Obligation to Return Contracts: Application within the Framework of Articles 77 et seq. of the Turkish Code of Obligations

1. Introduction

One of the most common problems encountered in practice is this:

• The parties are making a contract,

• The actions are beginning to be performed

• Years later, the court says "this contract is invalid.".

The client's first question is:

"What will happen to the money I paid, the goods I delivered, the work I did? Can I get them back?"

This question directly raises the issue of restitution obligations in invalid contracts . Articles 77 and subsequent articles of the Turkish Code of Obligations form the main framework of application in this regard: provisions on unjust enrichment .

In the case of invalid (void) contracts:

• Even if it is deemed that no valid debt relationship has arisen between the parties,

• If one party has performed an obligation for the other,

• The resulting situation appears as a classic case of "unjust enrichment."

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2. The Concept and Types of Invalid Contracts

2.1. What Does "Invalidity" Mean?

In contract law, for a contract to be formed;

• The parties' intentions must be in agreement

• The subject matter must be possible and definite/determinable

• It must not contain anything contrary to law, morality, or public order

• In some cases, if required, the formal requirements must be met

• The driver's license and representation requirements must be met

These conditions are required. The absence or defect of one or more of these conditions may render the contract invalid

The concept of invalidity;

• Absolute nullity (nullity),

• Suspended invalidity,

• Absence,

• Cancellability

It is evaluated together with subcategories such as these.

2.2. Absolute Nullity (Nullity)

Absolutely void contracts have never had any legal effect from the outset . For example:

• Contracts that are contrary to law or morality,

• Contracts that are impossible to deal with

• Contracts that are clearly contrary to the mandatory provisions of the law,

• A significant portion of contracts are invalidated if the mandatory form required by law is not met

It is void.

In case of nullity:

• The contract ex tunc (from the beginning).

• Nevertheless, the parties may have already fulfilled their obligations

• In this case, an obligation to return the item arises pursuant to Articles 77 et seq. of the Turkish Code of Obligations .

2.3. Suspended Invalidity and Unauthorized Representation

Unauthorized representationis a common occurrence, especially in commercial life. It happens when a person who lacks the authority to represent another enters into a contract on their behalf.

• If the person being represented does not subsequently ratify the contract,

• The contract becomes suspended and void, and ultimately no valid contractual relationship arises between the parties.

Nevertheless, if one party has performed an obligation to the other, this performance, which is not based on a valid contract, may be reclaimed under the provisions of unjust enrichment.

2.4. Contracts of Absence and Apparent Contracts

In some cases, one of the essential elements for the formation of a contract is missing; for example:

• A real estate sale that should be registered in the land registry can only be done with a simple written contract

• Failure to sign a contract that requires multiple signatures,

• The failure to conclude a contract that requires notarization

Absence may be a factor in such cases

If, in practical terms, the parties have performed their obligations relying on this void contract, then a restitution issue arises again within the framework of Articles 77 et seq. of the Turkish Code of Obligations

2.5. Cancellability and Exercise of the Right to Cancel

In cases of impaired will (such as error, deception, coercion):

• The contract remains valid until cancelled;

• If the right of cancellation is exercised, the contract is deemed void from the outset.

After the exercise of the right of cancellation, the parties must return the goods they have received to each other . Here, Articles 77 et seq. of the Turkish Code of Obligations come into play and the principle of unjust enrichment.

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3. General Framework of Unjust Enrichment Provisions (Turkish Code of Obligations, Articles 77 et seq.)

3.1. Conditions for Unjust Enrichment

The provisions of the Turkish Code of Obligations regarding unjust enrichment form the basis of the issue of restitution in invalid contracts. There are four classic conditions:

1. Enrichment: An increase in a person's assets or a decrease in their debts.

2. Impoverishment: A corresponding decrease in the other party's assets.

3. Causal link: A suitable causal relationship existing between enrichment and impoverishment.

4. Lack of justifiable cause: The absence of a valid legal reason to justify unjust enrichment.

In invalid contracts:

• The parties perform their obligations believing the contract to be valid

• later determined that the contract never came into being or was invalid from the outset ,

• There is no longer any legal reason to justify these actions

• Therefore, the party that gets richer having become rich unjustly .

3.2. Distinction Between Unjust Enrichment, Tort, and Unauthorized Agency

In practice, the legal nature of the case is important. Claims for return in invalid contracts:

• As a rule, of unjust enrichment .

• In some specific cases, it can compete with tort or unauthorized agency

However, the typical situation is this:

If there is no valid contract, no valid debt relationship has arisen between the parties, but the obligation has been fulfilled, the natural basis for a claim for restitution is Articles 77 et seq. of the Turkish Code of Obligations.

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4. The Arising of the Obligation to Return in Cases of Invalid Contracts

4.1. When Does the Refund Obligation Arise?

In the case of invalid contracts, the obligation to return goods is technically:

• The contract being invalid from the outset,

• The performance of the obligation by one or both of the parties,

• The determination/allegation of invalidity and the absence of any reason that would justify the act

It emerges together with.

the court's finding of "invalidity"generally has retroactive effect, the passive party can retroactively claim restitution under the provisions of unjust enrichment.

4.2. The Position of the Parties: Who Gets Richer, Who Gets Poorer?

In every case, these three questions should be asked:

1. Who got rich?

   • Who is the party receiving the money, taking delivery of the goods, or exercising the right?

2. Who became poorer?

   • Who is the party paying, delivering, or incurring the expenses?

3. Is enrichment still ongoing?

   • Has the enrichment remained the same, or has it been lost, has the value decreased?

For example:

• In an invalid lease agreement, if the tenant has paid rent for years, the landlord has become richer by the amount of rent received, while the tenant has become poorer.

• If a property sale is invalid and the buyer has paid the purchase price but the title transfer has not taken place, the seller has become richer and the buyer has become poorer.

4.3. Legal Nature of the Obligation to Return

Obligation to return goods in invalid contracts:

• It is not a "primary obligation" arising from the contract

• It is a secondary debt arising from the law, based on unjust enrichment.

Because;

• Statute of limitations,

• Interest start date,

• Items that can be requested:

Interest is determined directly according to Articles 77 et seq. of the Turkish Code of Obligations; provisions such as interest and penalty clauses in the contract are, as a rule, not applicable because they are dependent on an invalid contract.

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5. Scope and Limitations of the Refund Obligation

5.1. Principle of Same-For-Sight Refund

The basic principle in cases of unjust enrichment is restitution as far as possible.

• If money has been taken, the same amount will be refunded.

• If an item has been received, the same item must be returned.

• If usage rights have been granted, a refund may be required for the benefits derived over a certain period.

Even in cases of invalid contracts, the initial solution seems to be as follows:

You will return what you took.

However, a full refund may not always be possible.

5.2. Refund if Return of Item is Not Possible

If the goods have been destroyed, disposed of, lost their value, or it has become impossible to return them in their original condition:

• Those who become wealthy in good faithare liable to the extent of their wealth and for as long as that wealth continues to accumulate.

• who enrich themselves through malicious means , in most cases, broader liability ; they must return the proceeds they obtained and the expenses they were able to avoid.

For example:

• If a vehicle acquired through an invalid sales contract is subsequently sold, the refund will no longer be calculated based on the vehicle itself, but the proceeds and unjust enrichment received .

• In an invalid lease agreement, if the tenant has used the property but has since returned it, the landlord may be liable for the return of any rent unjustly received; a balancing act may also be considered between the benefit the tenant received from the use and the amount to be returned.

5.3. Use, Benefits and Costs

When determining the scope of the refund obligation, the following points are important:

• Fruits (revenues):

  • Those who enrich themselves through malicious means are considered liable to return the natural and civilized fruits and vegetables they have acquired.

  • The liability of someone who benefits from good faith enrichment is generally limited to the actual enrichment they have received.

• Fee for use:

  • If a party obtains the opportunity to use a good under an invalid contract and has used it, the other party may be liable to pay reasonable compensation for that use

  • For example, a party who has used a property for many years may be obligated to pay a usage fee to the property owner

• Expenses incurred:

  • The party that has benefited from the situation may claim reimbursement for necessary and useful expenses incurred for the preservation of the property or right

  • This reflects the principle that in cases of unjust enrichment, the other party must also be considered fairly .

5.4. Distinguishing Between Good Faith and Bad Faith

One of the most important factors affecting the restitution regime in invalid contracts is the distinction between good faith and bad faith.

• Well-meaning people getting rich:

  • If he doesn't know that it's invalid, and isn't expected to know,

  • He is liable to the extent that the enrichment remains in his possession; if it has left his possession, the obligation to return it may be limited in some cases.

• Enrichment through malice:

  • If he/she knows or could have known that it was invalid,

  • Regardless of whether the enrichment has been lost, there is a broader obligation to restitution;

  • The benefits obtained and the expenses avoided can also be subject to reimbursement.

For example:

• In contracts that are contrary to morality or law, the parties are often in bad faith . In practice, the return regime is interpreted more strictly in such contracts.

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6. Application Examples According to Different Cases of Invalidity

6.1. Contracts Invalid Due to Lack of Formal Form

The law prescribes a specific form as a condition for the validity of certain contracts . For example:

• The real estate sales contract must be officially registered in the land registry

• Some guarantee agreements are subject to specific formal requirements

• Certain property regime agreements related to family law must be drawn up in the form of a notarized document.

Failure to comply with this formal requirement renders the contract invalid; however, the parties:

• He paid the price,

• He has actually delivered the property,

• They may have taken out a loan.

In this situation:

• There is no debt relationship arising from an invalid contract

• The parties have the right to reclaim what they have given in accordance with Articles 77 et seq. of the Turkish Code of Obligations .

For example:

• If the buyer has paid the full price through a contract described as a "nominal sale" before the property transfer is officially registered, and the transfer of the property has not taken place, the buyer can reclaim the amount paid through an unjust enrichment lawsuit

6.2. Contracts Contrary to Morality or Law

Contracts that are contrary to law or morality are null and void from the outset. However, the restitution regime becomes more complex here because:

• In some cases, both parties equally at fault .

• In some cases, one of the parties is more deserving of protection.

acceptable.

For example:

• If one party has entered into a contract involving excessive interest or economic exploitation by taking advantage of the other's weaker position,

• If there is excessive exploitation (usury) or a serious imbalance that is contrary to public order,

The issue arises whether the weaker party should be held fully responsible for the payments made , and whether the stronger party should be held responsible for the return of any unjust enrichment. In practice, courts frequently apply the principles of equity and fairness in such cases

6.3. Contracts Concluded in Cases of Incapacity

In contracts entered into by persons lacking the capacity to make reasoned decisions, minors, or persons with limited legal capacity:

• The contract is considered invalid

• These individuals, or their legal representatives, may request the return of the item given.

However, in these cases, when applying the provisions on unjust enrichment, the protected party is usually the incapacitated or weaker party. For example:

• In transactions made by a person lacking the capacity to discern, whether the other party acted in good faith or not is irrelevant.

• Whether the received service is currently being preserved or not,

• The extent of property damage suffered by a person driving without a license

This is crucial in calculating refunds and limiting liability.

6.4. Unauthorized Representation and Suspended Invalidity

In cases of unauthorized representation, the contract is initially suspended and void. If the principal's consent is not obtained:

• No valid contractual relationship arises between the parties .

• However, if the obligation has already been fulfilled, the provisions regarding unjust enrichment apply.

For example:

• If an unauthorized person has signed a contract with a subcontractor on behalf of a company, the subcontractor has completed the work, but the company has not approved the contract;

• It is possible for a subcontractor to claim reimbursement/compensation for the work performed, based on the principles of unjust enrichment or acting without authorization

6.5. Fraudulent Transactions

In collusive transactions, the apparent contract is often invalid. The parties involved are:

• They claimed they didn't actually want it in order to deceive third parties,

• They may have made a seemingly formal contract, but secretly reached a different agreement between themselves.

When the apparent contract is found to be void:

• The party obligated to perform under this contract,

• Taking into account the actual situation, the scope of the collusion, and the unfair aim,

They may have the right to reclaim the property within the framework of unjust enrichment. Here, the fault of the parties and public order are extremely important factors.

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7. Statute of Limitations, Interest, and Litigation Strategy

7.1. Statute of Limitations

The Turkish Code of Obligations provides for a two-stage limitation period for claims arising from unjust enrichment:

1. Short-term statute of limitations:

   • The injured party must file their lawsuit relatively shortly after learning of the unjust enrichment and the identity of the enriched party.

2. Long-term statute of limitations:

   • Regardless of whether it was learned about, after a certain maximum period has passed since the date the unjust enrichment occurred, a lawsuit can no longer be filed.

The practical problem with invalid contracts is this:

• A party usually learns that the contract is invalid through a court decision

• However, the fact of unjust enrichment and the identity of the enriched party is, in most cases, considered to be known from the moment the transaction takes place.

Therefore, careful consideration of the statute of limitations and timely filing of lawsuits are vital.

7.2. Interest Commencement

Interest in a refund case:

• As a rule, it comes into effect from the date the debtor is put in default

• In the case of refunds for payments made under an invalid contract, the date of the lawsuit or the date of the notice is often considered the starting date for interest accrual.

• Strong arguments can be developed for demanding interest from an earlier date in cases involving those who have unjustly enriched themselves.

The interest provisions in the contract cannot, on their own, constitute grounds for ruling that the contract is invalid ; however, when determining the interest rate and commencement date in cases of unjust enrichment, the judge shall take into account the specific circumstances of the case and the situation of the parties.

7.3. Type of Case and Outcome Requested

In practice, one of the most critical points for a lawyer the legal basis and the outcome of the lawsuit:

• In different scenarios;

  • Determination of invalid contract + restitution (unjust enrichment),

  • Collection of unjust enrichment claims only,

  • Gradual (phased) demands
    can be used strategically.

• If both contractual claims and unjust enrichment are possible in the same event,

  • Firstly, contractual receivables,

  • In the event of a contrary conviction , asserting a claim for unjust enrichment protects the client's interests
    

the principle of adherence to the claim , the court may not automatically rely on unjust enrichment provisions; therefore, clearly establishing the legal basis is crucial.

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9. Frequently Asked Questions

Question 1: What is the obligation to return in invalid contracts? The obligation to return in invalid contracts refers to the return of performances rendered under a contract that was not legally binding from the outset or that subsequently became invalid, within the framework of unjust enrichment provisions (Turkish Code of Obligations, Articles 77 et seq.) . Since it is not a valid contract, the obligation to return is a secondary obligation arising from the law .

Question 2: Can I get a refund for the money I paid under an invalid contract?
Yes. If the contract is legally invalid, the money you paid based on that contract constitutes unjust enrichment without a legal basis. Under Articles 77 et seq. of the Turkish Code of Obligations, an unjust enrichment lawsuit . However, the statute of limitations and the nature of good/bad faith must be analyzed.

Question 3: In an invalid real estate sales contract, the title transfer was not completed; can I get a refund?
Sales contracts not formally registered in the land registry are generally invalid. However, if the title transfer has not been completed despite payment, a restitution obligation arises in the invalid contract, and the return of the paid amount unjust enrichment . In the specific case, the statute of limitations, good/bad faith, and the current condition of the property will be evaluated separately.

Question 4: Can restitution be demanded in contracts that are contrary to morality?
Contracts contrary to morality are null and void from the outset. However, the restitution regime is sensitive in these cases. Taking into account the fault of the parties, the interests worthy of protection, and public order, a restitution decision may be made in favor of only one party in some cases, and the restitution request may be rejected in others. The specific characteristics of the case are decisive.

Question 5: What is the statute of limitations for filing a claim for restitution in an invalid contract?
Claims arising from unjust enrichment are subject to the special statute of limitations in the Turkish Code of Obligations. A lawsuit must be filed within a certain period after determining who the enriched party and the injured party are; furthermore, the right to claim expires after a certain maximum period has elapsed from the date the enrichment occurred. How these periods will apply in the specific case requires a technical assessment.

Question 6: When does interest begin in a claim for restitution in an invalid contract?
Generally, interest on unjust enrichment claims is demanded from the date the debtor defaults. This date is often the date of the notice or the date of the lawsuit . Arguments may be made to demand interest from an earlier date for those who have benefited in bad faith; however, the judge's discretion and the specific circumstances of the case are important.

Question 7: In invalid contracts, is the obligation to return only applicable to money?
No. The obligation to return encompasses all types of assets, including money, goods, rights, usage rights, licenses, and services. If return in kind is possible, then return in kind is required; otherwise, a refund of the value is necessary. Those who have unjustly enriched themselves may also be obligated to return the fruits of their labor and any expenses they avoided.