative   of   a   person  without  a   legal  capacity  cannot  enter  into  a  surety  contract  for  the  name  of  the  person  under  representation.    

   c)  Form  Requirement     A   surety   contract  must   be   in  writing   in   order   to   be   deemed   as   valid.   A  valid   suretyship   contract  must   also   include   a   declaration   of   intent   to   create   a  suretyship   and   the   maximum   amount   of   suretyship   liability.   The   surety,   the  creditor   and   the   principal   obligation   must   also   be   indentified   within   the  suretyship  contract.    

2)  Types  of  Suretyship    

a) Ordinary  Suretyship  (Adi  Kefalet)    

When   the   promise   of   the   surety   is   entirely   collateral   to   the   principal  obligation,   there   is   an   ordinary   suretyship.   Being   entirely   collateral   to   the  principal   obligation  means   that:   the   creditor  must   first   resort   to   the   principal  debtor  before   turning   to   the   surety.  The   creditor   can  only  demand  satisfaction  from   the   surety   unless   he   has   made   a   reasonable   effort   to   exhaust   proper  remedies  against  the  principal  debtor.  

If   there   is  also  a   real   security   involved   in   securing   the  principal  obligation  then   the   sequence   of   the   securities   given   (real   and   personal)   becomes   of  importance.      When  a  real  security  is  created  before  the  date  of  the  suretyship  or  concurrently   with   it   then   the   creditor   shall   have   recourse   first   to   the   real  security.     Even   when   the   real   security   is   provided   after   the   creation   of   the  suretyship,   the   surety   can   still   demand   that   the   creditor   first   have   recourse   to  real  security.  

   

b) Joint  Suretyship  (Müteselsil  Kefalet)  If  a  surety  promises  a  joint  surety  or  as  a  co-­‐debtor  or  by  similar  expressions,  the  creditor  may  have   recourse   against   the   surety  before   the  principal   debtor   and  before  foreclosure  of  securities.    (Being  under  a  joint  obligation  (müteselsil  borç)  means   that   all   the  debtors-­‐in   this   case   the  primary  debtor   and   the   surety-­‐   are  each   liable   up   to   the   full   amount   of   the   relevant   obligation.   The   creditor   can  resort   to   any   debtor   for   the   total   debt.  When   one   debtor   satisfies   the   creditor  then  the  obligation  chain  between  the  debtors  and  the  creditor  is  solved  and  the  debtor  that  performed  the  debt  can  recourse  to  the  other  debtor-­‐or  debtors-­‐  for  his  satisfaction  within  the  frame  of  the  debtors’  internal  relationship.  To  be  more  precise:   in   a   joint   suretyship,   the   creditor   has   the   option   to   initially   resort   to  either  the  surety  or  the  principal  debtor.)  In  contracts  that  fall  within  the  scope  of  the  law  of  obligations,  the  agreement  on  a   joint   suretyship   must   be   expressed   explicitly.   However   in   commercial  obligations   governed   by   the   commercial   code   unless   contrary   stated   in   the  contract,  the  suretyship  created  is  of  a  joint  nature.  (-­‐presumption  of  solidarity)  

 

c)  Co-­‐suretyships  (Toplu  Kefalet)      Several   sureties   who   jointly   undertook   the   performance   of   the   same   divisible  claim  are  liable  for  their  part  as  ordinary  sureties  and  for  the  parts  of  the  others  as  secondary  sureties.      

3) Effects  of  Suretyship    

n The  surety   is  only   liable  to  the  extent  of  the  maximum  amount  stated  in  the   surety   contract   including   the   amount   brought   about   by   the   legal  consequences  of  the  debtor’s  non-­‐performance  or  improper  performance  or  default.  

n The   surety   is   entitled   and  obliged   to  bring   forward   against   the   creditor  the  defenses  and  exceptions  to  which  the  principal  debtor  is  entitled  even  if   the   principal   debtor   opts   to   waive   them.   The   surety   can   assert   the  principal   obligation   is   not   binding   on   the   grounds   that:  a)   the   principal  debtor   lacks   the  capacity  b)the  collection  of   the  principal  debt   is  barred  by  lapse  of  time  (zamanaşımı)  c)the  principal  obligation  has  already  been  discharged.  The  surety  has  also  the  right  to  assert  defenses  arising  from  the  contract  of  suretyship  such  as  that  the  surety  contract  is  not  valid  or  is  already   terminated.   In   ordinary   suretyship,   as   mentioned   above,   the  surety   has   also   the   right   to   demand   that   the   creditor   first   resort   to   the  principal  debtor   for  performance  or   first  have  recourse   to   the  pledge  (if  there  is  one).  A  Surety  cannot  argue  the  insolvency  of  the  principal  debtor  as  a  defense  against  the  creditor.  

n Proceedings  to  collect  the  principal  debt  cannot  be  instituted  against  the  surety  before   the   fixed  date  of  payment  even   if   the  principal  debtor  has  become  bankrupt.  

n A  creditor  who  has  been  satisfied  by  a   surety   is  under   the  obligation   to  hand   in   to   the   surety   the  documents  needed   for   the   enforcement   of   his  rights  and  deliver  the  securities  created  for  the  principal  debt.          

n If   the  surety  pays   in  part  or  all  of   the  principal  debt,  he  must  notify   the  principal   debtor   thereof.   Provided   he   fails   to   do   so   and   the   principal  debtor   also   pays   the   creditor   bona   fide   (in   good   faith),   the   surety   is  deemed   to   forfeit   his   right   of   recourse   against   him.   In   such   a   case,   the  surety  may  bring  an  action  of  unjustified  enrichment  (condictio  indebiti)  against  the  creditor  since  the  creditor  has  been  enriched  in  expense  of  the  surety  unjustified.  (The  initial  execution  of  the  principal  obligation  by  the  principal   debtor   abrogates   the   causa   of   this   successive   performance   by  the  surety.)      

n A   surety   is   released   by   the   extinction   of   the   principal   debt   in  whatever  way  it  occurs.  There  are  also  other  grounds  for  termination  of  a  contract  of  suretyship  which  originate  from  the  contract  of  suretyship  itself.    

 B)  GUARANTEES  (GARANTI)  A  guarantee  is  a  contract  that  some  particular  performance  will  be  undertaken  as  agreed  regardless  of  the  existence  of  a  prior  or  principal  obligation.    

1)  Pure  Guarantees  A  pure  guarantee  is  utilized  primarily  for  guaranteeing  the  losses  of  an  investor  or  assuring  him  a  fixed  ratio  of  profit  in  the  course  of  his  business  regarding  his  enterprise.  Pure  guarantees  do  not  benefit  from  special  legal  provisions  and  are  governed  by  the  general  conditions  applicable  to  all  contracts.    

2)  Collateral  Guarantees  Collateral   guarantee   is   a   contract   that   requires   the   existence   of   a   primary  obligation  and  by  which  the  guarantor  undertakes  to  compensate  the  creditor  in  case  the  primary  debtor  fails  to  perform  his  obligation.      The   main   difference   between   a   surety   and   a   collateral   guarantee   is   that   the  surety   creates   an   accessory   obligation   and   therefore   is   not   binding  where   the  principal   obligation   is   not   valid   whereas   the   collateral   guarantee   is   an  independent   contract  which  creates  a  primary  obligation   free   from   the   faith  of  the  obligation  it   is  created  to  back  up.  Another  important  distinction  is  that  the  surety   contract   must   be   in   writing   to   be   deemed   as   valid   while   there   is   no  requirement  of  such  for  the  validity  of  the  collateral  guarantee.  Collateral   guarantees   are   usually   utilized   by   banks   in   the   form   of   letters   of  guarantees.  A  contract  of  guarantee  by  a  bank  must  meet  the  following  criteria:    

n The   bank   shall   assume   totally   or   partially   the   risk   that   the   beneficiary  may  face  

n The   contract   shall   contain   clauses   that   stipulate   an   independent  undertaking  whereby  the  bank  is  the  principal  debtor  

n The   contract   shall   include   clauses   regarding   the   acceptance   of   the  punctual  payment  of  a  due  debt  without  any  prior  notice  or  action  against  the  primary  debtor  whose  performance  is  guaranteed  

 Unless   there   is  a  contract  of  counter-­‐guarantee,  a  guarantor   is  not  entitled  to  a  right  of  recourse  against  the  debtor  whose  performance  was  guaranteed.    C-­‐  BILLS  OF  EXCHANGE  GUARANTEES  (AVALS)          

An  Aval   guarantees,  wholly  or  partially,   the  payment  of   the  amount  of  a  Bill  of  Exchange   (Poliçe).   This   guarantee   can   be   given   by   a   third   person   as  well   as   a  person  whose  signature  already  appears  on  the  bill.  An  aval  must  be  in  writing-­‐attached   to   the   Bill   of   Exchange-­‐expressed   by   the   words   ‘it   is   for   aval’   or  equivalent-­‐signed  by  the  guarantor.  When  the  guarantor  pays  the  bill,  he  consequently  acquires  all  rights  attaching  to  the  bill  against  the  person  guaranteed  and  against  the  others  who  are   liable  on  the  bill  to  that  person.      

II)  REAL  SECURITIES    

In   today’s   world,   creditors   usually   prefer   real   security   over   personal  security.   It   provides   them   with   assets   of   a   rather   stable   value   which   can   be  converted  to  cash  (by  realization  of  the  property)  even  in  the  event  of  insolvency  and   it   excludes   the   risk   of   a   (second)   lawsuit   against   the   surety   (who  may   be  unwilling  to  pay),  or  being  faced  with  his  financial  collapse  too,  hence  the  Roman  legal   expression:   –Plus   cautionis   in   re   est   quam   in   persona   (goods   are   better  sureties  than  the  debtor’s  person)-­‐.    It  is  not  wrong  to  say  that  this  statement  is  a  fair  reflection  of  the  modern  trend  in  commercial  life.  

The  classification  of  real  property  takes   into  consideration  the  nature  of  the   property   in   question.   Therefore   we   can   talk   about   two   categories   of   real  security:   Real   security   over   immovable   property   (taşınmaz   eşya)   and   Real  security  over  movable  property  (taşınır  eşya).    A) REAL  SECURITY  OVER  IMMOVABLE  PROPERTY    

 The  most   common   type   of   real   security   over   immovable   property   is  mortgage  (ipotek).   Apart   from   mortgage   as   a   real   security   there   is   also   the   mortgage  certification  (ipotekli  borç  senedi)  and  the  land  charge  notes  (irat  senedi),  both  of  which   are   scarce   in   practice.   Unlike   mortgage,   mortgage   certificates   and   land  charge   notes   are   freely   transferable   negotiable   instruments   (kıymetli   evrak)  issued  to  the  order  (namına)  of  the  creditor  or  to  the  bearer  (hamiline)  without  specifying  the  basis  of  liability  although  the  mortgagor  retains  the  liability  for  the  secured  debt  of  both  the  mortgage  certificates  and  land  charge  notes.    

1) Mortgage  (İpotek)    The  most  important  aspect  of  mortgage  is  that  it  creates  a  real  right  over  

the  mortgaged  property  on  behalf  of  the  creditor.  This  real  right  is  accessory  to  the  debt   secured   thereby  and  consequently   the  validity  of  a  mortgage  requires  

the   existence   of   a   valid   debt   although   it   is   not   essential   that   such   a   debt   shall  exist   at   the   time   of   the   formation   of   contract   since   legally   a   mortgage   can   be  created   for   the   purpose   of   securing   a   future   or   conditional   debt   provided   it  becomes   effective   at   the   time   of   the   enforcement   of   the   right   of   the   creditor  against  the  mortgagor.    Effects  of  Mortgage  

n A  mortgage  can  be  created  for  a  single  debt  as  well  as  for  several  debts  on  the   same  property   to   the  extent   that   this  does  not   impose  any  unlawful  restriction  on  the  prospective  economic  activity  of  the  mortgagor.  

n A   mortgage   can   be   created   on   immovable   property.   Here,   the   term  immovable  property  includes  land,  alienable  personal  servitudes  that  can  be  entered   in   to   the  Land  registry   (tapu  sicili)  as   immovable  properties,  independent   parts   of   a   building   subject   to   flat   ownership   and   shares   of  co-­‐owners  of  land.  

n A   mortgage   property   can   belong   to   the   debtor   or   a   third   person   who  secures  the  debt  in  favor  of  the  debtor.  As  stated  above,  a  mortgage  (being  a   real   security)   does  not   create   a   personal   liability   on   the   owner   of   the  real   property,   the   liability   does   not   extend   outside   the   mortgaged  property.  

n A  mortgage  on  a  property  includes  all   its  integral  parts  (mütemmim  cüz)  and  accessories  (teferruat)  (f.e.  a  mortgage  created  on  a  piece  of  land  will  cover  all  the  buildings  and  trees  on  that  land)  

n A  mortgage  will  only  be  effective  once  it  is  recorded  in  the  Land  register.  The  prerequisite  for  the  registration  of  a  mortgage  is  a  contract  between  the   creditor   and   the   mortgagor.   This   contract   does   not   create   the  mortgage  but  conveys  the  right  and  obligation  to  record  the  mortgage  in  the  Land  register.  

n The   owner   of   the  mortgaged   property   can   create   further  mortgages   on  the   same   property.   However,   the   amount   realized   on   the   sale   of   the  property  will  be  disbursed  to  the  creditors  in  their  order  of  priority  which  will   be   determined   in   accordance   with   the   principles   of   ‘fixed   ranks’  system.   The   ‘fixed   ranks’   system   ensures   the   mortgages   on   the   same  property  to  acquire  an  order  of  priority  according  to  the  rank  of  the  place  in  which  they  are  registered  in  the  Land  register.    

n If  the  debtor  fails  to  pay  his  debt  the  creditor  can  demand  the  sale  of  the  property  under  mortgage.  There  is  no  statute  of  limitations  for  an  action  on   a   debt   secured   by   a   mortgage.   Any   agreement   made   before   the  maturity   of   the   mortgage   debt   and   providing   that   the   creditor   will  become   the   ipso  iure   owner  of   the  mortgaged  property   is  null   and  void.  (This  universal  principle  is  called  the  lex  commisoria  prohibiton)  

n Foreclosure   proceedings   begin   with   the   request   of   the   creditor.   The  execution  office  will  sell   the  property  and  distribute   the  proceeds  of   the  

sale   among   the   secured   creditors   in   accordance   with   their   order   of  priority.  

 B)  REAL  SECURITY  OVER  MOVABLES  The   creation   of   pledge   (pignus-­‐rehin)   provides   a   contractual   security   in  

rem  over  movable  property,  claims  and  other  assignable  rights.    

1)  Pledges  

a) Pledges  on  Movables  (Taşınır  Rehni)    

Movable  properties  can  be  given  in  pledge  only  by  the  delivery  of  possession  of  the  movable  property  to  the  pledgee  (which  does  not  necessarily  mean  that  the  delivery  of  the  movable  should  be  by  hand;  the  delivery  of  the  possession  can  be  in  direct  or  indirect  ways  as  well,  such  as  handing  in  the  keys  of  the  -­‐pledged  to  be-­‐  car  or  the  key  of  a  warehouse  where  the  immovable  to  be  pledged  is  placed).  

n The  main  distinction  between  a  pledge  and  a  mortgage   is   that   there  can  be   no   case   of   lapse   of   time   for   the   former.     A   creditor   can   enforce   his  rights  under  a  pledge  regardless  of  the  fact  that  he  can  enforce  his  original  claim  or  not.  

n A  pledge  on  assignable  claims  and  other  rights  are  possible  as  long  as  the  pledge  is  created  by  an  agreement  in  writing.  

n Negotiable   instruments   to   bearer   can   also   be   pledged   since   they   are  regarded  as  immovable  property.  

 

b) Ships  and  Aircrafts    

Notwithstanding  the  fact  that  ships  and  aircrafts  are  immovable  properties,  they  are  subject  to  mortgage  not  pledge.  Mortgages  on  ships  shall  be  registered  with  the  Ship  Registry  (gemi  sicili)  whereas  mortgages  on  aircrafts  shall  be  recorded  with  the  Civil  Aviation  Registry  (Sivil  Havacılık  Sicili).      

WEEK  7-­‐8    ¢Explain general principles governing international sales ¢Explain the general structure of CISG ¢Familiarize with common clauses in sales contracts    

LAW OF SALES CONTRACTS  

I) SALES  CONTRACTS  ıN  GENERAL    Undoubtedly,  one  of   the  most  common  commercial   transactions   is   the  contract  for   the   sale   of   personal   property.   A   contract   of   sale   is   an   agreement   on   an  exchange  of  goods,  services  or  property  to  be  exchanged  from  seller  (or  vendor)  to   buyer   (or   purchaser)   for   an   agreed   upon   value   in   money   (or   money  equivalent)  paid  or  the  promise  to  pay  same.  In  most  civil  law  jurisdictions40  the  conclusion   of   the   sales   contract   does   not  mean   that   the   ownership   right   over  goods   in   exchange   has   been   transferred.   The   conclusion   of   the   sales   contract  only  ascribe  certain  duties  and  obligations  on  both  parties:    -­‐the  obligation  to  the  transfer  of  ownership  on  the  vendor  and  the  obligation  to  pay  a  certain  sum  of  money  (or  money  equivalent)  on  the  buyer-­‐.  Therefore,  the  conclusion  of  a  sales  contract  is  not  enough  for  the  transfer  of  the  subject-­‐matter  of  the  contract  but  an  act  of  delivery  on  vendor’s  side  is  also  required.  If  a  movable  property  (res)  is  to  be  sold,  than  after  the  signing  of  the  contract  the  vendor  is  obliged  to  deliver  the  possesion  of  the  property  to  the  buyer.  This  can  be  done  by  either  an  actual  delivery  of   the  property  (f.e.  by  handing   it   in)  or  by  the   indirect   transfer  of   the  possesion  (such  as  handing   in   the  documents  and  keys  of  a  car41  to  be  sold  or  giving   the   keys   of   a   warehouse   where   the   goods   are   deposited   etc.)  Consequently,   the   transfer   of   the   document   to   ownership   does   tranfer   the  ownership  of  the  property  (such  as      If  an  immovable  is  to  be  sold  than  with  the  conclusion  of  the  sales  contract,  the  transfer  of  the  ownership  of  the  immovable  property  should  be  registered  in  the  Land  Registry.  42  

                                                                                                               40  Excluding  France  41  It  must  be  stated  here  that  apart  from  delivering  the  documents  and  the  keys  of  a  car  in  sale,  in  order  to  establish  the  ownership  of  the  car  its  registration  by  the  purchaser  is  also  required.    42  In  some  few  exceptional  cases,   the  ownership  may  be  transfered  without  the  delivery  of   the  goods  or  of   title   instruments:  F.e.   the  ownership  of  a  registered  

Anything   that   has   a   certain   economic   value   can   be   sold,  materialization   of   the  property   has   no   relevance.   Minerals,   crops,   quarry   materials,   negotiable  instruments,   legal   claims,   know-­‐how,   electricity43,   gas,   information,   and   even  foreign  currency,  all   can  be   the  subject  of  a  sales  contract.  Goods  which  do  not  exist  at  the  time  of  the  formation  of  the  contract  can  also  be  sold.  (f.e.  crops  that  have   yet   not   been   grown   can   be   sold)   Human   beings   can   not   be   the   subject-­‐matter   of   a   sales   contract   although   promise   to   render   their   services   can.  However   in   such   a   case,   the   contract   in   question   will   most   probably   not   be  considered   as   a   sales   contract   but   rather   as   an   employement   or   service  agreeement  (locatio  conductio).    The   difference   between   sales   agreement   and   other   types   of   contracts   can  sometimes  become  rather  blur.  F.e.,  a  service  agreement  can  be  construed  as  the  sale  of  services  or  a  rent  contract  can  be  construed  as  the  sale  of  the  use  of  the  rental   property   for   a   certain   amount   of   time.   However,   in   order   to   consider   a  contract  as  a  sales  contract  there  must  be  the  promise  from  the  buyer  to  pay  a  certain   sum   of   money.   This   exchange   is   the   basic   feature   that   distinguishes   a  sales  agreement   from  a  barter   (trampa)  or  a  gift   (hibe).  The  sales  contract   is  a  synallagmatic   contract   meaning   that   it   burdens   both   parties   with   certain  reciprocal  obligations.  (The  primary  obligations  being:   for  the  seller  to  transfer  the  ownership  of  the  property  and  the  buyer  to  pay  the  price).    The  sum  (price)  must  be  stated  in  a  reasonable  certainty  in  terms  of  money.  No  restrictions  on  the  sum  to  be  in  foreign  currency  or  Turkish  Liras  under  Turkish  Law.  The  parties  to  a  sales  contract  are  free  to  agree  any  price  unless  the  goods  are   in   a   limited   category   of   which   the   prices   are   fixed   by   authorities   such   as  bread,  gas  or  oil.        Whereas  the  sale  of  immovables  are  subject  to  a  formal  contract  to  be  concluded  in   the  presence  of  a   recording  officer   (tapu  memuru),   the  sale  of  movables  are  not  subject  to  any  formal  requirements  although  there  a  few  exceptions:  certain  types  of  sales  contract  are  subject  to  special  formal  requirements  (such  as  sale  of  stocks,  claims,  cars  and  trademarks)  as  well  as  some  special  consumer  contracts  such  as  sales  with  installements  (taksitle  satış).    

II) UNITED  NATIONS  CONVENTION  ON  CONTRACTS  FOR  THE  INTERNATIONAL  SALE  OF  GOODS  (CISG)    

A)  IN  GENERAL                                                                                                                                                                                                                                                                                                                                ship   is   considered   to   be   transfered   at   the   time   of   the   enactment   of   the   sales  contract.  43  Goods   or   services   such   as   electricity  which   can   be   sold,   can   also   be   utilized  without  compensation  hence  the  crime  of  stealing  electricity.  

 The  United  Nations  Convention  on  Contracts  for  the  International  Sale  of  Goods  is  a  treaty  offering  a  uniform  international  sales  law  that,  as  of  August  2010,  has  been  ratified  by  76  countries44  that  account  for  a  significant  proportion  of  world  trade,  making  it  one  of  the  most  successful  international  uniform  laws.  Turkey  is  one  of  the  recent  states  to  have  ratified  the  Convention.45    CISG  basically  governs  three  areas:  the  conclusion  of  the  contract,  the  obligations  of  the  seller  including  the  respective  remedies  of  the  buyer  and  the  obligations  of  the  buyer  including  the  respective  remedies  of  the  seller.    

The  Convention  is  divided  into  four  parts:46  

(1)  The  first  part  (Art.  1-­‐13  CISG)  contains  rules  on  its  sphere  of  application    

(2)  The  second  part  (Art.  14-­‐24  CISG)  deals  with  the  formation  of  the  contract.  

(3)  The  third  part  (Art.  25-­‐88  CISG)  is  by  far  the  most  comprehensive  part  of  the  Convention.   It   is  entitled  "Sale  of  Goods"  and  provides   the  actual  "sales   law"  of  the  Convention.  It  is  subdivided  into  five  chapters:  

Chapter   I   (Art.   25-­‐29   CISG)   contains   some   general   provisions   which   may   be  relevant  throughout  the  entire  sales  law,  in  particular  the  definition  of  the  notion  of   "fundamental   breach"  which  will   be   relevant   in  particular   as   a  precondition  for  the  right  to  avoid  the  contract.  

Chapter  II  (Art.  30-­‐52  CISG)  deals  with  the  obligations  of  the  seller,  delivery  of  the  goods  and  the  handing  over  of  documents.  The  conformity  of  the  goods  and  third  party  claims  are  also  included.  

Finally,  Section  III  (Art.  45-­‐52  CISG)  contains  the  core  element  of  every  sales  law,                                                                                                                  44http://en.wikipedia.org/wiki/United_Nations_Convention_on_Contracts_for_the_International_Sale_of_Goods    45  Kanun  No.  5870      Kabul  Tarihi:  2/4/2009  MADDE  1  –(1)  11  Nisan  1980   tarihinde  Viyana’da   imzaya  açılan   “Milletlerarası  Mal   Satımına   İlişkin   Sözleşmeler   Hakkında   Birleşmiş   Milletler   Antlaşması”na  katılmamız  uygun  bulunmuştur.  MADDE  2  –(1)  Bu  Kanun  yayımı  tarihinde  yürürlüğe  girer.  MADDE  3  –(1)  Bu  Kanun  hükümlerini  Bakanlar  Kurulu  yürütür.  46  This   part   is   taken   from  Peter  Huber,  Some   introductory  remarks  on  the  CISG,  Internationales   Handelsrecht   (6/2006)   228-­‐238,   Sellier,   Eruopean   Law  Publishers    

the   buyer's   remedies   for   breach   of   contract   by   the   seller.   Art.   45(1)   CISG  provides:  "If  the  seller  fails  to  perform  any  of  his  obligations  under  the  contract  or  this  Convention,  the  buyer  may:  (a)  exercise  the  tights  provided  in  Art.  46  to  52  CISG;  (b)  claim  damages  as  provided  in  Art.  74  to  77  CISG."  This  means  that  the   buyer   can   resort   to   the   following   remedies:   performance   (Art.   46   CISG),  including   substitute   delivery   (Art.   46(2)   CISG)   and   repair   (Art.   46(3)   CISG);  avoidance  of  the  contract  (Art.  49  CISG);  reduction  of  the  purchase  price  (Art.  50  CISG);  damages  (Art.  45  lit.  (b),  74  ff.  CISG).  There  are  several  specific  provisions  for   installment   contracts   (Art.   73  CISG)   and   for   cases  of   anticipatory  breach  of  contract  (Art.  72  CISG)  which  do,  however,  not  create  new  remedies,  but  rather  modify   the   existing   remedies.   The   most   defining   feature   of   the   system   of  remedies   in   the   CISG   is   that   its   aims   at   keeping   the   contract   alive   as   long   as  possible   in   order   to   avoid   the   necessity   to   unwind   the   contract.   The   prime  consequence  of  this  is  that  termination  of  the  contract  will  only  be  available  as  a  remedy  of   last   resort:   It  will   usually   require   that   the  breach   committed  by   the  seller   was   a   fundamental   one   (Art.   49(1)   lit.   (a),   25   CISG);   in   cases   of   non-­‐delivery,   the   buyer   may   also   terminate   the   contract   after   having   fixed   an  additional  period  of  time  without  success.  

Chapter   III   (Art.   53-­‐65   CISG)   has   a   similar   structure:   Art.   53   CISG   states   the  buyer's  obligations   in  a  general  way,  Section   I   (Art.  54-­‐59  CISG)  deals  with   the  obligation   to   pay   the   price,   Section   II   (Art.   60   CISG)   deals   shortly   with   the  obligation  to  take  delivery  and  Section  III  (Art.  61-­‐64  CISG)  governs  the  seller's  remedies   for   breach   of   contract   by   the   buyer.   The   structure   of   the   seller's  remedies  is  similar  to  the  structure  of  the  buyer's  remedies.  

Chapter  IV  (Art.  66-­‐70  CISG)  deals  with  the  passing  of  risk  and  is  closely  linked  to  the  buyer's  obligation  to  pay  the  price.  

Chapter  V  (Art.  71-­‐88  CISG)  contains  provisions  common  to  the  obligations  of  the  seller  and  of  the  buyer.  Section  I  (Art.  71-­‐73  CISG)  deals  with  anticipatory  breach  and   installment   contracts.   Section   II   (Art.   74-­‐77   CISG)   contains   the   extremely  important  rules  on  damages;  this  section  is  closely  linked  to  Section  IV  (Art.  79-­‐80  CISG)  which  governs  the  exemptions  from  the  strict  liability  for  damages  that  the  Convention  imposes  on  the  parties.  Section  III  (Art.  78  CISG)  contains  a  short  (and   fragmentary)   rule   on   interest.   Section   V   (Art.   81-­‐84   CISG)   governs   the  effects  of  an  avoidance  of  the  contract  and  Section  VI  (Art.  85-­‐88  CISG)  deals  with  the  preservation  of  the  goods.  

(4)   The   fourth   part   of   the   Convention   (Art.   89-­‐101   CISG)   contains   final  provisions   which   deal   in   particular   with   the   details   of   ratification   etc.,   with  possible  reservations  against  certain  parts  or  provisions  of   the  Convention  and  with  the  entry  into  force  of  the  Convention.  

 B)  SPHERE  OF  APPLICATION  AND  GENERAL  PROVISIONS  (ARTICLES  1-­‐13)47  

                                                                                                               47  From  Wikipedia,  the  free  encyclopedia  

 

1) Goods  that  CISG  is  applicable    The  CISG  is   intended  to  apply  to  commercial  goods  and  products  (not  services)  only.  With  some  limited  exceptions,  the  CISG  does  not  apply  to  goods  bought  for  personal,  family  or  household  use,  unless  the  seller,  at    any    time    before    or    at    the    conclusion    of    the    contract,    neither    knew    nor    ought    to    have    known    that    the    goods    were    bought    for    any    such    use.  This  exclusion  intends  to  ensure  that  domestic  consumer-­‐protection  laws  are  not  affected  by  CISG.    Since  there  might  be  a  conflict  between   the  Convention  and  mandatory  rules  of  domestic   law   for  the  protection  of  consumers.    On  the  other  hand  there  still  seems  to  be  a  tendency  to  recommend  the  exclusion  of  the  Convention,  especially  in  the  commodities  trade.    Auctions,  ships,  aircraft  or  intangibles  (e.g.  stocks,  shares,  investment  securities,  negotiable   instruments   or  money,   and   electricity.)   and   services   are   also   out   of  the   scope  of   the  Convention   (Art.   2).  Barter   contracts   are  not   governed  by   the  Convention  either.      Convention  also  provides  that  the  application  of  the  Convention  does  not  depend  on  whether   the  parties  are  considered  "civil"  or   "commercial".  The  Convention  thereby  avoids  the  intricate  problem  of  defining  a  "commercial  party".  It  is  also  irrelevant  whether  the  sales  contract  is  commercial  or  private  in  character.    

2) Whom  to  apply    

Article  1  defines   the  Convention's  scope  of  application.  The  Convention  applies  when  the  parties  have  their  places  of  business  in  different  Contracting  States  or  when  conflict  rules  designate  the  law  of  a  Contracting  State.    The  CISG  applies   to  contracts  of  sale  of  goods  between  parties  whose  places  of  business  are  in  different  States  when  these  States  are  Contracting  States.  Liaison  or  representative  offices  are  places  of  business  for  CISG  purposes.  However,  if  a  party  has  more  than  one  place  of  business,  the  place  of  business  is  that  which  has  the  closest   relationship   to   the  contract  and   its  performance,  having     regard     to    the    circumstances    known    to    or    contemplated    by    the    parties    at    any    time    before    or    at    the    conclusion    of    the    contract  (Art.  10/a).      A   sale   between   two   Italian   companies   where   the   goods   sold   are   to   be  manufactured  and  then  imported  into  Italy  would  not  fall  under  the  CISG.  On  the  

contrary,  a  sale  between  a  United  States  and  an  Italian  company  regarding  shoes  manufactured  in  Sicily  and  delivered  in  Florence  would  fall  within  the  ambit  of  the  CISG,  although  the  shoes  never  would  leave  Italy  prior  to  delivery.48    The   CISG   also   applies   if   the   parties   are   situated   in   different   countries   (which  need   not   be   Contracting   States)   and   the   conflict   of   law   rules   lead   to   the  application  of  the  law  of  a  Contracting  State.    Uniform   application   of   the   CISG   is   problematic   because   of   the   reluctance   of  courts  to  use  ‘solutions  adopted  on  the  same  point  by  courts  in  other  countries’  resulting  in  inconsistent  decisions.  For  example,  in  a  case  involving  the  export  to  Germany  by  a  Swiss  company  of  New  Zealand  mussels  with  a  level  of  cadmium  in  excess  of  German  standards,  the  German  Supreme  Court  found  that  it  is  not  the  duty  of   the   seller   to  ensure   that  goods  meet  German  public  health   regulations.  This  contrasted  with  a  later  decision  in  which  an  Italian  cheese  exporter  failed  to  meet  French  packaging  regulations  and  the  French  court  decided  it  is  the  duty  of  the  seller  to  ensure  compliance  with  French  regulations.    

3) Exclusion  of  CISG    

Parties   to   a   contract   may   exclude   or   vary   the   application   of   the   CISG.49  As  international  commercial  sales  are  largely  governed  by  party  autonomy,  the  CISG  provides  basic  default  rules.  International  sales  law  does  not  only  live  within  the  CISG   (supplemented   to   a   certain   extent  by  domestic   law),   but   also   in   the   sales  contracts  themselves  which  have  either  excluded  the  CISG,  in  whole  or  in  part,  or  supplemented  its  rules  with  provisions  that  correspond  to  certain  problems  and  needs  encountered  in  practice.    Although  it  is  now  generally  accepted  in  western,  industrialized  countries  that  at  least  business  parties  are  free  to  choose  the  law  applicable  to  their  contract,  this  is   not   true   in   all   parts   of   the  world.   The   fear   of   giving  western  businesses   too  many  advantages  still   leads  many  developing  and  transition  countries  to  refuse  the  recognition  of  choice  of   law  clauses.  The  most  prominent  example   is  Brazil  where  the  validity  of  choice  of  law  clauses  is  highly  controversial.50  

                                                                                                               48  Filip  De  Ly,    Sources  Of  International  Sales  Law:  An  Eclectic  Model,  JOURNAL  OF  LAW  AND  COMMERCE,  Vol.  25:1  49  Parties   may   include   an   express   statement   e.g.   "The   application   the   United  Nations   Convention   on   Contracts   for   the   International   Sale   of   Goods   is   strictly  excluded  from  this  Agreement."  50  Ingeborg   Schwenzer   &   Pascal   Hachem,   The   CISG   -­‐   Successes   and   Pitfalls,   57  American  Journal  of  Comparative  Law  (Spring  2009)  457-­‐478  

 

4)  Tort  Claims  and  CISG  The   international   contractual   regime   of   the   CISG   would   in   most   cases   face   a  domestic  tort  system  (i.e.  the  tort  law  that  the  private  international  law  rules  of  the  forum  as  applicable).  Any  concurrence  between  the  sales  law  of  the  CISG  and  a   (usually   domestic)   tort   system  will   therefore   run   a   high   risk   of   friction   and  discrepancies.    In   so   far   as   claims   for   personal   injury   or   death   in   the   sense   of  Art.   5   CISG   are  concerned,  CISG  does  not  govern  those  claims.  Claims  for  damage  to  the  buyer's  property  are  more  difficult  to  assess.  The  predominant  opinion  seems  to  be  that  tort   claims   under   domestic   law   are   fully   admissible   and   not   subject   to   any  (analogous   application   of   the)   restrictions   of   the   CISG   because   tort   claims   are  based  on  policy  considerations,  which  are  different  from  the  ones  which  underlie  contract  law.  

5)  Freedom  of  form    

Under  Article  11,  a  contract  of  sale  need  not  be    concluded    in    or    evidenced    by    writing    and    is    not    subject    to    any    other    requirement    as    to    form.    It  may  be    proved     by     any     means,     including     witnesses.   States   with   a   strict   written  requirement   exercised   their   ability   to   exclude   those   articles   relating   to   oral  contracts.   Specifically,   Argentina,   Belarus,   Chile,   China,   Hungary,   Latvia,  Lithuania,   Paraguay,   Russian   Federation   and  Ukraine   are   not   bound   by  Article  11.      Proving  Contract  Terms    Unlike  some  domestic  laws,  under  which  certain  agreements  must  be  in  writing  to   be   enforceable,   CISG   allows   verbal   contracts   or   modifications.   Additionally,  any  evidence  can  be  used  to  prove  the  parties'  intent,  even  if  it  changes  the  terms  of  a  written  contract.  Thus,  pre-­‐contract  negotiation  materials,  such  as  proposals,  MOUs,  term  sheets  or  letters  of  intent,  can  be  used  as  evidence  to  show  what  you  intended,  even  if  the  final  contract  contains  different  terms.     To   prevent   such   chaos   parties   usually   include   a   statement   in   all   pre-­‐contract  documents  that  no  representations  were  made  that  were  not   incorporated  into  the   pre-­‐contract   document   and   that   the   pre-­‐contract   document   will   be  superseded   and   extinguished   by   the   final   written   contract   executed   by   both  

                                                                                                                                                                                                                                                                                                                                 

parties.  It  is  also  practical  to  insert  a  provision  in  the  final  contract  stating  that  all  pre-­‐contract  discussions  and  documents  are  superseded  and  extinguished  by  the  written  contract  executed  by   the  parties  which  cannot  be  modified  except  by  a  writing  signed  by  the  parties.51    An  example  of  such  a  clause  is  as  follows:    

"None of the terms, conditions or provisions of this Agreement shall be held to have been changed, waived, varied, modified or altered by any act or knowledge of either party, their respective agents, servants or employees unless done so in writing signed by both parties."

B)  FORMATION  OF  THE  CONTRACT  (ARTICLES  14–24)    Under  CISG  "formation"  refers  to  the  mechanics  of  how  the  contract  is  concluded  (e.g.   by   offer   and   acceptance).   This   is  what  Art.   14-­‐24  CISG   actually   deal  with.  Other   matters   that   may   affect   the   validity   of   the   contract   such   as   incapacity,  fraud,  public  order  or  export  bans  are,   regarded  as  matters  of   "validity"  which  fall  under  the  exception  of  Art.  4  and  are  therefore  not  governed  by  the  CISG.  52  Domestic  law  shall  regulate  the  excluded  matters.  

1) Offer  and  Withdrawal  of  Offer      Art.  14  states  that  a  proposal  for  concluding  a  contract  addressed  to  one  or  more    specific     persons     constitutes     an     offer     if     it     is     sufficiently     definite     and    indicates    the    intention    of    the    offeror    to    be    bound    with  the    acceptance.    A  proposal   is   sufficiently  definite     if     it     indicates     the     goods     and     expressly     or    implicitly     fixes    or    makes    provision     for    determining     the    quantity    and    the    price.  Where  there  is  no  explicit  price  or  procedure  to  implicitly  determine  price,  Art.  55  provides  that  the  parties  are  assumed  to  have  agreed  upon  a  price  based  upon  that  ‘generally  charged  at  the  time  of  the  conclusion  of  the  contract  for  such  goods  sold  under  comparable  circumstances’.  However  the  interpretation  of  this  Article  has  raised  many  discussions.53  

                                                                                                               51  CISG  Article  29(2):    A  contract  in  writing  which  contains  a  provision  requiring  any   modifications   or   termination   by   agreement   to   be   in   writing   may   not   be  otherwise   modified   or   terminated   by   agreement.   However,   a   party   may   be  precluded   by   his   conduct   from   asserting   such   a   provision   to   the   extent   that   the  other  party  has  relied  on  that  contract.  52  Peter  Huber,  53  See,   Barry   Nicholas,   The   Vienna   Convention   on   International   Sales   Law,   105  Law  Quarterly  Review  (1989)  201-­‐243  

 Proposals  other  than  those  addressed  to  one  or  more  specific  persons    are  to  be  considered  merely  as  an  invitation  to  make  offers,  unless  the  contrary    is    clearly    indicated    by    the    person    making    the    proposal.  

 An  offer  becomes  effective  when  it  reaches  the  offeree.  An  offer  may  be  revoked,  if  the  revocation    reaches    the    offeree    before    he    has    dispatched    an    acceptance.  However,  an  offer  cannot  be  revoked:  (a)     if   it   indicates,  whether  by  stating  a  fixed  time  for  acceptance  or    otherwise,    that    it    is    irrevocable;    or    (b)    if  it  was  reasonable  for  the  offeree  to  rely  on  the  offer  as  being    irrevocable    and    the    offeree    has    acted    in    reliance    on    the    offer.    An  offer,   even   if   it   is   irrevocable,  may  be  withdrawn   if   the  withdrawal   reaches    the    offeree    before    or    at    the    same    time    as    the    offer.  

2)  Acceptance    A  statement  made  by  or  other  conduct  of  the  offeree  indicating  assent  to  an  offer    is    an    acceptance.    Silence  or  inactivity  does  not  in    itself    amount    to    acceptance.  The   general   rule,   is   that   acceptance   is   effective   when   it   reaches   the   offeror,  provided  that  it  does  so  within  the  time  he  has  fixed  or,  if  no  time  is  fixed,  within  a  reasonable  time  (Art.  18/2).    CISG  says  that  any  change  to  the  original  conditions  is  a  rejection  of  the  offer  –  it  is  a  counter-­‐offer  –  unless  the  modified  terms  do  not  materially  alter  the  terms  of  the   offer.   Changes   to   price,   payment,   quality,   quantity,   delivery,   liability   of   the  parties  and  arbitration  conditions  may  all  materially  alter  the  terms  of  the  offer.    An   acceptance  may   be  withdrawn     if     the     withdrawal     reaches     the       offeror    before    or    at    the    same    time    as    the    acceptance    would    have    become    effective.    C)  SALE  OF  GOODS  (ARTICLES  25–88)    

1) Fundamental  Breach54    

"Fundamental   breach"   is   a   central   concept   in   the   Convention's   system   of  remedies.   It   is   a  pre-­‐requisite   of   avoidance  of   the   contract  by   either  party   and  

                                                                                                               54  This  part  is  taken  from,  Barry  Nicholas  

also  of   the  buyer's   right   to   require  delivery  of   substitute  goods   in  case  of  non-­‐conformity.  And  it  is  also  important  in  the  rules  governing  risk.    Article  25  provides:  

"A  breach  of  contract  committed  by  one  of  the  parties  is  fundamental  if  it  results   in   such   detriment   to   the   other   party   as   substantially   to   deprive  him  of  what  he  is  entitled  to  expect  under  the  contract,  unless  the  party  in  breach  did  not  foresee  and  reasonable  person  of  the  same  kind  in  the  same  circumstances  would  not  have  foreseen  such  a  result."    

2) Obligations  Of  The  Seller  and  Buyer55    CISG   defines   the   duty   of   the   seller:   to   deliver   the   goods,   hand   over   any  documents  relating  to  them  and  transfer  the  property  in  the  goods,  as  required  by  the  contract.  Similarly,  the  duty  of  the  buyer  is  to  take  all  steps  ‘which  could  reasonably  be  expected’  to  take  delivery  of  the  goods,  and  to  pay  for  them.    Generally,  the  goods  must  be  of  the  quality,  quantity  and  description  required  by  the  contract,  be  suitably  packaged  and  fit  for  purpose.56  The  buyer  must  examine  the  goods  as  soon  as   is  practicable  and  he   loses  his   right   to   rely  on   the   lack  of  conformity   if  he  does  not  give  notice  of   it   to   the   seller   (1)  within  a   reasonable  time  after  he  has  discovered  it  or  ought  to  have  done  so,  (2)  in  any  case,  within  two  years  of  the  actual  handing  over  of  the  goods  (Article  39).57  No  lapse  of  time  will  disentitle   the  buyer  "if   the   lack  of  conformity  relates   to   facts  of  which  [the  seller]  knew  or  could  not  have  been  unaware  and  which  he  did  not  disclose   to  

                                                                                                               55  This  part  is  taken  from  Barry  Nicholas  56  Ayıptan  sorumluluk  MADDE  219-­‐  Satıcı,   alıcıya   karşı   herhangi   bir   surette   bildirdiği   niteliklerin   satılanda  bulunmaması   sebebiyle   sorumlu   olduğu   gibi,   nitelik   veya   niteliği   etkileyen  niceliğine   aykırı   olan,   kullanım   amacı   bakımından   değerini   ve   alıcının   ondan  beklediği   faydaları   ortadan  kaldıran   veya  önemli   ölçüde   azaltan  maddi,   hukuki  ya  da  ekonomik  ayıpların  bulunmasından  da  sorumlu  olur.  Satıcı,  bu  ayıpların  varlığını  bilmese  bile  onlardan  sorumludur.    57  MADDE  223-­‐  Alıcı,   devraldığı   satılanın  durumunu   işlerin  olağan  akışına  göre  imkân  bulunur  bulunmaz  gözden  geçirmek  ve  satılanda  satıcının  sorumluluğunu  gerektiren   bir   ayıp   görürse,   bunu   uygun   bir   süre   içinde   ona   bildirmek  zorundadır.  

the  buyer"  (Article  40).58  Claims  made  long  after  the  goods  have  been  delivered  are  often  of  doubtful  validity  and  when  the  seller  receives  his  first  notice  of  such  a  contention  at  a  late  date,  it  would  be  difficult  for  him  to  obtain  evidence  as  to  the  condition  of   the  goods  at   the  time  of  delivery,  or  to   invoke  the   liability  of  a  supplier  from  whom  the  seller  may  have  obtained  the  goods  or  the  materials  for  their  manufacture.59      The  seller  is  obliged  to  deliver  goods  that  are  not  subject  to  claims  from  a  third  party   for   infringement   of   industrial   or   intellectual   property   rights   in   the   State  where  the  goods  are  to  be  sold.    The  buyer  must  pay    the    price    for    the    goods    and    take    delivery    of    them    as    required    by    the    contract    and    this    Convention.  The  buyer’s  obligation  to  take  delivery  consists:    

(a) in  doing  all  the  acts  which  could  reasonably  be  expected  of  him    in    order    to    enable    the    seller    to    make    delivery;    and    

    (b)  in  taking  over  the  goods.    

3)  Passing  of  risk    National  laws  provide  for  the  passing  of  risk  in  domestic  sales  transactions.  Risk  may  pass  at  the  conclusion  of  the  contract  (as  it  does  under  Swiss  law),  or  with  the  transfer  of  property  (as   in  English  and  French  law),  or  upon  delivery  (as   in  German   law).  The  Convention  could  not  have  adopted   the  second  rule  because  the  Convention  is  not  concerned  with  the  effect  of  the  contract  on  the  property  of  the  goods.  The  first  rule  was  not  appropriate  because  international  sales  usually  are   concluded   at   a   distance   and   deal   with   goods   that   have   yet   to   be  manufactured.    Passing   of   risk   with   delivery,   is   workable   primarily   when   goods   are   actually  handed   over   by   the   seller   to   the   buyer.   International   sales,   however,   normally  involve  carriage  by  one  or  more   third  parties,   leaving   -­‐-­‐   for  a  period  of   time   -­‐-­‐  neither  the  seller  nor  the  buyer   in  physical  possession  of   the  goods.  Sellers  are                                                                                                                  58  MADDE  225-­‐     Ağır   kusurlu   olan   satıcı,   satılandaki   ayıbın   kendisine  süresinde   bildirilmemiş   olduğunu   ileri   sürerek   sorumluluktan   kısmen   de   olsa  kurtulamaz.  Satıcılığı  meslek   edinmiş   kişilerin   bilmesi   gereken   ayıplar   bakımından   da   aynı  hüküm  geçerlidir.  59Secretariat  Commentary, http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-­‐39.html    

anxious  to  transfer  the  risk  at  the  earliest  stage  of  the  transaction;  buyers  want  to  assume  the  risk  much  later.  The  Convention  needed  to  provide  balanced  rules  that  took  into  account  various  transactional  situations.    The   Convention   does   not   establish   a   general   rule;   rather,   it   distinguishes  between  different  transport  situations.  Where  the  goods  must  be  handed  over  to  a  carrier  at  a  particular  place,  the  risk  does  not  pass  to  the  buyer  until  the  goods  are  actually  handed  over   to   the  carrier  at   the  designated  place.   If  no  particular  place  was  contemplated,  the  risk  passes  to  the  buyer  when  the  goods  are  handed  over  to  the  first  carrier.    Where  the  goods  are  sold  while  they  are  in  transit,  the  risk  normally  passes,  with  some  exceptions,  to  the  buyer  at  the  time  the  contract  is  concluded.    In  circumstances  in  which  the  buyer  is  to  take  the  goods  from  the  third  party  -­‐-­‐  for  example,  at  a  warehouse  -­‐-­‐  the  risk  passes  when  delivery  is  due  and  the  buyer  is  aware  that  the  goods  are  at  his  disposal.  In  all  other  circumstances,  i.e.,  when  the  contract  does  not  involve  carriage  of  goods,  the  risk  passes  when  the  goods  are  placed  at  the  buyer's  disposal.  On  the  whole,  the  Convention  imposes  the  risk  of  loss  on  the  party  in  the  better  position  to  take  care  of  or  insure  the  goods.    In  practice  most  contracts  define  the  ‘seller's  delivery  obligations  quite  precisely  by  adopting  an  established  shipment  term  such  as  FOB  and  CIF.    New  Turkish  Code  of  Obligations  has  adopted  a  similar  position  with  regard  to  passing  of  risk  in  art.  208.60    

4)  Remedies  of  Buyer  and  seller61  

a) Repair  or  delivery  of  substitute  goods                                                                                                                  60  Yarar  ve  hasar  MADDE  208-­‐  Kanundan,  durumun  gereğinden  veya   sözleşmede  öngörülen  özel  koşullardan   doğan   ayrık   hâller   dışında,   satılanın   yarar   ve   hasarı;   taşınır  satışlarında  zilyetliğin  devri,  taşınmaz  satışlarında  ise  tescil  anına  kadar  satıcıya  aittir.Taşınır   satışlarında,   alıcının   satılanın   zilyetliğini   devralmada   temerrüde  düşmesi   durumunda   zilyetliğin   devri   gerçekleşmişçesine   satılanın   yarar   ve  hasarı   alıcıya   geçer.Satıcı   alıcının   isteği   üzerine   satılanı   ifa   yerinden   başka   bir  yere   gönderirse,   yarar   ve   hasar,   satılanın   taşıyıcıya   teslim   edildiği   anda   alıcıya  geçer.  61  Barry   Nicholas,  The  Vienna  Convention   on   International   Sales   Law,   105   Law  Quarterly  Review  (1989)  201-­‐243      

 In  case  of  lack  of  conformity  the  buyer  may  request  the  seller  to  repair  the  goods,  unless  this  is  in  all  the  circumstances  unreasonable.  Or,  if  the  lack  of  conformity  constitutes  a  fundamental  breach,  he  may  request  the  seller  to  deliver  substitute  goods.   Claims   made   long   after   the   goods   have   been   delivered   are   often   of  doubtful  validity  and  when  the  seller  receives  his  first  notice  of  such  a  contention  at  a  late  date,  it  would  be  difficult  for  him  to  obtain  evidence  as  to  the  condition  of  the  goods  at  the  time  of  delivery,  or  to  invoke  the  liability  of  a  supplier  from  whom   the   seller   may   have   obtained   the   goods   or   the   materials   for   their  manufacture.  

b) Seller's  right  to  cure    The  seller  has  a  right  to  cure  "any  failure  to  perform  his  obligations"  (including  of   course   a   failure   to   deliver   conforming   goods).   The   exercise   of   this   right   is  subject  to  its  not  causing  the  buyer  unreasonable  inconvenience  or  unreasonable  expense  and  to  the  buyer's  right  to  damages.    

c) Reduction  of  price    In  case  of  non-­‐conformity  of  the  goods,  buyer  is  entitled  to  demand  the  reduction  of   the   price   "in   the   same   proportion   as   the   value   that   the   goods   actually  delivered  had  at   the   time  of  delivery  bears   to   the  value   that   conforming  goods  would  have  had  at  that  time

Resort   to   the   remedy   of   reduction   of   price   or   to   any   other   remedy   is   not   an  obstacle   to   a   claim   for   damages.   (Article   45/2).   The  buyer  may   therefore  both  reduce  the  price  and  claim  damages  for  any  consequential  loss.  

When the buyer cannot resort to the remedy of damages because the lack of conformity is "due to an impediment beyond his control" (Article 79). In this situation the restitutionary remedy of reduction of price protects the buyer.

d)  Avoidance  of  the  contract    A  party  may  declare  the  contract  avoided;  (a)  if  a  failure  by  the  other  party  to  perform  any  of  his  obligations  amounts  to  a  fundamental  breach,    OR    (b)  if  the  seller  fails  to  deliver  or  the  buyer  to  pay  the  price  or  take  delivery  of  the  goods  within  a  time  period    fixed  by  the  other  party.  The  party  avoiding  the  contract  must  do  so  within  a  reasonable  time.  Avoidance  of   the   contract   releases   both   parties   from   their   obligations,   subject   to   any  damages  which  may  be  due.  A  party  who  has  performed  in  whole  or  in  part  may  claim  restitution  of  anything  supplied  or  paid.  

 

e)  Partial  performance    Art.  51  and  52  deal  with  three  situations:     (a)  partial  delivery  of   the  goods,   (b)  delivery  of  all  the  goods,  but  some  is  non-­‐conforming.    In  case  of  (a)  or  (b),  Article  51  provides  that  the  remedies  discussed  above  apply  in  respect  of  the  undelivered  or  non-­‐conforming  part.  Assume,  for  example,  that  the  contract  is  for  100  tons  of  wheat  and  seller  delivers  100,  but  10  are  seriously  defective.  If  the  defectiveness  of  the  10  tons  constitutes  a  fundamental  breach  of  the   entire   contract   (i.e.   if   the   delivery   of   only   90   tons   of   conforming   wheat  substantially  deprives  buyer  of  what  he  is  entitled  to  expect  under  the  contract),  buyer   can   avoid   the   contract   (and   claim   damages).   On   the   more   probable  assumption,  however,  that  the  defectiveness  of  the  10  tons  does  not  constitute  a  fundamental  breach  of  the  entire  contract,  buyer  may  either  (i)  require  seller  to  deliver   substitute   goods   for   the   10   tons,   or   (ii)   accept   the   full   100   tons   and  reduce  the  price  in  respect  of  the  10  tons,  or  (iii)  "avoid  the  contract"  in  respect  of  the  10  tons.  

f)  Seller's  right  to  make  specification    Article   65   makes   special   provision   for   the   case   in   which   the   buyer   places   an  order   for  goods  but   leaves  until   later  the  detailed  specification  of  what   is   to  be  supplied   and   then   fails   to  make   the   specification,   thus  making   performance   of  the   contract   impossible.   In   these   circumstances   the   seller's  normal   recourse,   if  Article  65  did  not  exist,  would  be  to  avoid  the  contract  (assuming  the  breach  to  be   fundamental)   and/or   to   claim   damages.   Article   65,   however,   allows   him   to  "make   the   specification   himself   in   accordance   with   the   requirements   of   the  buyer   that  may   be   known   to   him."   If   he  wishes   to   do   this   he  must   inform   the  buyer  of  the  details  of  the  specification  and  allow  him  a  reasonable  time  within  which  to  make  a  different  specification.  If  the  buyer  fails  to  respond,  he  is  bound  by  the  seller's  specification.    

g)  Damages    Article  74  states  the  general  rule  in  terms  of  foreseeability:    

"Damages  for  breach  of  contract  by  one  party  consist  of  a  sum  equal  to  the  loss,   including  loss  of  profit,  suffered  by  the  other  party  as  a  consequence  of   the  breach.  Such  damages  may  not  exceed   the   loss  which  the  party  in  breach  foresaw  or  ought  to  have  foreseen  at  the  

time  of   the  conclusion  of   the  contract,   in   the   light  of   the   facts  and  matters   of   which   he   then   knew   or   ought   to   have   known,   as   a  possible  consequence  of  the  breach  of  contract."  

 Article  75  applies  where  the  contract  has  been  avoided  by  either  party  and  the  aggrieved  party  has  made  a  substitute  transaction  (either  a  "cover"  purchase  of  replacement  goods  by  the  buyer  or  a  resale  by  the  seller).  In  such  cases  party  can  recover  the  difference  between  the  contract  price  and  the  price  in  the  substitute  transaction,   provided   that   the   transaction  was  made   "in   a   reasonable  manner  and  within   a   reasonable   time   after   avoidance."   For   if   the   seller   re-­‐sells   at   less  than   the  market  price   (or   the  buyer  makes   a   cover  purchase   at  more   than   the  market  price),  he  might  have  difficulty  in  showing  that  he  acted  reasonably.      Art.  76  provides  that   if   the  contract   is  avoided  without  a  substitute  transaction  but  there  is  a  current  price  for  the  goods,  the    party    claiming    damages    may,    if    he    has    not    made    a    purchase    or    resale    under  article  75,  recover  the  difference  between  the  price  fixed  by  the    contract    and    the    current    price    at    the    time    of    avoidance    as    well    as    any    further    damages    recoverable    under    article    74.      In  all  the  cases  governed  by  Articles  75  and  76  further  damages  may  of  course  be  recovered  under  Article  74.    Under  the  new  Turkish  Code  of  Obligations,  the  default  of  the  seller  is  regulated  with   reference   to   general   principles   with   regard   to   the   nonperformance   of  contracts.  Art.  212  further  states  that,  in  a  commercial  sale  under  which  certain  date   is   fixed   for   delivery;   the   buyer,   if   the   seller   defaults,   is   deemed   to   have  chosen   the   option   to   avoid   the   contract   and   to   demand   damages   for   non-­‐performance.   The   buyer   should   notify   the   buyer   if   he   is   willing   to   accept   late  performance.   Seller   should   compensate   the   loss   sustained   by   the   buyer   either  due  to  late  performance  or  due  to  no  performance  at  all.    Substitute  transactions  either   as   a   actual   purchase   or   a   hypothetical   one   with   reference   to   current  market   price,   are   regulated   in   accordance   with   art.     75   and   76   of   CISG,  respectively.    

h)  Mitigation    Article  77  provides  for  the  aggrieved  party's  duty  to  mitigate  his  loss  and  reads  as  :    

A    party    who    relies    on    a    breach    of    contract    must     take    such    measures    as    are    reasonable     in     the    circumstances     to    mitigate    the    loss,    including    loss    of    profit,    resulting    from    the    breach.    If    he    fails    to    take    such    measures,    the    party    in    breach    may    claim    

a    reduction    in    the    damages    in    the    amount    by    which    the    loss    should    have    been    mitigated.    

 

i)  Anticipatory  breach      An  express   repudiation  by   the  defaulting  party   is  not  necessary.   It   is   sufficient  that   it   is  "clear"   that  he  will  default.  The  prospective  default  must,  however,  be  such   as   to   amount   to   a   fundamental   breach   in   order   to   entitle   the   aggrieved  party  to  avoid  the  contract.        Art.  72  provides  that  :  

    (1)  If  prior  to  the  date  for  performance  of  the  contract  it  is  clear  that    one    of    the    parties    will    commit    a    fundamental    breach    of    contract,    the    other    party    may    declare    the    contract    avoided.       (2)     If   time   allows,   the   party   intending   to   declare   the   contract  avoided    must    give    reasonable    notice    to    the    other    party    in    order    to    permit    him    to    provide    adequate    assurance    of    his    performance.       (3)     The   requirements   of   the   preceding   paragraph   do   not  apply  if  the    other    party    has    declared    that    he    will    not    perform    his    obligations.    

 

j)  Impossibility    A  party   is  not   liable   for  a   failure   to  perform  any  of  his  obligations   if  he  proves  that  the  failure  was  due  to  an  impediment  beyond  his  control  and  he  could  not  reasonable  be  expected  to  have  taken  the  impediment  into  account  at  the  time  of  the   conclusion   of   the   contract   or   to   have   avoided   or   overcome   it   or   its  consequences.    

III) BASIC  ELEMENTS  OF  AN  INTERNATIONAL  SALES  CONTRACT  

 A) PREAMBLE    &  RECITAL  

 The  preamble  of  a  contract  is  a  kind  of  explanation  for  the  contract.  It  is  drawn  up   once   by   the   contracting   parties.   Each   phrase   is   introduced   by   "Considering  that"  or   "Whereas".  The  preamble   is   concluded  by   the  phrase   "Now   therefore"  which  introduces  the  contract  itself.    The  parties  which  have  drawn  up  a  preamble  may  wish   to  be   reminded  of   the  background  of   the  contract,  which  conditions   their  obligation   :   the  existence  of  closely   related   contracts,   the   particular   competence   of   a   party,   the   objectives  

which   they   persue,   or   also   the   circumstances  which   prevail   at   the  moment   of  conclusion.  Finally,   their  willingness  can  be  to  summarise  the  contract  and  it   is  then  simply  addressed  to  the  third  party  or  management  of  the  company.          B)  THE  DELIVERY  METHOD-­‐  INCOTERMS    The  delivery  method   following   the   sale   should  be   specified   in  accordance  with  the  general  commercial  customs.  (f.e.  FOB-­‐Antalya).    The   term   INCOTERMs   (international   commerce   terms)   means   a   series   of  international  sales  terms  published  by  ICC  (international  chamber  of  commerce)  and  widely  used  by  in  international  commercial  sales.  Scope  of  this  is  limited  to  matters  relating   to   the  rights  and  obligations  of   the  parties  with  respect   to   the  delivery   of   the   goods   sold.   They   are   used   to   divide   transaction   costs   and  responsibilities   between   buyer   and   seller   and   reflect   state-­‐of-­‐the-­‐art  transportation   practices.   They   closely   correspond   to   the   U.N.   Convention   on  Contracts  for  the  International  Sale  of  Goods.  These  INCOTERMS  are  applicable  if  only   there   is   a   reference   to   them   in   the   contract   articles.   The   INCOTERMS   are  divided  into  2  main  groups:    

ALL  MODES  OF  TRANSPORTATION:   EXW:  Ex  Works   FCA:  Free  Carrier   CPT:  Carriage  Paid  To   CIP:  Carriage  and  Insurance  Paid   DAT:  Delivered  at  Terminal   DAP:  Delievered  at  Place   DDP:  Delievered  Duty  Paid    SEA  AND  INLAND  WATERWAY  TRANSPORTATION:   FAS:  Free  Alongside  Ship   FOB:  Free  On  Board   CFR:  Cost  and  Freight        CIF:  Cost,  Insurance,  and  Freight      

 

62

   

   ALL  MODES  OF  TRANSPORTATION:  

1) EXW  (Ex  Works)    The  seller  makes   the  goods  available  at  his  premises.  The  buyer   is   responsible  for   all   charges.  This   trade   term  places   the   greatest   responsibility   on   the  buyer  and  minimum  obligations  on  the  seller.  The  Ex  Works  term  is  often  used  when  making  an  initial  quotation  for  the  sale  of  goods  without  any  costs  included.  EXW  means   that   a   seller   has   the   goods   ready   for   collection   at   his   premises   (Works,  factory,   warehouse,   plant)   on   the   date   agreed   upon.   The   buyer   pays   all  transportation  costs  and  also  bears  the  risks  for  bringing  the  goods  to  their  final  destination.    

                                                                                                               62  Turkish   parts   are   taken   from,   İç   ve   Dış   Ticarete   ilişkin   Ticari   Terimlerin  Kullanımı  için  ICC  Kuralları,  Ercüment  Erdem  

   

2)  FCA  (Free  Carrier)    The  seller  hands  over  the  goods,  cleared  for  export,  into  the  custody  of  the  first  carrier   (named   by   the   buyer)   at   the   named   place.   This   term   is   suitable   for   all  modes   of   transport,   including   carriage   by   air,   rail,   road,   and   containerised   /  multi-­‐modal  sea  transport.    

   

 

3)  CPT  (Carriage  Paid  to)    CPT:  The  general/containerised/multimodal   equivalent  of  CFR.  The   seller  pays  for  carriage   to   the  named  point  of  destination,  but   risk  passes  when   the  goods  are  handed  over  to  the  first  carrier.    

   

 4)  CIP  (Carriage  and  Insurance  Pay  to)    CIP:   The   containerised   transport/multimodal   equivalent   of   CIF.   Seller   pays   for  carriage  and  insurance  to  the  named  destination  point,  but  risk  passes  when  the  goods  are  handed  over  to  the  first  carrier.    

   

5)  DAT  (Delivered  at  Terminal)  

 

 

6)  DAP  (Delivered  at  Place)    

   

7)  DDP  (Delivered  Duty  Paid).          

 

   

   

SEA  AND  INLAND  WATERWAY  TRANSPORTATION:    

8)  FAS:  Free  Alongside  Ship    The  seller  must  place  the  goods  alongside  the  ship  at  the  named  port.  The  seller  must  clear  the  goods  for  export.  Suitable  only  for  maritime  transport  but  NOT  for  multimodal  sea  transport  in  containers.  This  term  is  typically  used  for  heavy-­‐lift  or  bulk  cargo.    

   

     

9)  FOB:  Free  On  Board    

The  seller  must  themselves  load  the  goods  on  board  the  ship  nominated  by  the  buyer,  cost  and  risk  being  divided  at  ship's  rail.  The  seller  must  clear  the  goods  for   export.   Maritime   transport   only   but   NOT   for   multimodal   sea   transport   in  containers.  The  buyer  must  instruct  the  seller  the  details  of  the  vessel  and  port  where  the  goods  are  to  be  loaded,  and  there  is  no  reference  to,  or  provision  for,  the  use  of  a  carrier  or  forwarder.  It  DOES  NOT  include  Air  transport.  This  term  has  been  greatly  misused  over  the  last  three  decades  ever  since  Incoterms  1980  explained  that  FCA  should  be  used  for  container  shipments.    

     

10)  CFR:  Cost  and  Freight    Seller  must  pay  the  costs  and  freight  to  bring  the  goods  to  the  port  of  destination.  However,  risk  is  transferred  to  the  buyer  once  the  goods  have  crossed  the  ship's  rail.   Maritime   transport   only   and   Insurance   for   the   goods   is   NOT   included.  Insurance  is  at  the  Cost  of  the  Buyer.    

     

 11)  CIF:  Cost,  Insurance,  and  Freight    Exactly  the  same  as  CFR  except  that  the  seller  must  in  addition  procure  and  pay  for  insurance  for  the  buyer.  Maritime  transport  only.    

   

IV) ICC  MODEL  SALES  CONTRACT    

ICC  has  prepared  a    Model   International  Sale  Contract       (the  "Model  Contract").  for  "manufactured  goods  intended  for  resale".  Thus  it  excludes  those  large  vital  goods  produced  for  single  users  (which  have  a  host  of  additional  complexities),  and  such  goods  as  commodities  which  have  widely   fluctuating  values.   It   is  also  not  best  suited  for  continuing  supply  arrangements.    The  Model   Contract   is   divided   into   two  parts.   The   first,   Part  A,   is   essentially   a  checklist  of  specific  conditions  to  an  international  sale;  the  second,  Part  B,  is  a  list  of  General  Conditions  divided  into  14  articles.  

ICC MODEL INTERNATIONAL SALE CONTRACT

(Manufactured Goods Intended for Resale)

A. Specific Conditions

These Specific Conditions have been prepared in order to permit the parties to agree the particular terms of their sale contract by completing the spaces left open or choosing (as the case may be) between the alternatives provided in this document. Obviously this does not prevent the parties from agreeing other terms or further details in box A-16 or in one or more annexes.

A-1 GOODS SOLD

___________________________________

___________________________________

(DESCRIPTION OF THE GOODS)

If there is insufficient space parties may use an annex.

A-2 CONTRACT PRICE (ART. 4)

Currency: ______________________ amount in numbers:______________ amount in letters: _____________________

A-3 DELIVERY TERMS

Recommended terms (according to Incoterms 2010): (see Introduction of Incoterms 2010, ��5)

�� EXW Ex Works named place: ____________

�� FCA Free Carrier named place: ____________

�� FAS Free Alongside Ship named port of shipment: ____________

�� FOB Free On Board named port of shipment: ____________

�� CFR Cost and Freight named port of destination: ____________

�� CIF Cost Insurance and Freight named port of destination: ____________

�� CPT Carriage Paid To named place of destination: ____________

�� CIP Carriage and Insurance Paid To named place of destination: ____________

�� DAT: Delivered at Terminal �� DAP: Delievered at Place

�� DDP Delivered Duty Paid named place of destination: ____________

�� Other delivery terms

CARRIER (where applicable) NAME AND ADDRESS CONTACT PERSON ________________ ________________ A-4 TIME OF DELIVERY

Indicate here the date or period (e.g. week or month) at which or within which the Seller must perform his delivery obligations according to clause A.4 of the respective Incoterm (see Introduction, �� 6)

________________________________________________________ ________________________________________________________ �� A-5 INSPECTION OF THE GOODS BY BUYER (ART. 3)

�� Before shipment place of inspection: _______________ �� Other: ________________________________________ A-6 RETENTION OF TITLE (ART. 7)

�� YES �� NO

A-7 PAYMENT CONDITIONS (ART. 5)

�� Payment on open account (art. 5.1) Time for payment (if different from art. 5.1) ____ days from date of invoice. �� Open account backed by demand guarantee or standby letter of credit (art.

5.5) ��

�� Payment in advance (art. 5.2) Date (if different from art. 5.2): ________ �� Total price �� ____%

of the price ��

�� Documentary Collection (art. 5.5)

�� D/P Documents against payment �� D/A Documents against acceptance ��

�� Irrevocable Documentary Credit (art. 5.3) �� Confirmed �� Unconfirmed

Place of issue (if applicable): _________ Place of confirmation (if applicable): _________ �� Credit available: �� By payment at sight �� By deferred payment at:

___ days �� By acceptance of drafts at: ___ days �� By negotiation �� Partial shipments: Transhipment: �� Allowed �� Allowed �� Not allowed �� Not allowed �� Date on which the documentary credit must be notified to seller (if different from

art. 5.3) �� ______ days before date of delivery �� other: _____________ ��

�� Other: _________________________________________________________ (e.g. cheque, bank draft, electronic funds transfer to designated bank account of

seller) A-8 DOCUMENTS

Indicate here documents to be provided by Seller. Parties are advised to check the Incoterm they have selected under A-3 of these Specific Conditions. (As concerns transport documents, see also Introduction, �� 8)

�� Transport documents: indicate type of transport document required _________ �� Commercial Invoice �� Certificate of origin �� Packing list �� Certificate of inspection �� Insurance document �� Other: ____________ Insurance:   Under   Incoterms   CIF   the   seller   is   responsible   for   purchasing   only  "free   of   particular   average"   insurance,   which   has   the   most   limited   type   of  recovery   and   is   commensurately   inexpensive.   Most   buyers   on   the   other   hand  would  prefer  the  goods  to  be  insured  on  the  basis  of  a  "with  average",  "all  risks",  including  "war  risks"  policy.63  

                                                                                                               63  James  M.  Klotz,  Critical  Review  of  The  ICC  Model  International  Sale  Contract,  ISGw3  Database,  Pace  Law  School,  

 With  regard  to  the  Certificate  of  Origin,  the  buyer  may  ask  for  a  warranty  of  the  veracity   of   the   Certificate   along  with   an   undertaking   to   notify   the   seller   if   the  Certificate  of  Origin  is  ever  investigated,  as  this  may  affect  the  buyer's  ability  to  export  the  goods  into  other  countries  at  the  preferential  tariff  rate.64    A  Certificate  of  Inspection  can  vary  in  a  myriad  of  ways.  It  can  be  issued  based  on  a  sample  inspection,  a  closed,  or  an  open  package  inspection.  By  merely  checking  off   the   box   on   the   Model   Contract,   the   seller   is   unrestricted   in   the   inspecting  agency  that  is  chosen,  or  the  type  of  inspection  undertaken.  Such  a  Certificate  of  Inspection   might   be   of   far   less   value   to   the   buyer   than   one   which   fulfills   the  buyer's  needs.65    A-9 CANCELLATION DATE

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ARTICLE 10.3

If the goods are not delivered for any reason whatsoever (including force majeure) by (date) _______ the Buyer will be entitled to CANCEL THE CONTRACT IMMEDIATELY BY NOTIFICATION TO THE SELLER

A-10 LIABILITY FOR DELAY (art. 10.1, 10.4 AND 11.3)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 10.1, 10.4 OR 11.3 Liquidated damages for delay in delivery shall be: �� ____ % (of price of delayed goods) per week, with a maximum of ____ % (of price of delayed goods) or: �� ________ (specify amount) �� In case of termination for delay, Seller��s liability for damages for delay is limited to ____ % of the price of the non-delivered goods �� A-11 LIMITATION OF LIABILITY FOR LACK OF CONFORMITY (ART. 11.5) TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.5.

Seller��s liability for damages arising from lack of conformity of the goods shall be:

�� limited to proven loss (including consequential loss, loss of profit, etc.) not exceeding _____ % of the contract price; or:

�� as follows (specify):                                                                                                                64  ibid.  65  ibid.  

_____________________________________________________________

A-12 LIMITATION OF LIABILITY WHERE NON-CONFORMING GOODS ARE RETAINED BY THE BUYER

(ART. 11.6)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.6

The price abatement for retained non-conforming goods shall not exceed:

�� ___% of the price of such goods or: �� ________ (specify amount)

A-13 TIME-BAR (Art.11.8)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.8.

Any action for non-conformity of the goods (as defined in article 11.8) must be taken by the Buyer not later than __________ from the date of arrival of the goods at destination

A-14(a), A-14(b) APPLICABLE LAW (Art.1.2)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO SUBMIT THE SALE CONTRACT TO A NATIONAL LAW INSTEAD OF CISG.

(a) This sales contract is governed by the domestic law of __________ (country) To be completed if parties wish to choose a law other than that of the seller for questions not covered by CISG (b) Any questions not covered by CISG will be governed by the law of ____________ (country)

A-15 RESOLUTION OF DISPUTES (Art.14)

The two solutions hereunder (arbitration or litigation before ordinary courts) are alternatives: parties cannot choose both of them. If no choice is made, ICC arbitration will apply, according to art. 14

�� ARBITRATION �� LITIGATION (ordinary courts)

�� ICC (according to art. 14.1) In case of dispute the courts of

Place of arbitration _________ _________________ (place)

�� Other ___________________ (specify) shall have jurisdiction.

It  is  important  to  indicate  whether  the  selected  jurisdiction  is  to  be  exclusive  or  not.   In   an   international   sale,   if   litigation   is   clearly   chosen   as   the   dispute  resolution   mechanism,   giving   jurisdiction   to   one   party's   local   court,   but   not  exclusive  jurisdiction,  may  not  fulfill  the  needs  of  the  parties.  

A-16 OTHER

_______________________________

________________________________

The present contract of sale will be governed by these Specific Conditions (to the extent that the relevant boxes have been completed) and by the ICC General Conditions of Sale (Manufactured Goods Intended for Resale) which constitute part B of this document.

SELLER BUYER (signature) (signature) ___________________________ ___________________________ place __________ date ________ place __________ date ________

B. General Conditions

Art. 1 GENERAL

1.1 These General Conditions are intended to be applied together with the Specific Conditions (part A) of the International Sale Contract (Manufactured Goods Intended for Resale), but they may also be incorporated on their own into any sale contract. Where these General Conditions (Part B) are used independently of the said Specific Conditions (Part A), any reference in Part B to Part A will be interpreted as a reference to any relevant specific conditions agreed by the parties. In case of contradiction between these General Conditions and any specific conditions agreed upon between the parties, the specific conditions shall prevail.

1.2 Any questions relating to this Contract which are not expressly or implicitly settled by the provisions contained in the Contract itself (i.e. these General Conditions and any specific conditions agreed upon by the parties) shall be governed:

A. by the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention of 1980, hereafter referred to as CISG), and

B. to the extent that such questions are not covered by CISG, by reference to the

law of the country where the Seller has his place of business.

1.3 Any reference made to trade terms (such as EXW, FCA, etc.) is deemed to be made to the relevant term of Incoterms published by the International Chamber of Commerce

1.4 Any reference made to a publication of the International Chamber of Commerce is deemed to be made to the version current at the date of conclusion of the Contract.

1.5 No modification of the Contract is valid unless agreed or evidenced in writing. However, a party may be precluded by his conduct from asserting this provision to the extent that the other party has relied on that conduct.

ART. 2 CHARACTERISTICS OF THE GOODS

2.1 It is agreed that any information relating to the goods and their use, such as weights, dimensions, capacities, prices, colours and other data contained in catalogues, prospectuses, circulars, advertisements, illustrations, price-lists of the Seller, shall not take effect as terms of the Contract unless expressly referred to in the Contract.

2.2 Unless otherwise agreed, the Buyer does not acquire any property rights in software, drawings, etc. which may have been made available to him. The Seller also remains the exclusive owner of any intellectual or industrial property rights relating to the goods.

ART. 3 INSPECTION OF THE GOODS BEFORE SHIPMENT

If the parties have agreed that the Buyer is entitled to inspect the goods before shipment, the Seller must notify the Buyer within a reasonable time before the shipment that the goods are ready for inspection at the agreed place.

ART. 4 PRICE

4.1 If no price has been agreed, the Seller’’s current list price at the time of the conclusion of the Contract shall apply. In the absence of such a current list price, the price generally charged for such goods at the time of the conclusion of the Contract shall apply.

4.2 Unless otherwise agreed in writing, the price does not include VAT, and is not subject to price adjustment.

4.3 The price indicated under A-2 (contract price) includes any costs which are at the Seller’s charge according to this Contract. However, should the Seller bear any costs which, according to this Contract, are for the Buyer’s account (e.g. for transportation or insurance under EXW or FCA), such sums shall not be considered as having been included in the price under A-2 and shall be reimbursed by the Buyer.

ART. 5 PAYMENT CONDITIONS

5.1 Unless otherwise agreed in writing, or implied from a prior course of dealing between the parties, payment of the price and of any other sums due by the Buyer to the Seller shall be on open account and time of payment shall be 30 days from the date of invoice. The amounts due shall be transferred, unless otherwise agreed, by teletransmission to the Seller’s bank in the Seller’s country for the account of the Seller and the Buyer shall be deemed to have performed his payment obligations when the respective sums due have been received by the Seller’s bank in immediately available funds.

In   open   account,   payment   is   made   by   the   buyer   in   determined   time   after   the  seller  ships  the  goods.    “Purchase  on  open  account  means  that  the  buyer  agrees  to  pay  for  goods  ordered  within  a  designated  time  after  their  shipment.  Common  terms  are  30,  60,  or  90  days.  In  open  account,  parties  don’t  necessarily  need  to  use   banks   and   billing   can   be   done   by   the   seller   in   firsthand.     In   this   method,  conversely  to  cash  in  advance,  the  seller  takes  the  greatest  risk  and  he  is  totally  allocated  to  risk,  whereas  the  buyer  is  risk  free.    Payment  is  solely  based  on  the  buyer’s  creditworthiness  and  commitment  to  pay    5.2 If the parties have agreed on payment in advance, without further indication, it will be assumed that such advance payment, unless otherwise agreed, refers to the full price, and that the advance payment must be received by the Seller’s bank in immediately available funds at least 30 days before the agreed date of delivery or the earliest date within the agreed delivery period. If advance payment has been agreed only for a part of the contract price, the payment conditions of the remaining amount will be determined according to the rules set forth in this article.

Cash   in   advance   is   the   frequently   used   and   the   easiest   international   payment  method.    The  definition  and  procedure  of  cash  in  advance,  which  is  also  known  as   “Payment   in   Advance”,   is:   “The   buyer   simply   prepays   the   seller   prior   to  shipment  of  the  goods.  This  term  of  payment  requires  that  the  buyer  have  a  high  level  of  confidence  in  the  ability  and  willingness  of  the  seller  to  deliver  the  goods  as  ordered.  This  method  protects  sellers  and  sellers  undertake  no  risk.    On  the  other  hand,  in  cash  in  advance  risk  is  totally  carried  by  buyers.        5.3 If the parties have agreed on payment by documentary credit, then, unless otherwise agreed, the Buyer must arrange for a documentary credit in favour of the Seller to be issued by a reputable bank, subject to the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce, and to be notified at least 30 days before the agreed date of delivery or at least 30 days before the earliest date within the agreed delivery period. Unless otherwise agreed, the documentary credit shall be payable at sight and allow partial shipments and transhipments.

In   form,   a     letter   of   credit   is   nothing   more   than   a   letter   from   a   financial  institution  promising  to  pay  a  stated  sum  of  money  upon  the  receipt  of  specified  documents.    The  basic  concept  is  that  the  prospective  payor  goes  to  a  bank  and  asks  it  to  issue  a  letter  of  credit  to  the  prospective  payee.  The  L/C  is  a  guarantee,  given  by   the  buyer's  bank,   that   they  will   pay   for   the   goods   exported,  provided  that   the   exporter   can   provide   a   given   set   of   documents   in   accordance   with  clauses   specified   in   the   L/C   and   in   a   timely  manner.   In   letter   of   credit   risk   is  evenly  shared  and  carried  by  the  seller  and  the  buyer.    5.4 If the parties have agreed on payment by documentary collection, then, unless otherwise agreed, documents will be tendered against payment (D/P) and the tender will in any case be subject to the Uniform Rules for Collections published by the International Chamber of Commerce.

A documentary collection is an order by the seller to his bank to collect payment from the buyer in exchange for the transfer of documents that enable the holder to take possession of the goods A set of documents containing a Bill of Lading would normally allow the holder to take possession of the goods. Bill of exchange is a negotiable instrument that orders payor to make the deficient mount of payment to payee. On the other hand, A bill of lading is a document issued by a carrier to a shipper, signed by the captain, agent, or owner of a vessel, furnishing written evidence regarding receipt of the goods (cargo), the conditions on which transportation is made (contract of carriage), and the engagement to deliver goods at the prescribed port of destination to the lawful holder of the bill of lading. Under D/P terms, the seller, through a bank acting as an agent, is able to retain control of the goods until the buyer pays.

5.5 To the extent that the parties have agreed that payment is to be backed by a bank guarantee, the Buyer is to provide, at least 30 days before the agreed date of delivery or at least 30 days before the earliest date within the agreed delivery period, a first demand bank guarantee subject to the Uniform Rules for Demand Guarantees published by the International Chamber of Commerce, or a standby letter of credit subject either to such Rules or to the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce, in either case issued by a reputable bank.

ART. 6 INTEREST IN CASE OF DELAYED PAYMENT

6.1 If a party does not pay a sum of money when it falls due the other party is entitled to interest upon that sum from the time when payment is due to the time of payment.

6.2 Unless otherwise agreed, the rate of interest shall be 2% above the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place of payment, or where no such rate exists at that place, then the

same rate in the State of the currency of payment. In the absence of such a rate at either place the rate of interest shall be the appropriate rate fixed by the law of the State of the currency of payment.

ART. 7 RETENTION OF TITLE

If the parties have validly agreed on retention of title, the goods shall remain the property of the Seller until the complete payment of the price, or as otherwise agreed.

ART. 8 CONTRACTUAL TERM OF DELIVERY

Unless otherwise agreed, delivery shall be "Ex Works" (EXW).

ART. 9 DOCUMENTS

Unless otherwise agreed, the Seller must provide the documents (if any) indicated in the applicable Incoterm or, if no Incoterm is applicable, according to any previous course of dealing.

ART. 10 LATE-DELIVERY, NON-DELIVERY AND REMEDIES THEREFOR

10.1 When there is delay in delivery of any goods, the Buyer is entitled to claim liquidated damages equal to 0.5% or such other percentage as may be agreed of the price of those goods for each complete week of delay, provided the Buyer notifies the Seller of the delay. Where the Buyer so notifies the Seller within 15 days from the agreed date of delivery, damages will run from the agreed date of delivery or from the last day within the agreed period of delivery. Where the Buyer so notifies the Seller after 15 days of the agreed date of delivery, damages will run from the date of the notice. Liquidated damages for delay shall not exceed 5% of the price of the delayed goods or such other maximum amount as may be agreed.

The  subject  of  direct,  indirect,  special  and  consequential  damages  is  ambiguous.  Such   damages,   at   least   to   certain   extent,   are   of   the   kind   that   the   seller  would  ordinarily  prefer  to  contract  out  of.      Below  are  some  sample  clauses  to  this  effect  :  

“In no event shall the Seller be responsible for any direct, indirect, special or consequential damages, including loss of anticipated profits, loss of time or any other losses incurred by the Buyer in connection with the purchase, installation or operation or failure of the goods."

 10.2 If the parties have agreed upon a cancellation date in Box A-9, the Buyer may terminate the Contract by notification to the Seller as regards goods which have not been delivered by such cancellation date for any reason whatsoever (including a force majeure event).

10.3 When article 10.2 does not apply and the Seller has not delivered the goods by the date on which the Buyer has become entitled to the maximum amount of liquidated damages under article 10.1, the Buyer may give notice in writing to terminate the Contract as regards such goods, if they have not been delivered to the Buyer within 5 days of receipt of such notice by the Seller.

If  the  parties  have  not  agreed  to  a  "drop  dead"  date,  the  buyer  can  terminate  the  agreement  after  the  expiration  of  a  10  week  period  -­‐-­‐  a  very  long  period  of  time.  A  two  and  a  half  month  delay   in  delivery  of  manufactured  goods  for  resale   is  a  very  long  delay  -­‐-­‐  much  longer  than  a  buyer  would  ordinarily  agree  to.66    10.4 In case of termination of the Contract under article 10.2 or 10.3 then in addition to any amount paid or payable under article 10.1, the Buyer is entitled to claim damages for any additional loss not exceeding 10% of the price of the non-delivered goods.

10.5 The remedies under this article are exclusive of any other remedy for delay in delivery or non-delivery.

ART. 11 NON-CONFORMITY OF THE GOODS

11.1 The Buyer shall examine the goods as soon as possible after their arrival at destination and shall notify the Seller in writing of any lack of conformity of the goods within 15 days from the date when the Buyer discovers or ought to have discovered the lack of conformity. In any case the Buyer shall have no remedy for lack of conformity if he fails to notify the Seller thereof within 12 months from the date of arrival of the goods at the agreed destination.

The   wording   does   not   match   the   language   of   the   CISG   Article   39/167  which  requires   the   buyer   to   notify   the   seller   of   the   "nature   of   the   non-­‐conformity".    Therefore   it  would   be   for   sake   of   clarity   to   draft   the   clause   so   as   to  make   the  notification  including  necessary  details.      In  2006  a  German  Court  ruled  that    

"1. If the buyer accepts the goods without immediate notice he has to prove their lack of conformity regardless of whether the time span of Art. 39 has already elapsed. When taking over the goods under FOB terms that point in time is decisive.

                                                                                                               66  ibid.    67  CISG,  Article  39(1):  The  buyer  loses  the  right  to  rely  on  a  lack  of  conformity  of  the  goods  if  he  does  not  give  notice  to  the  seller  specifying  the  nature  of  the  lack  of  conformity  within  a   reasonable   time  after  he  has  discovered   it  or  ought   to  have  discovered  it.  

"2. The buyer may retain the right to rely on the lack of conformity only by giving a notice which identifies the non-conformity and shows intention to object in accordance with Art. 39(1) CISG. In this respect, it is insufficient if the unconformity is only mentioned incidentally amongst other such notices and it is stated therein that this specific unconformity is no longer of importance." GERMANY: Oberlandesgericht Karlsruhe 8 February 200668

 11.2 Goods will be deemed to conform to the Contract despite minor discrepancies which are usual in the particular trade or through course of dealing between the parties but the Buyer will be entitled to any abatement of the price usual in the trade or through course of dealing for such discrepancies.

11.3 Where goods are non-conforming (and provided the Buyer, having given notice of the lack of conformity in compliance with article 11.1, does not elect in the notice to retain them), the Seller shall at his option:

(a) replace the goods with conforming goods, without any additional expense to the Buyer, or

(b) repair the goods, without any additional expense to the Buyer, or

(c) reimburse to the Buyer the price paid for the non-conforming goods and thereby terminate the Contract as regards those goods.

The Buyer will be entitled to liquidated damages as quantified under article 10.1 for each complete week of delay between the date of notification of the non-conformity according to article 11.1 and the supply of substitute goods under article 11.3(a) or repair under article 11.3(b) above. Such damages may be accumulated with damages (if any) payable under article 10.1, but can in no case exceed in the aggregate 5% of the price of those goods.

The  Model  Contract  does  not  set  a  time  limit   identify   for  the  Buyer  to  elect  the  optional   remedies.  However   since   the   liquidated  damages  are   limited   to  %5  of  the  price,  buyer  has  a  small  monetary  incentive  to  delay  making  its  "election".    11.4 If the Seller has failed to perform his duties under article 11.3 by the date on which the Buyer becomes entitled to the maximum amount of liquidated damages according to that article, the Buyer may give notice in writing to terminate the Contract as regards the non-conforming goods unless the supply of replacement goods or the repair is effected within 5 days of receipt of such notice by the Seller.

Article   B-­‐11.4,   the   buyer   has   to   notify   the   seller   at   the   expiry   of   this   10  week  period  of  its  intention  to  terminate  the  agreement,  in  which  case  the  seller  gets  

                                                                                                               68  http://cisgw3.law.pace.edu/cases/060208g1.html    

an   additional   five   days   to   perform.   These   provisions   are   not   typical   of   non-­‐conformity   provisions   that   get   negotiated   in   the   real-­‐life   international   sale   of  manufactured  goods.    11.5 Where the Contract is terminated under article 11.3(c) or article 11.4, then in addition to any amount paid or payable under article 11.3 as reimbursement of the price and damages for any delay, the Buyer is entitled to damages for any additional loss not exceeding 10% of the price of the non-conforming goods.

11.6 Where the Buyer elects to retain non-conforming goods, he shall be entitled to a sum equal to the difference between the value of the goods at the agreed place of destination if they had conformed with the Contract and their value at the same place as delivered, such sum not to exceed 15% of the price of those goods.

11.7 Unless otherwise agreed in writing, the remedies under this article 11 are exclusive of any other remedy for non-conformity.

11.8 Unless otherwise agreed in writing, no action for lack of conformity can be taken by the Buyer, whether before judicial or arbitral tribunals, after 2 years from the date of arrival of the goods. It is expressly agreed that after the expiry of such term, the Buyer will not plead non-conformity of the goods, or make a counter-claim thereon, in defence to any action taken by the Seller against the Buyer for non-performance of this Contract.

ART. 12 COOPERATION BETWEEN THE PARTIES

12.1 The Buyer shall promptly inform the Seller of any claim made against the Buyer by his customers or third parties concerning the goods delivered or intellectual property rights related thereto.

12.2 The Seller will promptly inform the Buyer of any claim which may involve the product liability of the Buyer.

It  will  not  be  surprising  that  sellers  would  limit  this  obligation  significantly.    ART. 13 FORCE MAJEURE

13.1 A party is not liable for a failure to perform any of his obligations in so far as he proves:

(a) that the failure was due to an impediment beyond his control, and

(b) that he could not reasonably be expected to have taken into account the impediment and its effects upon his ability to perform at the time of the conclusion of the Contract, and

(c) that he could not reasonably have avoided or overcome it or its effects.

13.2 A party seeking relief shall, as soon as practicable after the impediment and its effects upon his ability to perform become known to him, give notice to the other party of such impediment and its effects on his ability to perform. Notice shall also be given when the ground of relief ceases.

Failure to give either notice makes the party thus failing liable in damages for loss which otherwise could have been avoided.

13.3 Without prejudice to article 10.2, a ground of relief under this clause relieves the party failing to perform from liability in damages, from penalties and other contractual sanctions, except from the duty to pay interest on money owing as long as and to the extent that the ground subsists.

13.4 If the grounds of relief subsist for more than six months, either party shall be entitled to terminate the Contract with notice.

FORCE  MAJEURE  &  HARDSHIP  CLAUSES    After   a   contract   is   agreed   upon,   according   to   the   legal   principle   pacta   sund  servanda   both   parties   are   bound  with   the   contract   and   the   provisions   thereof.  The  only  exception  of  this  rule  comes  with  the  occurance  of  some  extraordinary  events   that   are   totally   beyond   the   control   of   the   parties.   War,   civil   unrest,  rebellion,  strike,  fire,  flood,  earthquake,  extraordinary  surge  in  the  prices  of  raw  materials,  unexpected  hyper  inflation  or  devaluation  are  among  some  instances  that   can   deeply   affect   the   proper   execution   of   an   international   business  agreement.   The   issue   becomes   more   serious     when   dealing   with   long   term  agreements.      As   a   general   legal   principle   such   acts   of   god   (vis  maiore,   force  majeur,  mücbir  sebep)  nullifies   (or  alters)   the  obligations  of   the  parties.  However,   if   the  events  that   constitute   a   force   majeur   are   not   specified   in   the   contract   then   the  determination   of   the   events   that   will   be   deemed   as   a   force   majeur   will  nonetheless  prove  to  be  problematic.  The  important  point  here  that  needs  to  be  mentioned  is:  if  both  parties  cannot  agree  upon  a  specific  event  to  have  the  effect  of  a   force  majeur   then  this  problem  is  to  be  solved  by  the  courts  of  the  country  whose  law  is  to  be  applied  to  the  contract.  And  if  this  law  is  not  specified  in  the  contract  then  this  becomes  the  problem  of  the  conflicts  of  laws.      The  parties  to  the  contract  can  designate  the  events  that  they  deem  to  be  a  force  majeur;  the  scope  under  which  they  will  hold  an  event  to  have  the  effect  of  force  majeure;  they  can  frame  compensation,  refundment  or  remittance  opportunities;  they  can  set  up  legal  frameworks  where  they  can  decide  to  themselves  whether  they  want  to  keep  the  contract  valid  or  not  in  the  light  of  such  developments.  69                                                                                                                  69  İfa  imkânsızlığı  

    Sample  Clauses  

“A party is not liable for failure to perform the party's obligations if such failure is as a result of Acts of God (including fire, flood, earthquake, storm, hurricane or other natural disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalisation, government sanction, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service. No party is entitled to terminate this Agreement under Clause 19 (Termination) in such circumstances.

   

“If a party asserts Force Majeure as an excuse for failure to perform the party's obligation, then the nonperforming party must prove that the party took reasonable steps to minimize delay or damages caused by foreseeable events, that the party substantially fulfilled all non-excused obligations, and that the other party was timely notified of the likelihood or actual occurrence of an event described in Clause 18 (Force Majeure).” OR “The obligations of each of the Parties hereunder, other than the obligation to make payments of money, shall be suspended during a period of Force Majeure and the term of the relevant period or phase of this Agreement shall be extended for a time equivalent to the period of Force Majeure situation. In the event of Force Majeure the Party affected thereby shall give notice thereof to the other Party as soon as reasonably practical stating the starting date and the extent of such suspension of obligations and the cause thereof. A Party whose obligations have been suspended as aforesaid shall resume the performance of such obligations as soon as reasonably practical after the removal of the Force Majeure and shall notify the other Party accordingly.”

                                                                                                                                                                                                                                                                                                                             I.  Genel  olarak  MADDE   136-­‐   Borcun   ifası   borçlunun   sorumlu   tutulamayacağı   sebeplerle  imkânsızlaşırsa,  borç  sona  erer.  Karşılıklı   borç   yükleyen   sözleşmelerde   imkânsızlık   sebebiyle   borçtan   kurtulan  borçlu,   karşı   taraftan   almış   olduğu   edimi   sebepsiz   zenginleşme   hükümleri  uyarınca  geri  vermekle  yükümlü  olup,  henüz  kendisine  ifa  edilmemiş  olan  edimi  isteme  hakkını  kaybeder.  Kanun  veya  sözleşmeyle  borcun  ifasından  önce  doğan  hasarın  alacaklıya  yükletilmiş  olduğu  durumlar,  bu  hükmün  dışındadır.  Borçlu   ifanın   imkânsızlaştığını   alacaklıya   gecikmeksizin   bildirmez   ve   zararın  artmaması   için   gerekli   önlemleri   almazsa,   bundan   doğan   zararları   gidermekle  yükümlüdür.      

Hardship  clause  is  a  clause  in  a  contract  that  is  intended  to  cover  cases  in  which  unforeseen  events  occur   that   fundamentally  alter   the  equilibrium  of  a   contract  resulting   in   an   excessive   burden   being   placed   on   one   of   the   parties   involved.  (also   called   Changes   in   circumstances,   unforeseen   events,   termination   clause,  exoneration  clause.)  

Sample  Clauses  

Economic Change: “In case fundamental change in economy of the Contract which render its execution uneconomical or much more burdensome than it was originally expected, the Parties will enter into negotiation to replace them in the same situation as it was at the time of conclusion of the Contract.” Changes in Circumstances: “In the event of unforeseeable events or events which were excluded from the Parties’, forecasts, including any substantial changes to taxes and duties, which could have the effect of undermining the economic basis of the existing market or prejudice the Parties, the Parties shall come to an agreement, in the spirit in which the present agreement was concluded, to make the necessary adjustments so as to replace one or the other provisions of the present contract under the conditions of balance comparable to those which existed at the time of entering into the present contract. In the absence of an agreement, the Parties may refer their dispute to arbitration (as set in article ..)” Price adaptation: (for contracts on transaction related with energy): “ It is agreed between the parties that in case significant changes in primary energy costs, and in particular gas prices would occur and make the electrical power purchased by the Buyer not competitive towards electrical energy based on such primary energy, the partners shall find a mutual agreement to adapt the prices of delivery accordingly such agreement cannot be reached within 2 months, the parties are entitled to refer the matter to arbitration.” Exonoration Clause: “ If, due to circumstances of an economic, unforeseen, exceptional or particularly serious nature, occurring after the conclusion of the Contract and outside control or will of the Parties, the economy of the contractual relations would be disturbed in such way that the execution of its obligations would be detrimental towards one of the Parties, the Parties will in good faith to obtain the most suitable solution in order to continue their contractual relationship. If the Parties have not found a mutual agreement within a period of three (3) months as from the moment of the unforeseen, serious change of the economic contractual relations, each Party will have the possibility to terminate the Contract.”

ART. 14 RESOLUTION OF DISPUTES

14.1 Unless otherwise agreed in writing, all disputes arising in connection with the present Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

14.2 An arbitration clause does not prevent any party from requesting interim or conservatory measures from the courts. GAPS  IN  THE  MODEL  CONTRACT    

1)  Form  of  notification      

Model  Contract  refers  to  “notification”  in  various  articles,    however  the  there  is  no  clarity  with  regard  to  the  form  of  the  notice.  In  commercial  transactions  it  is  not   rare   that   parties   allege   not   to   have   received   notification   properly,   in  particularly,  where  notice  is  of  serious  legal  consequence.    Therefore  most  of  the  times   sales   contracts   provide   detailed   provisions   as   to   how   to   serve   the  notification.    Article  27,     the  sender  may  rely  on  notice   if   the  notice   is  given  by  "means  appropriate  in  the  circumstances,  even  though  there  is  a  delay  or  error  in  the  transmission  of  the  communication".  For  example,  a  fax  which  is  sent  but  is  not  received.      A  well-­‐drafted  notice  clause  will  avoid  this  problem.70    

Every notice to be given under this Agreement (Contract) shall be in writing and either delivered by hand or sent by facsimile or by registered [post/airmail]. The address of each party for the service of notices shall be as set out in this Agreement (Contract) (unless or until that address is changed by notice given under this clause). A written notice shall be delivered by hand or sent by pre-paid first class post or registered post. A correctly addressed notice sent by pre-paid first class post shall be deemed to have been delivered at the time at which it would have been delivered in the normal course of the post.

 

2)  Other    

                                                                                                               70  James  M.  Klotz  

There   are   numerous   other   clauses   missing   from   the   Model   Contract.   These  include   for   example   acceptance   by   facsimile,   assignment,   "entire   agreement",  reference   to   agents?   fees,   intellectual   property   provisions,   and   the   myriad   of  specifics  to  the  various  existing  clauses  which  relate  to  the  subject  goods,  which,  although   not   vital,   will   greatly   improve   the   likelihood   of   each   party's  understanding  of  its  rights  and  obligations.71    

                                                                                                               71  ibid.