Turkey: Understanding standard T&Cs

Author: | Published: 8 Jul 2015
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Isil Ökten Mustafa Yigit Örnek
The provisions of template agreements drafted by one party for use in multiple transactions are known as standard terms and conditions. The standard terms and conditions concept was previously regulated by the Law on the Protection of the Consumer in terms of consumer relations and was also used in private law transactions based on good faith principles. It is now clearly regulated by articles 20-25 of the Turkish Code of Obligations as mandatory provisions as of July 1 2012. The Supreme Court emphasises how these rules prevent the weaker party in contracts from being stuck with unfair and unilateral acts of counterparties (particularly banks).

For instance, the Supreme Court in many decisions approved that the fees collected from the borrower under the names of filing fee or similar (for loans or early repayment) in general term loan agreements are unfair. They are deemed not to have been set out in such agreements, because they have not been mutually negotiated between the parties. The court approved that the fees need to be refunded to the plaintiff: the bank can only demand mandatory, reasonable and documented costs and expenses under the contract, which are required to make the relevant loan available and which are in consideration of an actual service provided by the bank.

Further, in other decisions, the Supreme Court ruled that if a bank includes a general term in the mortgage agreement whereby the mortgagor is also a joint guarantor of the loan amounts, this clause is a standard term and condition. The clause is unfair, not in conformity with the nature of a mortgage transaction, and therefore non-existent.

In line with the foregoing practice, the drafting party of a template agreement (such as a bank in general term loan agreements) should pay attention to the content of such agreements as communicated to their customers. Banks should ensure that the customer reviews the agreement and are duly informed of their contents, particularly provisions which are not in the customer's interests. Fees collected from the borrower should be actual and documented and in consideration of an actual service provided by the bank; they should also have been negotiated and accepted by both parties.

Isil Ökten and Mustafa Yigit Örnek