Is It Possible For Contracts To Be Adapted Due To The Novel Coronavirus Outbreak? 31 March 2020

After the fast and unexpected spread of the novel coronavirus worldwide, the whole world countries started to take precautions as quarantine, state of emergency in order to prevent the outbreak. Considering the global extent of the economy, it can be seen that the sweep of the outbreak and the precautions taken correspondingly, have affected the business life negatively in all world countries.

The consequences of the possible problems that may occur during the fulfillment of the commercial agreements signed previously to the spread of novel coronavirus outbreak and the related legal procedures to be applied are taking their place on the docket of the business life swiftly as well.

Within this scope; under Turkish Law, provisions regarding the adaptation of contract which were regulated under the Article 138 of the Turkish Code of Obligations (“TCO”) attract attention.

What Does Adaptation Of The Contract To The Change Of Circumstances Mean?

Under Turkish Law, the fundamental rule due to the principle of adherence (pacta sunt servanda) is the debt arising from the contract should be performed exactly as it was initially agreed. In other words, in principle, the debtor cannot assert matters that have arisen afterwards, regarding the fulfillment of the performances arising from the contract.

However; the legislator has determined some exceptions while applying the principle of adherence in case conditions that make it impossible or excessively difficult to fulfill the performance arising from the contract. Within these possibilities, the opportunity to request for the contract to be adapted to the new conditions is given to the debtor provided that the conditions determined in TCO are fulfilled.

What Are The Conditions For The Contract To Be Adapted To The Change Of Circumstances?

The adaptation of the contract to the new conditions was regulated under Article 138 of TCO titled which is titled as “Excessive Difficulty of Performance”. Accordingly, for the adaptation of contract to the changing conditions to be in question:

• An extraordinary situation which is not foreseen and not expected to be foreseen by the parties, shall occur due to a reason not caused by the debtor;
• The extraordinary situation shall change the conditions which were present during the conclusion of the contract to the detriment of the debtor in such a way as to violate the rules of good faith to demand the performance of the debt;
• The debtor shall have performed his obligations by reserving his rights arising from excessive difficulty or not have performed the obligations yet.

Article 138 of TCO, regulated the abovementioned conditions cumulatively. In other words; for the debtor to benefit from the adaptation of contract to the changing conditions provisions, all of the conditions listed above should be met.

Is It Possible To Evaluate The Novel Coronavirus Outbreak As A Circumstance That Creates Excessive Difficulty Of Performance?

Whether is it possible to request for an adaptation of contract to the changing conditions due to the novel coronavirus outbreak, depends on the evaluation of the abovementioned conditions for each concrete situation.

Accordingly; it is beyond dispute that the novel SARS-CoV-2 outbreak that affected the whole world is unforeseen and occurs from a reason which does not arise from debtor’s negligence. However; for the novel coronavirus outbreak to be an extraordinary event that does not arise from debtor’s negligence, is not sufficient by itself for the contract to be adapted to the changing conditions.

For as much as; it should be evaluated for each contract separately if the novel SARS-CoV-2 outbreak does make it excessively difficult to fulfill the performance against the good faith principles and if the mentioned difficulty is caused by the reasons arising from the novel coronavirus outbreak. In other words; since it cannot be concluded that the novel coronavirus outbreak and precautions taken will create an excessive difficulty of performance for every contract, it should be determined whether, within the scope of good faith principles, it is possible to demand from the debtor to perform its obligations.

What Are The Rights Of The Debtor In Case Of The Excessive Difficulty Of Performance?

As it is explained above, the excessive difficulty of the debtor due to the novel SARS-CoV-2 outbreak can be mentioned if the all the conditions stated in TCO article 138 are fulfilled. The debtor experiencing payment difficulties because of the novel SARS-CoV-2 outbreak, may request adaptation of the contract to the changing conditions from the court. In the course of adaptation of the contract, the judge shall evaluate the concrete event’s conditions ex officio and determine which circumstances the matter of dispute contract’s conditions shall be adapted. According to the type of the contract, if it is not possible for the contract to be adapted to the new conditions, the debtor shall have a right to terminate the contract. However; at this point it is important to apply the provisions regarding the termination of the contract after evaluating that adaptation of the contract to the changing conditions is truly not possible.

Consequently; adaptation of the contract to the changing conditions is one of the plenty legal institutions in Turkish Law in order to decrease the negative impacts of precautions taken because of the novel coronavirus outbreak on the business life. However; due to the fact that it is not possible to say the impact of the novel coronavirus outbreak constitutes an excessive difficulty of performance in every circumstance, it is essential to carefully evaluate the existence of the legal conditions in each concrete event.