1. Legal Nature of the Deposit and “Forfeiture” Status

Is the deposit forfeited? The general view prevailing in court decisions is that the deposit will generally “not be forfeited” and should be returned if the contract is not performed or is invalid.

A. General Rule: Acceptance as Earnest Money (TCO Art. 177) Pursuant to Article 177 of the Turkish Code of Obligations, money given when a contract is made, unless otherwise agreed, is not considered “withdrawal penalty” but rather “earnest money” given as proof that the contract has been made.

Obligation of Return: Courts have ruled that unless explicitly stipulated to be “cancellation penalty”, the deposit can be requested back by the party who gave it, regardless of whether they were justified in breaking the contract. The purpose of the deposit is to be evidence that the contract has been established; it is not a penalty clause (İstanbul Anadolu 13. Civil Court of Commerce, 2022/229; Bursa 1. Civil Court of Commerce, 2018/18K 58).

Burden of Proof: The party claiming that the money given is a withdrawal penalty (i.e., that it will be forfeited) must prove this claim with written evidence. If it cannot be proven, the money is considered earnest money and must be returned (Bakırköy 6. Civil Court of Commerce, 2021/1000; Regional Court of Justice (İstanbul BAM) 13. Civil Chamber, 2020/747).

B. Situation in Invalid Contracts (Unjust Enrichment) 

In “external” (outside notary/land registry) contracts, frequently seen especially in real estate sales, earnest money is absolutely not forfeited.

Principle of Ancillary Condition: Earnest money is an ancillary (subsidiary) condition dependent on the main contract. If the main contract (e.g., real estate sale) is invalid due to non-compliance with the official form requirement, then the provisions regarding earnest money are also invalid.

Conclusion: The parties are obliged to return what they have received due to the invalid contract, within the framework of “unjust enrichment” provisions. Even if the contract states “earnest money is not refundable” , this clause does not produce a legal effect because the contract is invalid (Yargıtay 3. Hukuk Dairesi, 2018/3077; Bakırköy 7. Asliye Ticaret Mahkemesi, 2022/552; İstanbul Anadolu 2. Asliye Ticaret Mahkemesi, 2023/608).

C. Exceptional Circumstances and Forfeiture Fee 

The “forfeiture” of earnest money (its retention by the seller) is only possible if it is explicitly agreed upon as a “forfeiture fee” (TBK art. 178) in a valid contract or if there is a commercial provision.

Valid Contract Clause: Istanbul 15th Commercial Court of First Instance (2024/66) has taken into account the provision that earnest money will not be refunded if the buyer withdraws from a contract deemed valid.

Proforma Invoice/Commercial Relationship: Istanbul Anatolian 3rd Civil Court of Commerce (2021/152) found it lawful for a deposit not to be refunded, given that it was clearly stated in the proforma invoice “will not be refunded if abandoned” and the buyer was a merchant. However, Konya 4th Civil Court of Commerce (2020/321), despite the contract stating “non-refundable,” ruled that the money was a binding deposit based on the presumption of Article 177 of the Turkish Code of Obligations (TBK 177) and should be refunded. The specific characteristics of the concrete case are decisive in this matter.

2. Conditions for the Validity of a Deposit

Certain conditions are required for a deposit to be considered a legally valid “earnest money” (cayma akçesi) or proof of contract.

A. Formal Requirement and Dependency on the Main Contract

Official Form: In real estate sales, the validity of a deposit is contingent upon the main sales contract being executed in an official form (land registry or notary public). In real estate sales made in ordinary written or verbal form, the deposit agreement is invalid (Supreme Court 3rd Civil Chamber, 2017/1137; Regional Court of Appeals Istanbul 3rd Civil Chamber, 2025/183).

Written Evidence: For a deposit to be classified as “earnest money” (i.e., forfeited), this point must be explicitly agreed upon and preferably in writing. Otherwise, it is considered a “binding deposit” according to Article 177 of the Turkish Code of Obligations (TBK 177) (Regional Court of Appeals Istanbul 13th Civil Chamber, 2020/747).

B. Means of Proof

Explanation on Receipt: The presence of descriptions such as “deposit”, “commitment fee”, or “vehicle sale deposit” on a bank receipt is considered sufficient proof that the money was given as a deposit (Istanbul Regional Court of Justice 43rd Civil Chamber, 2020/613k; Bakırköy 7th Civil Court of Commerce, 2021/189).

Commercial Books: In commercial disputes, entries in the parties’ commercial books can prove the existence of a deposit (Izmir 6th Civil Court of Commerce, 2018/338).

3. Sectoral and Special Considerations

Vehicle Sales: In vehicle sales, deposits given before the notary sale are usually refunded if the sale does not materialize. The seller cannot keep the deposit if they cannot prove that they suffered a loss due to the buyer backing out (Istanbul Anatolian 13th Civil Court of Commerce, 2021/307; Istanbul Regional Court of Justice 12th Civil Chamber, 2022/1246).

Conditional Deposit: If the refund or forfeiture of the deposit is tied to a specific condition (e.g., loan approval, location confirmation) and this condition is not met, the deposit is refunded (Istanbul Anatolian 2nd Civil Court of Commerce, 2016/1154K; Supreme Court 19th Civil Chamber, 2011/226K).

Price Guarantee: It has been stated in a decision that the down payment is only for reservation purposes, does not provide a price guarantee, and will be deducted from the final invoice (Istanbul 14th Commercial Court of First Instance, 2023/602)

In Conclusion: In Turkish legal practice, a down payment (earnest money) is proof that the contract has been formed and, as a rule, is not “forfeited”. Its return is essential if the sale does not materialize. For the down payment to remain with the seller (to be forfeited); the contract must be valid (if there is a formal requirement, it must be complied with) and it must be clearly agreed that the money is “withdrawal money”. In invalid contracts, the down payment is returned in any case.

Why is Expert Legal Support Necessary in Down Payment Forfeiture Disputes?

Whether the down payment will be forfeited; whether the given money is earnest money or withdrawal money, whether the main contract is valid, whether the formal requirement is met, and whether the parties are merchants, requires the joint evaluation of many legal criteria. The most common mistake in practice is the belief that the presence of the phrase “non-refundable” in the contract automatically leads to the forfeiture of the down payment. However, the precedents of the Supreme Court are highly technical and restrictive on this matter.

Especially in regions with high real estate and vehicle sales, such as Tuzla, Pendik, Kartal, Maltepe, Gebze, and Çayırova, down payment disputes are frequently litigated. Incorrect legal assessment can lead to the loss of a down payment that should be refunded or to wrongful litigation.

Tuzla 2M Law Firm is proficient in Supreme Court practice regarding the legal nature of earnest money, the distinction between withdrawal penalty and commitment fee, and restitution cases arising from unjust enrichment, and provides results-oriented legal support. To prevent loss of rights, expert legal support is of great importance.