Introduction

This study analyzes the question of whether a penalty clause can be demanded in case of termination of construction contracts in return for a land share, and in which situations it cannot be demanded, within the framework of the provided literature. A penalty clause is a secondary performance obligation tied to the main debt, which the debtor undertakes to pay in case of breach of contract. Its primary purpose is to compel the debtor (contractor) to perform in accordance with the contract and to eliminate the creditor’s (landowner’s) burden of proving potential damages. The analysis particularly focuses on the effect of the type of contract termination on the demand for a penalty clause.

1. Legal Nature of the Penalty Clause and Its Relationship with Termination

In construction contracts in return for a land share, a penalty clause is generally a sanction that comes into play when the contractor fails to deliver the construction on time (default). This clause “arises as a secondary debt tied to the main debt, serving as security for the main debt.” This secondary nature of the penalty clause directly affects its fate in case of termination.

The main distinction in the literature is made according to the effect of termination:

Claim for Penal Clause in Case of Retroactive Termination (Rescission)

Rescission of a contract retroactively extinguishes the debt relationship. In this case, the contract is considered as if it was never established. Since the main obligation ceases to exist, the accessory penal clause claim attached to it also terminates. If the prospective termination of the contract is accepted, the penal clause stipulated in the contract may be awarded; otherwise, in the case of retroactive termination of the contract, a penal clause cannot be claimed.”

Since the penal clause is an accessory claim dependent on the main obligation, upon rescission of the contract, the debt relationship is retroactively extinguished, and the right to the penal clause also ceases retroactively.

The exception to this rule is if the parties stipulate a specific penal clause in the contract for the event of termination. If the contract is terminated, a penalty clause cannot be claimed based on this provision. If a penalty clause or compensation is not explicitly stipulated in the contract for the event of termination only a claim for negative damages is possible.

Claim for Penal Clause in Case of Prospective Termination

In prospective termination, accepted by the Supreme Court, especially in cases where construction is substantially completed, the contract remains valid until the moment of termination and only ceases for the future. In this case, the sanctions stipulated for breaches of obligation that occurred up to the termination date remain valid.

In case of partial termination or prospective rescission of the contract, since the contract will remain valid until the termination date, it is possible to claim delay compensation accrued until this point. The penal clause and rent compensation stipulated in the contract can be claimed until the termination date. Therefore, if there has been a delay in the delivery of the construction and the contract was subsequently rescinded prospectively, the landowner has the right to claim the penal clause accrued from the default date until the termination date.

2. Other Situations Where a Penal Clause Cannot Be Claimed

Aside from the type of termination, there are other legal situations that prevent the penal clause from being claimed:

Invalidity of the Contract: A penal clause depends on the existence of a valid principal debt. A construction contract in return for land share is invalid if it is not made in accordance with the official form stipulated by law (in the form of a notarized deed). A penal clause cannot be claimed based on an invalid contract. Even if agreed upon by the parties, it is not possible to demand a penal clause in an invalid contract. Since the contract is entirely invalid, claims such as the penal clause or compensation stipulated in the contract will also not be possible to demand.

Impossibility of Performance: If the performance of the debt becomes impossible for a reason not attributable to the parties, the principal debt ceases. With the termination of the principal debt, the accessory penal clause also cannot be claimed. In a situation where the contract is terminated due to impossibility, the penal clause will also cease according to Article 131 of the Turkish Code of Obligations (TBK). Therefore, it states that “when the debt ceases due to impossibility of performance, the penal clause cannot be demanded even if it is included in the contract.”

Acceptance Without Reservation: One of the most frequently encountered situations in practice is when the land owner accepts the delayed delivery of the construction without expressing any reservation. Pursuant to Article 179/2 of the Turkish Code of Obligations, in this case, the land owner loses the right to demand the penal clause added to the performance. The penal clause added to the performance… cannot be demanded later unless reserved with an explicit reservation at the time of delivery of the structure. If the land owner has accepted the construction without expressing a reservation or has explicitly waived the right to demand the penal clause, then according to the provision of Article 179/2 of the TCO, the right to demand the penal clause ceases to exist.

Condition of Fault: Although controversial in doctrine, according to the prevailing view, for the penal clause to be demanded, the debtor (contractor) must be at fault for falling into default. If the contractor proves that they are not at fault for falling into default, they may be relieved from paying the penal clause. However, the parties may stipulate in the contract that the contractor will pay the penal clause even if there is no fault on their part..

Conclusion

According to literature analysis, the answer to the question of whether a penal clause can be demanded in case of termination of construction contracts in exchange for land shares is not absolute and primarily depends on the nature of the termination:

Retroactive Termination (Rescission): As a rule, a penal clause cannot be demanded because it voids the contract from the beginning.

Prospective Termination: Since the contract is considered valid until the moment of termination, the penal clause accrued until the termination date can be demanded.

In addition to this main rule, the following points also prevent the demand for a penal clause:

The parties not having explicitly stipulated a penalty clause in the contract for termination (in case of retroactive termination).

The contract being invalid from the outset due to a defect in form, for example.

The performance ending due to impossibility not attributable to either party.

The landowner accepting delayed performance without reservation.

Consequently, when an attorney encounters such a claim, it is critically important to first determine the legal nature of the contract termination (whether it is retroactive or prospective), then to examine whether there is a penalty clause specific to termination in the contract, and finally to investigate the existence of other legal circumstances (such as contract validity, reservation, etc.) that could preclude the claim. An article suggestion.

Why is Expert Attorney Support Necessary?

In construction contracts in exchange for land share, a claim for a penalty clause after termination is a much more complex and technical legal process than it appears. Issues such as whether the termination is retroactive or prospective, whether there is a penalty clause specific to termination in the contract, the validity of the contract, impossibility of performance, reservation, and fault requirement can lead to different outcomes in each case.

In such construction contract disputes, frequently encountered in Istanbul regions like Tuzla, Pendik, Kartal, Tepeören, Orhanlı, Aydınlı, Şifa Mahallesi, and Bayramoğlu, obtaining support from a specialized construction law and contract law attorney is critically important to prevent loss of rights and determine the correct strategy.

A lawyer correctly identifies the type of contract termination to determine whether a penalty clause can be claimed, analyzes risks such as invalidity, impossibility of performance, or reservation, and technically prepares the claims to be submitted to the court without any deficiencies. This professional approach both minimizes the landowner’s financial loss and provides a strong position during the lawsuit process.