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THE EFFECTS OF COVID-19 PANDEMIC ON THE FRANCHISE RELATIONS

It is useful to take a look at the reflections of the pandemic on the franchise relationships while evaluating the pandemic’s effects on many contractual relationships. The coronavirus outbreak (also known as Covid-19), which has affected the whole world, has also affected the franchise relationships. Disputes related to the Franchise Contracts have answers in our law within the scope of the principles of force majeure and impossibility of performance.

As it is known, Franchise Contracts are the contracts concluded between the company and the vendor, where the company undertakes to provide the products and where the vendor undertakes to sale these and this contract is consensual and burdens obligations on both parties. In case of a dispute, firstly, the relevant contract should be examined and if there is a provision related to force majeure, this provision should be put into practice. If the mentioned provision does not meet the current situation, if it does not exist, it is null or void it is possible to talk about the following principles;

– Permanent impossibility of performance

– Temporary impossibility of performance

If there is permanent impossibility of performance, franchise contracts that are continuous may be terminated prospectively. For example, the franchise of an automobile brand may decide to stop its long-term production due to the government’s decision. Considering the period of endurance to the contract, parties may terminate the contract due to good faith principle under the Article 2 of Turkish Civil Code. However, if there is temporary impossibility, such as 1 month – 2 months, the rules of hardship may be applied.

The period to endure the contract should be considered in legal terms. For example, in fuel franchise contracts, parties may set minimum limits as an obligation on the vendor whit the contract. Let us assume that the limit for the vendor to sell 80 tons of white product in a month has been set and the vendor shall pay a penalty if this commitment is not followed. When we think that curfew has been declared, such case would result in impossibility. Temporary impossibility of performance should be considered firstly and when the endurance period is exceeded, the provisions of permanent impossibility of performance may be applied.


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