Fluctuations in foreign exchange rates, especially in recent years, can make contracts made in foreign currency quite disadvantageous for the parties. In such cases, the “Hardship of Excessive Performance” provisions in Article 138 of the Turkish Code of Obligations (TBK) come into play, allowing the contract to be adapted.
In this blog post, we will examine in detail the basic information and legal framework regarding the adaptation of foreign currency contracts.
What is Excessive Performance Difficulty?
According to Article 138 of the Turkish Code of Obligations, if an extraordinary situation arises that was not foreseen or expected to be foreseen by the parties at the time the contract was made and changes the existing facts at the time of the contract to the detriment of the debtor to the extent that it would be against the rules of honesty to demand performance from him, and the debtor has not yet fulfilled his debt or the performance is excessive. If the debtor has performed by reserving his rights arising from the difficulty, the debtor has the right to ask the judge to adapt the contract to new conditions, and if this is not possible, to withdraw from the contract.
When Does Excessive Performance Difficulty Occur in Contracts Concluded in Foreign Currency?
Fluctuations in exchange rates are considered to be a situation that may create undue hardship. However, not every exchange rate change leads to this result. When evaluating the existence of extreme hardship, the judge will take into account the following issues:
The amount and speed of change in the exchange rate: How large and sudden the change in the exchange rate is plays an important role in the occurrence of overperformance. While small and gradual changes do not usually lead to this result, large and sudden changes can make the debtor’s obligation to perform extremely difficult.
Duration of the contract: The duration of the contract is also taken into account in the evaluation of extreme hardship. In long-term contracts, the impact of exchange rate changes may become more pronounced.
Özlem Zennup Özkök
Arb. Av. Özlem Zennup Özkök, 2010 yılında Bilkent Üniversitesi Hukuk Fakültesi’nden mezun olmuştur. Bursa Barosu’na kayıtlı avukat ve arabulucudur. Türkiye’nin önde gelen hukuk bürolarında edindiği şirketler hukuku ve birleşme-devralma deneyiminin ardından Bursa’da Özkök Hukuk Bürosu’nu kurmuştur. Aile hukuku, şirketler hukuku ve gayrimenkul uyuşmazlıkları alanlarında çalışmaktadır.