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EFFECTS OF COVID-19 PANDEMIC ON CONTRACTUAL RELATIONS AND AN OVERVIEW OF RELATED CONCEPTS

The Covid-19 pandemic that started in Wuhan, China has spread rapidly and has become a problem affecting many countries in the world in a global nature, rather than being a regional problem. Indeed, in line with the statement made by the World Health Organization, the Covid-19 is declared as a “pandemic”.

The economy being negatively affected by this process has brought some questions and problems in terms of contractual relations between the parties along. There may be difficulties especially for the parties who are obliged with fulfilment of an execution or paying a debt to the counter party. The first thing that comes to mind in this regard is whether the Covid-19 pandemic is a force majeure or not and whether it has a direct effect on the contracts or not. First of all, it will be more useful to explain the related concepts regarding the specified situation in the analysis of the process. Matters that come to mind in such situations in contractual relations are; force majeure, impossibility of fulfilment, partial impossibility, hardship, unexpected situation. Brief explanations in terms of each concept;

Force Majeure: While it is one of the most conceivable concepts in terms of fulfilment in contractual relations, in our legislation, a clear description has not been made about the definition of force majeure and its conditions to be applied. In the interpretation of this concept, doctrine and Supreme Court practices have a guiding role. If we need to describe it with a definition, the force majeure; is the situations that may constitute obstacles for the fulfilment of a responsibility, a task or a commitment.

In terms of Covid-19 pandemic; It is recommended as the best option;

  1. To include an article related to force majeure when first making the contract between the parties,
  2. To include a global pandemic, disaster, etc. that may occur around the world within the scope of force majeure in the contract,
  3. To indicate how the outcome of the contract will be affected in such case

What if any article about force majeure is not included in the contract or if only limited cases are mentioned and the possibility of a global epidemic is not specified in the contract? Will Covid-19 pandemic be accepted as a force majeure situation in this direction?

The important issue in the answer of this question is the scope of the contract between the parties and the obligations that the parties are obliged to within the contract. Pursuant to the principle of “freedom of will” prevailing in the Turkish Law of Obligations, the parties are free to make a contract and to determine and regulate the subject of the contract and not obliged to make a contract they do not wish.

For the evaluation of the concept of force majeure within the scope of the contract, the qualification of the parties (whether they are merchants or not) or whether the force majeure situation has a quality that will affect the overall of the contract or not is important.

Impossibility of Fulfilment: The impossibility of fulfilment, which we can define briefly as “the fulfilment becomes unrealizable after the arisen of the debt”, has been described in our legislation as contrary to force majeure concept. Impossibility of fulfilment may be in the form of complete or partial impossibility. Under the 136th Article of the Turkish Code of Obligations, the impossibility of fulfilment which the debtor is not responsible has been regulated.                                                                       

If the execution of the debt becomes impossible due to the reasons that the debtor cannot be held responsible for, the debt ends.

The concept of impossibility may arise from a natural event, a material or legal reason. As quoted above, in terms of the impossibility of execution of the debt; if the debtor cannot be held responsible for the impossibility of execution, the debt ends.

In terms of partial impossibility; The execution of the debt is partially impossible without the responsibility of the debtor. The subject is included under the Article 137 of the Turkish Code of Obligations.

Accordingly, the partial execution may be possible as well as the termination of the full debt, if the contractual relationship would never be established in case the partial execution impossibility could be foreseen, considering the equity balance in the relationship between parties. In the direction of partial impossibility, the debt will terminate in terms of the part of the execution which becomes impossible.

It is also stated that if the creditor does not give consent to partial execution or that the obligations cannot be divided, the parties will be subjected to full impossibility provisions.

Hardship: The concept of hardship is the fact that the execution of the debt is not impossible but the execution of the debt has become extremely difficult due to a reason the debtor cannot be held responsible for. Cases included within the scope of hardship may be the reason for the adaptation or termination of the contract. Indeed, the hardship concept has been regulated under the 138th Article of the Turkish Code of Obligations.

In this respect, we would like to emphasize that; the principle of good faith which is stated under the Article 2 of the Civil Code is the general principle to be applied in determining of hardship concept.

Upon the application of one of the parties, it will be assessed by the judge whether the subject of the case is within the scope of hardship under the Article 138 of the Turkish Code of Obligations or not. In order to be able to talk about hardship concept, the following conditions must be met:

  • The balance between the obligations of the parties must be extremely impaired.
  • The situation that causes the impair of the executions should be a situation that is unforeseen or not expected to be foreseen.
  • The aforementioned situation should not be caused by the debtor’s fault.
  • The obligations of the parties must not have been performed yet.

After the judge’s evaluation, adaptation for the obligations within the contract may be made in accordance with equity in contract acts.

One of the concepts associated with hardship is the unexpected case concept.

Unexpected case: In accordance with the principle of pacta sun servanda which is one of the basic principles of the Law of Obligations, the parties must fulfil their obligations arising from the contract as agreed in the contract. However, the application of this principle without exception may lead to unfair consequences in some cases. Extraordinary incidents that are not foreseen or not expected to be foreseen at the time of making the contract may affect the obligations agreed in the contract. In such situation, it can be extremely difficult for one of the parties to fulfil the agreed obligations. There may be an extreme imbalance between the execution obligations.

In such cases, unexpected and very high devaluations may occur. In such cases, the judge may make an adaption in the contract by evaluating the contract between the parties, the balance between the execution obligations and the extraordinary situation.

The concept of unexpected case can be confused with the concept of force majeure, however, they are essentially different. Although the difference is not important in terms of proving the faultless situation; in unexpected case, the incident cannot be prevented despite all the measures the debtor may take; but in the force major, the incident cannot be prevented by measures that nobody may take. Therefore, the impossibility in the unexpected case is more relative, and the impossibility in the force majeure is more absolute.

General Evaluation and Conclusion:

As explained above, it is obvious that the Covid-19 pandemic has negative effects on our country’s economy. There is no general answer to which of the above-mentioned issues include Covid-19 pandemic which is a problem that deeply affects society and economic life. Because, as explained above, as a rule, the parties are free in terms of contracting and determining its content, and accordingly, each contract should be considered in the context of its specific circumstances. Covid-19 pandemic may be within the scope of impossibility of execution for a contractual relationship or it may be described as hardship in another one or for any other contract, it may not be considered under any of the stated circumstances. In order to evaluate the effects of the Covid-19 pandemic on contracts, the issues such as the qualifications of the parties, the place of execution, the time of execution, and the actions taken by the parties in the contract should be examined in detail.


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