Supreme Court Decisions on: i) goodwill indemnity claim of an insurance agency, ii) application of a post non-compete covenant within a franchise agreement, iii) onerous clause determination within a franchise agreement.
Three remarkable decisions have been selected and presented below for the aim of reflecting the latest tendencies under Turkish case law.
1. The factors to be taken into account while calculating the goodwill indemnity of an insurance agent.
In its decision dated 4.10.2018 and numbered 2018/6010, the 11th Chamber of the Supreme Court reversed the decision of the Court of First Instance on the grounds that the calculation with regards to the goodwill indemnity of an insurance agency shall be realized by taking into account of specific factors.
Such factors include:
- the type of policies the insurance agency drafted on behalf of the principle during the term of the agency agreement,
- the duration of such policies,
- the significant and specific benefits the principal will gain from agency’s client portfolio,
- whether a goodwill indemnity must be paid in line with the rule of equity.
2. Justifiable activity of a franchisee after the termination of the franchise agreement which is bound with a post non-compete covenant.
In its decision dated 24.04.2018 and numbered 2018/3093, the 11th Chamber of the Supreme Court held that the franchisor may well claim positive damage against the franchisee who violates the post non-competition clause without a justified reason and with negligence.
However, in order for the franchisor to be awarded compensation, it has been indicated that it is necessary to elaborate on the allegation of the franchisee that “it was selling from stocks following the termination of the agreement”, since the franchisor did not accept the return of the goods.
The Supreme Court ruled that the Court of First Instance must have examined the commercial books of the franchisee and investigate whether it has been supplying goods from other manufacturers during the post non-compete term and reversed the decision in favor of the franchisee.
3. Assessment with regards to an alleged onerous penalty clause within a franchise agreement.
In another decision dated 28.04.2016 and numbered 2016/4814, the 11th Chamber of the Supreme Court reversed the decision of the Court of First Instance which has declared that; a penalty clause within a franchise agreement involving the payment of 30.000 USD together along with 10 years’ worth consulting fee at once by the franchisee to the franchisor shall not be considered an onerous clause.
The Supreme Court pointed out that, Turkish Code of Obligations defines onerous clauses as provisions of a contract drafted and submitted by one of the parties unilaterally in order to be used in a variety of similar contracts in the future. The Supreme Court added that the factors to be taken into consideration when assessing the existence of an onerous clause are; i) assessment with regards to the enforceability of the clause, ii) assessment with regards to the interpretation of the clause and iii) and assessment with regards to the content of the clause.
Thus, the Supreme Court concluded that the Court of First Instance shall analyze the clause from all such perspectives and reversed the decision on basis of insufficient analysis.
Hikmet Koyuncuoğlu, IDI Country Expert for franchising in Turkey