Debtor's Default

Once a debt relationship is established, the obligation is to fulfill the debt at the agreed time, place, and manner. Debtor default is the debtor's refusal to pay the debt and the resulting fault.

Conditions for Debtor Default:

1. The Possibility of Performing the Obligation

Default does not mean that performance of the debt has become impossible. If it becomes impossible, then performance of the debt is not possible under any circumstances. However, in a case of default, performance of the debt is possible but is not performed within the agreed time. If the debtor is at fault for the impossibility of performance, the debt in question is replaced by a liability for compensation, while in a case of default, the creditor is granted the right to terminate the contract.

In fixed-term contracts, the purpose of the agreement and the creditor's interest depend on the timely performance of the obligation. If the debt is not fulfilled on time, subsequent performance becomes meaningless. For example, if a wedding dress that was supposed to be made by the wedding date is made after the wedding date, the creditor no longer benefits from this performance. Even if it has become impossible for the debtor to fulfill the obligation as requested, it is up to the creditor whether or not to still demand performance.

2. The Debt Becoming Due

The time agreed upon for performance when a valid and legally effective debt relationship is established is the moment the debt becomes due. At this point, the creditor is not obliged to wait to demand payment, and the debtor is considered in default if they fail to perform.

A valid and legally effective debt relationship is a prerequisite for maturity. In the absence of such a relationship, or if it is contrary to public order and personal rights, due to incapacity, contrary to mandatory provisions of the law, not made in accordance with formal requirements, or is a form of collusion, it cannot be said to be a valid and legally effective debt relationship.

A new contract can extend the payment term or grant additional time. During this extended period, the creditor cannot demand payment. If the parties do not specify when the new term will begin, according to the law, it starts on the first day following the expiration of the previous term. Additionally, the deferment agreement must conform to the form required for the original contract. If this agreement is made after the debtor has defaulted, it must be explicitly stated in the contract that the creditor has waived their rights to default interest, etc. If this is not stated, it cannot be interpreted as a waiver of these claims.

3. The Creditor's Readiness to Accept Performance

If a creditor refuses performance without a valid reason, or fails to make the necessary preparations for performance, it constitutes creditor default, and the debt cannot be paid even if the debtor wishes to pay.

When the creditor is in default, meaning they refuse performance, it is possible for the debtor to withdraw from the contract and deposit the payment.

4. The Debtor Does Not Have the Right to Refuse to Perform the Obligation

According to Article 97 of the Turkish Code of Obligations, there may be a right to refuse performance:

• 97- In a contract imposing reciprocal obligations, the party demanding performance must have performed or offered to perform their own obligation, unless the terms and characteristics of the contract grant them the right to perform later.

There is also a provision regarding this in Article 98 of the Turkish Code of Obligations:

• 98- In a contract imposing reciprocal obligations, if one party becomes incapacitated and unable to perform its obligation, particularly due to bankruptcy or the failure of enforcement proceedings against it, thereby jeopardizing the rights of the other party, the latter party may refrain from performing its own obligation until the performance of the counter-obligation is secured. Furthermore, the party whose rights are jeopardized may withdraw from the contract if the requested security is not provided within a reasonable time.

Article 138 of the Turkish Code of Obligations also addresses the right of a debtor who faces excessive difficulty in performance to refuse payment:

• 138– If an extraordinary circumstance, unforeseen and unforeseeable by the parties at the time the contract was concluded, arises due to a reason not attributable to the debtor, and this situation alters the facts existing at the time the contract was concluded to such an extent that demanding performance from the debtor would be contrary to the principles of good faith, and the debtor has not yet performed their obligation or has performed it while reserving their rights arising from the excessive difficulty of performance, the debtor has the right to request the court to adapt the contract to the new conditions, or, if this is not possible, to terminate the contract. In contracts involving continuous performance, the debtor generally exercises the right of termination instead of the right of rescission. This provision also applies to foreign currency debts.

5. The Creditor Having Issued a Notice to the Debtor

This applies to situations where a notice is required. A notice serves as a warning to the debtor to pay their debt. If the creditor remains silent in the face of non-payment, default does not occur. The debt becomes due when the creditor demands payment. When the creditor remains silent, it is assumed that they have not suffered any loss due to the non-performance of the debt, or that they have given the debtor a deadline for payment. In cases where a notice is not required, the debtor, by failing to perform the debt on time, has already breached the contract and violated their responsibilities arising from the debt relationship.

For default to occur, the debtor does not necessarily have to be at fault. However, some consequences arising from default may require fault. For example, for liability for delay or for unforeseen circumstances, the debtor's own fault is sought.