Ⅰ. INTRODUCTION
Within the framework of the law of obligations, non-liability agreement can be defined as provisions that limit or completely eliminate the liability of one party under certain conditions. Such agreements are commonly encountered in high-risk businesses, specific service sectors, or commercial contracts. The purpose of non-liability agreement is to limit the legal responsibilities that parties may encounter and to prevent potential lawsuits arising from damages caused by breaches of contract.
While non-liability agreement provide flexibility in risk management within commercial relationships, they may also leave one party unprotected. There is a risk that economically stronger debtors may impose such agreements on weaker creditors. For this reason, while Turkish law recognizes the validity of such agreements if mutually agreed upon, the Turkish Code of Obligations (“TCO”) No. 6098 introduces certain limitations to ensure the protection of the creditor’s rights. This article will discuss the legal nature, elements, validity conditions, and limitations of non-liability agreement under the provisions of the TCO.
ⅠⅠ. LEGAL NATURE AND ELEMENTS OF NON-LIABILITY AGREEMENTS
Within the scope of the law of obligations, the principles of freedom of contract and freedom of will are fundamental, allowing parties to freely determine the content and form of a contract, except for mandatory provisions stipulated by law. Article 112 of the TCO protects the creditor by regulating that, unless the debtor proves the absence of any fault, they are liable for any breach of the obligation. As understood from this provision, the basic understanding in the law of obligations is that the debtor is liable to the extent of their fault, and the debtor is responsible for compensating the damage suffered by the creditor due to the non-performance or improper performance of the obligation.
According to the principle of freedom of will, the parties may include any provisions they wish in their contracts. However, this freedom is restricted by public order, morality, personal rights, and other limitations specified by law. Non-liability agreements are evaluated within these boundaries. Particularly in cases where there is a high likelihood of harm to the creditor, agreements that completely eliminate the debtor’s liability may be deemed invalid by the legal system. The TCO introduces specific exceptions to this general understanding, outlined in Articles 115 and 116, which state that the debtor’s liability arising from breaches of contract can be partially or entirely waived through mutual agreement.
Under the TCO no specific formal requirement is stipulated for non-liability agreements. Such agreements may either be included as an addendum to a contract executed between the parties or drawn up as a separate agreement. Considering the nature and purpose of non-liability agreements, they typically possess the following essential elements: (i) the existence of a breach of obligation, (ii) the agreement being made prior to the occurrence of any harm, and (iii) a modification of the statutory liability regime in favor of the debtor. As previously mentioned, non-liability agreements may either partially or entirely relieve the debtor of liability. Additionally, agreements that impose more burdensome conditions on the creditor’s ability to claim compensation from the debtor, or that limit the amount of compensation, may also be classified as non-liability agreements. In this context, agreements that, for example, place the burden of proof on the creditor or shorten the statutory prescription periods, except for mandatory time limits set by law, may also be considered within the scope of non-liability agreements as they alleviate the potential compensation burden on the debtor.
ⅠⅠⅠ. THE LIMITS OF NON-LIABILITY AGREEMENTS UNDER THE PROVISIONS OF THE TCO
As previously mentioned in this article, contracts within the scope of the law of obligations are fundamentally subject to the principle of freedom of contract. However, non-liability agreements will be deemed invalid not only if they conflict with the provisions of Article 27 of the TCO by violating personal rights, having an unlawful purpose, being contrary to public order and morality, or breaching the prohibition against the abuse of rights, but also in certain cases explicitly outlined by the lawmaker in the TCO. As noted earlier, non-liability agreements can either be drawn up as separate contracts or incorporated as provisions within an agreement signed between the parties. In its decision dated December 18, 2014, numbered 2014/13539-2014/16751, the 3rd Civil Chamber of the Court of Appeal emphasized the need for maintaining the balance of power if non-liability agreements are included as provisions in a contract between the parties, stating:
“…Given that the defendant’s service is monopolistic in nature, and considering Articles 20 and 25 of the TCO, it has been concluded that the balance of power, which is necessary for freedom of contract, has been disrupted to the detriment of one party, and that justice in the contract must be ensured by intervening in the freedom of contract…”
With respect to the limits of non-liability agreements and the conditions under which they will be deemed invalid, the provisions of Article 115 of the TCO are mandatory. In this article, without defining non-liability agreements, the lawmaker has set forth their boundaries. The relevant article states:
“Any prior agreement that exempts the debtor from liability for gross negligence is absolutely null and void.
Any prior agreement exempting the debtor from liability for any debt arising from an employment contract with the creditor is absolutely null and void.
If a service, profession, or art requiring expertise can only be carried out with permission from the law or competent authorities, any prior agreement exempting the debtor from liability for slight negligence is absolutely null and void.”
In this way, non-liability agreements are limited with respect to: (i) negligence, (ii) liability arising from employment contracts, and (iii) slight negligence in services requiring expertise that are conducted with the permission of competent authorities.
In the first paragraph of Article 115 of the TCO, the legislator states that non-liability agreements shall be valid only in cases of slight fault, and that non-liability agreements containing provisions stating that the debtor shall not be liable in cases of gross fault, intent or gross negligence shall be invalid. In the second and third paragraphs of Article 115 of the TCO, the legislator has introduced mandatory regulations by expanding the situations in which non-liability agreements will be deemed invalid, stating that in some cases, even the liability of the debtor for damages due to slight negligence cannot be eliminated by an non-liability agreement. According to the decision of the 11th Civil Chamber of the Court of Appeal numbered 2016/3632-20175846 dated 30.10.2017, the characteristics of the concrete case and the provisions of the law to be applied in the concrete case should be evaluated together regarding the validity of the non-liability agreements;
“…The court decided to dismiss the case on the grounds that the Crane Operation Slip submitted by the defendant contains a non-liability record. However, Article 854 of the TCC No. 6102, which was in force on the date of the lawsuit and the incident, states that all contractual provisions that result in the prior mitigation or removal of the responsibilities imposed by the Law on the carrier, the transportation broker and the transportation companies whose activities are subject to State permission are invalid. Article 115 of the TCO No. 6098 stipulates that if a service, profession or art requiring expertise can only be carried out with the permission granted by law or by the competent authorities, any prior agreements stating that the debtor will not be liable for slight negligence are absolutely null and void.
In general, while the first paragraph of Article 115 of the TCO states that non-liability agreements will be invalid in cases of gross fault, gross negligence and intent, the third paragraph constitutes an exception to the first paragraph by stipulating that non-liability agreements regarding slight negligence cannot be made in activities that are carried out with the permission granted by the competent authorities and require expertise.
In the second and third paragraphs of Article 116 of the TCO,
“Even if the debtor has lawfully entrusted the performance of an obligation or the exercise of a right arising out of a debt relationship to his auxiliaries, such as his cohabitants or employees, he is obliged to compensate for the damage caused to the other party while they are carrying out the work.
Liability for the acts of auxiliaries may be fully or partially extinguished by prior agreement.
If a service, profession or art requiring expertise can only be carried out with the permission granted by law or by the competent authorities, the agreement that the debtor will not be liable for the acts of the auxiliaries is absolutely null and void.”
Another important limitation on non-liability agreements has been regulated in a mandatory manner. Pursuant to the first paragraph of this Article, even if the debtor has entrusted the performance of the obligation or the exercise of the rights under the obligation relationship to his auxiliaries, such as his cohabitants or employees, he is obliged to compensate for the damage caused by such persons. The provisions of the second paragraph, which limits non-liability agreements, stipulate that the liability arising from the acts of such assistants may be fully or partially removed by prior agreements. However, the third paragraph stipulates that for specialized services, professions or arts, such services may only be performed with the authorization granted by law or by the competent authorities, and that agreements not to hold the debtor liable for the acts of the auxiliaries shall be conclusively invalid. This provision ensures that although the debtor expands its field of activity by utilizing assistants, it also bears the risk of this expansion. Thus, the breaches of obligation such as intent, gross negligence and slight negligence are evaluated together, and the non-liability agreements regarding these situations are deemed invalid in accordance with the mandatory regulations.
The outlines drawn by the legislator regarding the non-liability agreements in the provisions of Article 115 of the TCO find an application area in the liability provisions regarding the obligation to guarantee against defects in certain special types of contracts within the scope of the TCO. For example, Article 221 of the TCO regarding the sales contracts defined under Article 207 of the TCO;
“…if the seller is grossly negligent in transferring the goods in a defective condition, any agreement which removes or limits his liability for the defect shall be null and void.”
It is stated that the non-liability agreement between the seller and the buyer regarding the seller’s liability against defects will only be valid in cases where the seller does not know or cannot be expected to know the defect of the defective goods.
Article 393 of the TCO defines service contracts as contracts where the employee performs work for a definite or indefinite period of time dependent on the employer and the employer pays the employee a wage for the work performed. The predominant opinion in the doctrine regarding service contracts, which is another type of contract defined under the TCO, is that the provisions of the second paragraph of Article 115 of the TCO mentioned above should be evaluated through the lens of the principle of protection of the employee, which is one of the fundamental principles of labor law, and the mandatory provisions of Article 417 of the TCO, which is entitled the protection of the personality of the employee.
There is no specific provision governing the application of non-liability agreements or their limitations in lease agreements. However, Article 304 of the TCO outlines certain conditions regarding the lessor’s liability for defects:
“In the event that the lease is delivered with significant defects, the lessee may apply to the provisions regarding the default of the debtor or the responsibility of the lessor arising from the subsequent defective condition of the lease.
If the leased property is delivered with minor defects, the lessee may invoke the provisions relating to the lessor’s liability for defects that later arise in the leased property.”
This provision sets out certain limits on the lessor’s liability for defects. In this context, defects are classified as significant and insignificant in lease agreements. A significant defect is one that objectively renders the use of the leased property impossible. The TCO does not contain any special provisions concerning residential and workplace leases with roofs, but Article 301 of the TCO states:
“The lessor is obliged to deliver the leased property on the agreed date, in a condition suitable for the use intended in the contract, and to keep it in this condition for the duration of the contract. This provision cannot be amended against the lessee in residential and roofed workplace leases; in other lease agreements, arrangements contrary to this provision cannot be made against the lessee through general transaction conditions.”
This provision establishes that the prohibition against terms unfavorable to the lessee applies equally to residential and workplace leases. Additionally, Article 358 of the TCO, concerning the lease of goods, states that if there are no specific provisions, non-liability agreements regarding damages caused by the lessor’s failure to fulfill their obligations will be evaluated according to the rules applicable to ordinary lease agreements.
In light of these explanations, non-liability agreements in lease contracts that impose unfavorable consequences on the lessee are likely to be deemed invalid, especially in accordance with the general provisions of Articles 115 and 301 of the TCO, and where applicable, under the conditions stipulated by Article 304.
In contracts of work as defined by Article 470 of the TCO, the person receiving the work has an obligation to inspect the work and notify the contractor of any defects. Article 477 states that, after delivery, the employer is obliged to inspect the work and notify the contractor of any defects. If the employer fails to fulfill their obligation to inspect and notify, they will be deemed to have accepted the work. However, this acceptance only applies to obvious and simple defects. If there are defects intentionally concealed by the contractor or defects that cannot be detected through proper inspection, the contractor’s liability will continue. On the other hand, if the defect arises from the employer’s actions, the employer will not have the right to invoke remedies arising from the defect. Since the provisions of Article 477 regarding contracts of work align with the provisions of Article 115 of the TCO, and there are no specific provisions regarding non-liability agreements in contracts of work, we are of the opinion that the general provisions of Article 115 may also apply to contracts of work.
Ⅳ. CONCLUSION
Non-liability agreements are provisions established between parties under the law of obligations and contain provisions that limit or eliminate the liability of the debtor. These agreements are made in order to allocate the risks between the parties and to reduce uncertainties in commercial relations, and the validity of such agreements under the TCO is determined within the limits stipulated by the law.
The provisions of Articles 115 and 116 of the TCO, which determine the general limits of non-liability agreements, also apply to special types of contracts that are not specifically regulated under the TCO, and the non-liability agreements in these contracts should also be evaluated in line with the principles stipulated by the law.
In conclusion, while non-liability agreements can be arranged by the parties based on the principle of freedom of contract under the law of obligations, the validity of these agreements is determined within the limits established by the TCO, taking into account factors such as the nature of the contract and the position of the parties. In this context, agreements that aim to completely eliminate the debtor’s liability are deemed invalid, particularly when they have the potential to weaken the creditor’s rights, due to their violation of mandatory legal provisions.
Sincerely,
Kılınç Law & Consulting
