CMS Guide to Consequential Loss in Turkiye

The term 'consequential loss has no set meaning under Turkish law. However, similar concepts and legal terms are recognised and used in Türkiye, such as 'indirect loss' (dolaylı zarar) and 'subsequential loss' (yansıma zarar).

These concepts and terms are not explicitly defined in the Turkish Code of Obligations No. 6098 (TCO), but are recognised and developed in Türkiye through doctrine and jurisprudence.

According to Turkish law, compensation or indemnification (tazminat) generally requires the following conditions to be met cumulatively: an act causing liability (sorumluluğu doğuran fiil), fault (kusur), causality (illiyet bağı) and damage/loss (zarar).

The term 'consequential loss' may be described as an umbrella term encompassing any damage caused by direct loss. Direct loss could therefore be described as a decrease in actives or an increase in liabilities (fiili zarar) as a result of a damaging event. Against this background, indirect, subsequent or consequential loss is generally recoverable if the causality condition is met pursuant to Articles 49 et seq. of the TCO.

Yes, the phrase 'consequential loss' is often used in contractual liability exclusion clauses in Türkiye. Within the framework of the TCO, the parties may generally limit or extend their contractual liability at their discretion with some exceptions. Consequently, as a general rule, the parties can agree whether or not they are liable for consequential losses.

Furthermore, alongside consequential loss exclusions, clauses concerning the exclusion of the contractual liability for (i) loss of profit; (ii) loss of reputation; (iii) loss of data; or (iv) loss of production are also frequently used in Türkiye. Please note that, such exclusion clauses do not usually simply refer to the term ‘consequential damages’ or the terms mentioned above, but define this category of damages by means of examples aimed at excluding any liability as far as possible.

Such exclusion clauses are not generally invalid, unlawful or unenforceable under Turkish law. That said, Article 115(1) of the TCO, subtitled ‘Disclaimer Agreement’ (sorumsuzluk anlaşması), declares contractual exclusion clauses that exclude liability for (i) gross negligence and (ii) intent to be null and void:

Article 115 of the TCO – Non-liability Contract Clause:

“1. The contract clauses on exclusion of liability for gross fault [ağır kusur] in advance are void.

2. Any contract clauses on exclusion of obligor’s liability towards the oblige for any obligations caused by service contracts in advance are void.

3. If a service, profession or art which requires specialisation can only be performed with the permission of the law or competent authority, the agreements on exclusion of obligor’s liability for slight negligence in advance are void.”

There is no uniformly accepted definition of “consequential loss” under Turkish law. As the term is still being developed based on doctrine and case law, it is not possible to clearly state what “consequential loss” means under Turkish law when used in a contractual exclusion clause unless it is expressly specified in the contract. Accordingly, the meaning attributed to the words “consequential loss” in contractual exclusion clauses must be determined on a case-by-case basis. In this respect the interpretation of the entire contract and the determination of the parties’ real intention and will (tarafların gerçek iradesi) are essential in order to identify the meaning attributed to the words “consequential loss” in contractual exclusion clauses in Türkiye. In the event of any doubt over the meaning of such exclusion clauses, either the contractual parties may agree on the scope and content of the clause or, in the event of a dispute, the competent court may provide a supplementary interpretation which will reflect as closely as possible the real intention and will of the contractual parties when agreeing on such an exclusion clause.

As mentioned above, according to Turkish law, consequential loss may be deemed as any damage arising from a direct loss (e.g. loss of profit, loss of production, etc.). In a dispute, the competent court is expected to evaluate any claim within the framework of the contract and in line with the intentions of the parties when concluding the contract in question.

The Turkish legal system is also based on civil law. The principle of binding precedents (stare decisis) does not generally apply. For example, the Turkish Court of Appeals (Yargıtay) has issued a ruling that was not recognized by first instance courts. This ruling states that damages incurred by third parties in connection with the claimant also fall under indirect damages, even if the claimant did not cause any direct damage to the third party. Accordingly, despite existing legal doctrines and case law, courts are not bound by previous decisions in similar cases when deciding a case. Each case is therefore decided individually and depends on the circumstances of the case. This general rule of Turkish law also applies to the interpretation of the term ‘consequential damage’ in contractual exclusion clauses.

As previously mentioned, the concept of 'consequential loss' is neither specifically regulated nor defined under Turkish law. Therefore, where a clause includes other heads of loss alongside consequential loss, it is difficult to predict the legal approach of Turkish courts precisely.

According to the principle of freedom of contract, the inclusion of other heads of loss alongside 'consequential loss' does not affect the effectiveness of the clause.

However, if there is any inconsistency regarding the types of losses and 'consequential loss' covered by an exclusion clause, each exclusion shall be interpreted in isolation, taking into account the true intention and will of the parties at the time the contract was signed. During this process, the competent court will evaluate all circumstances in light of the evidence submitted by the contracting parties to determine the extent to which the exclusion clause covers consequential loss and other types of loss. To this end, Turkish courts may appoint an independent expert or an expert committee (bilirkişi heyeti) to examine the case and submit a report on the relevant exclusion clause.

No; legal claims arising from non-damages can be asserted under Turkish law regardless of the existence of 'consequential damages' related exclusion clauses. Therefore, exclusion clauses for consequential damages have no effect on the contractual obligation to provide specific performance (aynen ifa) or other non-damages claims under Turkish law.