TURKEY: Decision of the 11th Chamber of the Turkish Supreme Court Assessing the Penalty Clause and Termination Fee within the Franchise Agreement.

Hikmet KOYUNCUOGLU | TURKEY | 19 February 2024


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The lawsuit is related to the claim of the franchisor for the collection of the franchise fees for the remaining term of the franchise agreement together along with the penalty clause based on the claim that the franchise agreement between the parties has been terminated by the franchisee without any justifiable ground.

The Court of First Instance (“Court”) ruled that the franchisee breached the franchise agreement by taking down the signboard belonging to the franchisor and put up the signboard of another brand instead and marketed the products of another brand, and that it was appropriate for the franchisor to terminate the agreement for just cause.

With the relevant decision, it was decided that the franchisee shall be held liable for the entire remaining amount in the franchise agreement, and the penalty clause agreed upon in the agreement shall be paid subject to discretionary reduction pursuant to Article 182 of the Turkish Code of Obligations on the grounds that it is in an amount that may cause the economic ruin of the franchisee even though the franchisee is a merchant which shall act prudently. Hence, the penalty amount has been reduced from what has been stipulated within the agreement (€ 100.000) to € 15.000 by the Court.

Such assessment and reasoning of the Court on the penalty amount has been approved by the Supreme Court.

On the other hand, Supreme Court reversed the reasoning of the Court regarding the term which the franchisee shall be liable of regarding the franchise fees and stated that instead of the whole remaining term, the franchisee shall be liable only for a reasonable period in which the franchisor may conclude a similar agreement of the same quality with another prospective franchisee.


Hikmet Koyuncuoğlu, IDI Country Expert for franchising in Turkey

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