A. Freedom of Form and the Obligation to Conclude Contracts in Turkish
The Turkish Code of Obligations ("TCO") is based on the principle of freedom of contract. In this context, Article 12 of the TCO regulates the freedom of form of contracts. According to the art.12, the validity of contracts is not subject to any form unless otherwise provided by law. Thus, unless the law provides otherwise, the parties may conclude a contract without being bound by any formal requirements.
The formal requirements set forth in other legislations should also be considered when drafting contracts. Law No. 805 on the Compulsory Use of the Turkish Language in Business Enterprises (the “Law"), adopted in 1926, is a law that sets out the formal requirements regarding the language in contracts. According to Article 1 of the Law, which consists of 9 articles in total, all types of companies and institutions of Turkish nationality are obliged to conclude all of their transactions, contracts, communications, and keep their accounts and books in Turkish. Similarly, with reference to Article 12 of the TCO, Turkish companies are obliged to prepare their contracts in Turkish. However, it should be noted that this obligation applies to matters within Türkiye. .
Article 2 of the Law imposes a similar obligation for foreign companies and organizations. Article 2 imposes an obligation for foreign companies and institutions to ensure that their correspondence and transactions with Turkish persons and organizations, their contacts, the documents and books they are obliged to submit to official bodies and authorities are in Turkish. At this point, branches or representative offices of foreign companies in Turkey should also be considered as foreign establishments within the scope of the Article. In this respect, Article 2, unlike Article 1, does not require that the agreements that foreign companies and organizations conclude with each other must be in Turkish.
According to the provisions of the Law, the contracts to be concluded in Türkiye by two Turkish companies must be in Turkish. On the other hand, the contracts to be concluded between two foreign companies are not required to be in Turkish, as can be seen from the wording of Article 2. At this point, the important question is whether it is obligatory to use Turkish in the contract between a Turkish company and a foreign company.
B. Doctrine and Decisions of the Court of Cassations
The doctrine is divided on this issue. According to one opinion, the omission of the word "agreement" in Article 2 of the Law is a deliberate choice and there is no language restriction in the agreements to be concluded by foreign companies with Turkish companies. According to another opinion, such an interpretation should not be based on the fact that the word "agreement" is not explicitly mentioned in Article 2. Accordingly, contracts are also multilateral transactions (legal transactions) and contracts are also included in the scope of the word "transaction" in Article 2. Therefore, it is obligatory to use the Turkish language in a contract signed between a Turkish company and a foreign company.
The Court of Cassation has not yet reached a consensus on this issue. For example, the 11th Civil Chamber of the Court of Cassation, in its decision no. 2007/5129 E. and 2007/9050 K., stated that contracts are not listed in Article 2 of the Law and therefore rejected the appeals.
The 11th Civil Chamber of the Court of Cassation, in its decision no. 1986/4231 E. and 1986/5032 K, stated that contracts between Turkish companies and foreign companies in a language other than Turkish are not prohibited.
In a contrary decision of the 11th Civil Chamber of the Court of Cassation no. 2014/1385 E. and 2014/3815 K., the court rejected the appeals on the grounds that the contract written in English between the parties was contrary to the Law.
C. Sanctions for Violations of the Law
According to Article 7 of the Law, the criminal sanction for violation of the Law is a judicial fine of not less than one hundred days.
The civil sanction for violation of the Law is regulated by Article 4. . Accordingly, in case of violation of Articles 1 and 2 of the Law, documents and certificates issued in violation of the Law shall not be taken into consideration in favor of companies and institutions. However, although there are different opinions in the doctrine on the nature of the violation of the Law, if contracts are issued in violation of the Law, it can be claimed that the contract is invalid or that the contract cannot be taken into consideration in any dispute.
D. Conclusion and Assessment
In today's globalised world and economy, many businesses and transactions are conducted with foreign companies and individuals. As a result, these transactions may be conducted in a foreign language and contracts may be signed in a foreign language. And indeed, beyond a foreign language, smart contracts, which are written in a coding language and can only be read by a computer, have been in use for years. Due to the fact that the law is still in force and there is no uniformity in the jurisprudence of the Turkish judicial bodies, there are doubts about the enforceability of contracts signed in a foreign language within the scope of the law. In order to eliminate these uncertainties and to avoid possible sanctions under the Law, it may be useful to draft contracts in Turkish. If it is necessary to conclude a contract in a foreign language for the foreign representative of Turkish companies, because his/her mother tongue would not be Turkish, a situation where the Turkish language contract would be the main contract and the foreign language version of the contract is signed by reference to the Turkish contract could create a solution. In addition, the signing of the contract by the foreign official who signs the contract by annotating the translation of the articles and his/her understanding of the provisions of the contract may also help to avoid some other drawbacks regarding the validity of the contract.
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Gungor Law Firm