What is a Release Agreement? What does it cover?

 Legal Limits of Release Agreements and Disputes Regarding "Ambiguity of Scope"

In debt law, a release is the act of a creditor partially or completely waiving their claim, thereby freeing the debtor from their obligation. According to Article 132 of the Turkish Code of Obligations (TBK), an agreement between the debtor and creditor stating that the debt has been extinguished constitutes a release agreement. However, in practice, this concept is often perceived as a "complete relinquishment," becoming a vague and risky "release document." The biggest source of dispute regarding release agreements is determining which claims, periods, and rights are covered by the release.

1. “General Release” and Legal Ambiguity Statements frequently encountered in practice, such as “the parties have no remaining rights or claims against each other,” are referred to as “general release” in legal terminology. However, Turkish judicial precedents are wary of release agreements formulated with general expressions. If the release agreement does not clearly specify which debt relationship, which period, or which claim item is being referred to, it does not provide broad legal protection. Especially in complex commercial contracts, this ambiguity can lead to one of the parties filing a lawsuit claiming, “I did not release this claim.” The Supreme Court, as a rule, expects the amount or at least the subject matter of the claim to be released to be clearly stated in the text.

2. Formal Requirements and Proof Issues of Release Agreements A release agreement is, as a rule, not subject to any specific form; however, in practice, it is essential that the document be in writing. Oral release is almost impossible from the perspective of evidentiary law. In a commercial relationship, even if the parties say "okay, you don't owe anything" without a written document, proving this statement in a future dispute is very difficult for the creditor if they do not have a document. Bank statements, written contracts, or transactions made through a notary are the strongest tools for proving a release. In commercial disputes involving foreign partners or foreign parties, beyond being in writing, the fact that the text is in a language understood by the parties directly affects its probative value.

3. “Ambiguity of Scope” and Future Claims One of the biggest legal disputes is whether a release covers rights that will arise in the future. In our legal system, “pre-emptive release of a future claim” is, as a rule, invalid. That is, a party cannot, by signing a release today, preemptively release themselves from a potential loss or a right to compensation that has not yet arisen from the contract. For example, in a construction project, a contractor saying “I hereby release you from any future defects” would be considered invalid in court. A release can only be made for claims that have arisen, become due, or at least whose existence is known.

4. “Scope” Risk for Foreign Investors: A “Release Agreement” signed by a foreign investor to terminate a relationship with a local supplier in Turkey poses a significant risk if it is prepared in a language they do not understand, such as “I release all my rights.” The document must clearly state the amount being released, the period it covers, and especially the “currency.” If the foreign investor signs without reading the text or fully understanding its content, they will later have to try to have the release agreement annulled on grounds of “error” (Turkish Code of Obligations, Article 30) or “fraud” (Turkish Code of Obligations, Article 36), a process that is quite costly in terms of commercial reputation and time loss.

5. The Principle of "Interpretation" in Dispute Resolution: Courts interpret the wording in release agreements based on "the common will of the parties at the time the contract was concluded." If the text is too general, the court may make a restrictive interpretation, accepting that the released debt is only the amount the parties were discussing at that time. This could lead to the release being deemed partially invalid if one of the parties claims, "My entire claim was not limited to this amount." Therefore, a professional release agreement must detail the date range, the source of the debt (invoice number, contract clause, etc.), and the amount.

In short, a release agreement is a document of "reconciliation" for a debt relationship. However, if the boundaries of this reconciliation are not clearly defined, it becomes not a "waiver" but a ticket to a new "legal process" for the parties. A professional release agreement should be a text with clear boundaries, a defined scope, and that reflects the intentions of the parties in the most transparent way.

 Criteria for Discharge in Labor Law and the Grievances of Foreign Employees

In labor law, waivers are subject to stricter rules than those in general contract law, shaped around the principle of "employee protection." For foreign employees in Türkiye, signing a waiver is generally presented as a "mandatory step" in the termination procedure. However, in Turkish labor law, waivers signed under duress or lacking the legal requirements are likely to be considered "invalid." So, what are the requirements for a valid waiver, and how are foreign employees disadvantaged in this process?

1. “Golden Rules” for a Valid Waiver Agreement: The Turkish Labor Law and court precedents require the following conditions to make it difficult for a worker to waive their claims:

• Time Requirement: The release agreement must be made at least one month after the termination of the employment contract . A release agreement signed on the day of termination is considered invalid by the Supreme Court because the employee was "under duress".

• Clear and Specific Content: The release agreement must clearly state which entitlements (severance pay, notice pay, annual leave pay, overtime pay, etc.) have been paid and the amount. General statements such as "I have received all my rights" are invalid.

• Bank Payment: Payments must be made directly to a bank account. Having an employee sign a release form with cash in hand leaves the employer defenseless against claims of non-payment or incomplete payment.

2. Language Barrier and Victimization of Foreign Workers: The biggest victimization of foreign workers arising from Turkish labor law is signing a document that is not in their native language or that uses complex legal terminology in Turkish. The employer assumes the employee understands the text or obtains the signature without a sworn translator, thus "completing" the process. However, when the employee realizes that the document they signed actually means "waiving their right to severance pay," they may lose the protection provided by labor law (if the document is properly issued). The biggest risk for foreign workers is not being able to distinguish whether the document they signed is a "release" or a "resignation letter."

3. "Signing Under Coercion" and Impairment of Will: Employers sometimes try to persuade foreign employees with statements like, "If you don't sign this release now, I will revoke your work permit or damage your references." According to Article 36 of the Turkish Code of Obligations, which concerns "coercion" (intimidation), a release obtained in this manner is invalid. Proving this is difficult for foreign employees because they usually lack witnesses. Therefore, obtaining copies of the documents to be signed during the termination process and emails sent to the employer (even translated ones) during the process are the strongest evidence to prove the termination.

4. How to Reclaim Rights If a Release Agreement is Invalid? A release agreement is considered "invalid" if it was not signed within the stipulated time, if payment was not made via bank transfer, or if its content is unclear. In this case, the foreign employee a "labor claim" . An invalid release agreement does not completely erase the payment made by the employer; it only removes the release agreement as a "legal shield." If the employer has already made a payment, this only serves as a "receipt," and the unpaid portions can be sued for with interest.

5. Recommendations for Foreign Workers Here are some things foreign workers should be aware of when working in Turkey:

• Not Sign Without Examining the Document: Do not sign any document titled "Release Agreement" or containing the phrase "I hereby release" without reading and understanding it.

• Keep a record: Compare the amounts paid to your payslips. If the amount paid is less than you are entitled to, adding a note such as "I received payment of .... but reserve my rights regarding the underpayment" will limit the effect of the release.

• Legal Assistance: The termination process is directly linked to the status of the work permit. Foreign nationals facing the risk of work permit cancellation should definitely review the release agreement with a lawyer before leaving their job.

Labor law is not just a contractual relationship for foreign workers, but also a process that affects their legal status in Türkiye. An improperly executed release agreement is risky enough to cause a foreign worker to lose the fruits of years of labor.

Notarized Release Certificates and Translation Risks for Foreign Investors

For foreign investors conducting business in Turkey , a "Notarized Release" document , used to terminate a contract or partnership , can become a "capital loss trap" if improperly structured, rather than a source of legal security. The notary is the most powerful public authority in the Turkish legal system, overseeing the content of the document and legally recording the parties' intentions. However, for a foreign investor, the notary process carries the risk of "signatures without understanding" due to language barriers.

1. The Legal Force of a Notarized Release: A release document drawn up before a notary public constitutes "conclusive evidence" in court. This means the signatory cannot later deny the document's existence by claiming "I didn't sign this" or "I wasn't aware of its contents." For a foreign investor, signing before a notary public means waiving all claims against the other party (e.g., a local business partner or supplier). If the notarized document does not reflect the investor's true commercial intentions, this can lead to significant financial consequences.

2. Sworn Translator and Transparency of Intent: According to the Turkish Notarial Law, notaries a sworn translator . The sworn translator must read the text word for word to the foreign party and explain its legal implications. However, in practice, the translation process is sometimes superficial in order to expedite transactions. When a foreign investor signs the document trusting the translator without fully understanding the text, they are essentially signing a "commercial delivery document." It is not enough for the translator to simply translate the text; it is necessary to confirm that the investor understands terms such as "waiver," "release," and "relinquishment of rights" in the release document.

3. “Draft” vs. “Certified” Release Agreement For foreign investors, the most critical distinction is how the release agreement text is drafted:

• Certified Document: Only the signature is verified as yours; the content of the document is not reviewed by the notary. This is risky for foreigners.

• Disclosure by Draft: The text is prepared by the notary themselves. The notary is responsible for verifying whether the content is illegal or contains unfair terms. Investors should always "dismissal by draft" agreements in large-scale commercial liquidations or partnership separations in Turkey. This means that the notary, using their legal expertise, protects the investor against "clearly unfair and illegal terms."

4. Translation Errors and "Impairment of Will": If there is a translation error in a release document made at a notary public, the investor's situation becomes much more difficult. This is because the notary document has the status of an official document. When the investor claims that the translation is incorrect, they are obligated to "prove" it. This situation necessitates that the investor file a lawsuit for annulment based on the notary documents. Numerical translation errors, especially those related to receivables in foreign currency or share transfer prices, can lead to the investor losing millions of liras when made at a notary public.

5. Advanced Recommendations for Foreign Investors

• Obtain a Bilingual Document: When conducting transactions at a notary public, request "bilingual" documents where the release document text is presented side-by-side in both Turkish and your native language (or English). This will refute any claim that the text is not understood from the outset.

• Seek Legal Advice from the Notary: A notary is an impartial legal professional. Don't hesitate to ask the notary directly what the clauses in the release agreement mean.

• Pre-Signature Law Firm Review: Before going to the notary, be sure to have the draft text reviewed by an independent law firm. The process at the notary is merely an "approval" stage; a strategic analysis of the content should be done at the law firm.

In summary, a notarized release document is the "final document" for foreign investors entering the Turkish business community. Its content, linguistic transparency, and legal oversight make it the only way for an investor to safely leave Türkiye or terminate their operations.

Obtaining a Release Through "Error, Fraud, or Coercion": Annulment Cases

The Turkish Code of Obligations (TBK) places great importance on freedom of will. For a contract, and therefore a release from liability, to be valid, the parties' intentions must be formed freely, without any external influence or deception. However, in practice, releases obtained through methods such as commercial pressure or withholding information can be annulled under Turkish law within the framework of "violation of will" provisions. How can foreign investors and individuals legally overturn such irregular release processes they encounter in Türkiye?

1. What is Defect in Will? Defect in will occurs when one party is mistaken (erred), deceived (fraud), or coerced (under duress) while entering into a contract.

• Error (Mistake): A fundamental mistake regarding the nature or amount of the debt being released. For example, the other party knowingly misrepresenting the amount of the debt, resulting in the investor releasing a smaller amount believing it to be "full payment."

• Fraud (Deception): When a debtor actively lies or conceals the truth to mislead a creditor. This is especially true when a release agreement is drawn up as if no problems exist, despite knowing about hidden defects.

• Coercion: When a debtor forces a creditor through threats such as, "If you don't release me from liability, I will terminate the contract and remove you from the market."

2. How to File an Annulment Lawsuit? A release agreement signed as a result of vitiated consent is not "automatically invalid"; the creditor must exercise their right to annul the agreement within one year from the moment they become aware of this situation

• Cancellation Notice: It is sufficient to send a notice to the debtor stating, "I am canceling the contract due to error/fraud/coercion."

• Cancellation Lawsuit: If the other party does not accept the cancellation, the cancellation of the release agreement and the payment of the debt in question should be requested through the court. Here, the burden of proof rests with the party alleging vitiation of consent.

3. Burden of Proof and the Importance of “Confidential Information” The biggest challenge in cancellation lawsuits is proving the case. How will a foreign investor prove that the other party defrauded them (for example, that financial statements were deliberately altered)?

• Financial Audit Reports: If the discharge is based on financial data, independent audit reports can reveal fraudulent activity.

• Email Correspondence: The correspondence between the parties constitutes "digital evidence" that proves how the debtor concealed the truth or pressured the creditor before the release of the debt.

• Witness: If the signature was obtained under duress, the testimony of third parties present in the room during the interview is a crucial element in winning the case.

4. The "Intimidation" Criterion for Foreign Investors: For foreign investors, "intimidation" can sometimes manifest as "bureaucratic threats." Statements such as "If you don't sign, I will revoke your work permit" or "I will initiate legal proceedings against you and force you to leave the country" are considered "unlawful intimidation" in Turkish courts. A release signed under such pressure can be revoked to protect the legal rights of the foreign investor.

5. Statute of Limitations in Annulment Cases: The right to annul a contract due to vitiated consent (error, fraud, coercion) a one-year forfeiture period. This period is:

• In cases of error and fraud, the penalty begins from the date it is discovered.

• In cases of intimidation, the waiver period begins from the date the effects of the intimidation cease. After this one-year period, the waiver becomes legally valid and cannot be revoked (it is considered ratified). It is vital for foreign investors to contact law firms in Türkiye as soon as they realize they have been wronged, so as not to lose this one-year period.

6. Strategy: Examine the "Prior Agreement" Before Cancellation Before filing a cancellation lawsuit, the "underlying agreement" linked to the release agreement sought to be cancelled should be examined. Sometimes, even if the release agreement is cancelled, the "dispute resolution methods" or "arbitration panel" clauses in the underlying agreement may tie the investor's hands. A cancellation lawsuit is a serious legal process requiring a high degree of proof, and should be pursued as a last resort by the investor.

A waiver is a settlement document; however, if this settlement is based on "deception" or "coercion," the Turkish judiciary grants foreign victims the right to protect their will.

Partial Release and Potential Future Hidden Damages

In debt law, releases are generally made with the intention of "clearing" the debt; however, if this clearing is not done correctly, it can leave behind hidden legal obligations that will cause you trouble in the future. Especially in large-scale commercial projects, software development processes, or long-term construction works, parties partial releases ." So, what risks does a partial release carry, and does this document constitute an obstacle when "hidden damages" arise?

1. What is Partial Release? Partial release is a situation where the parties waive only a portion of the total debt or release only for debts related to a specific period. For example, in a construction project, a release might be signed for all progress payments related to the rough construction phase, but the release for finishing work and the post-delivery period might be reserved. A major mistake for foreign investors is signing comprehensive documents thinking they have "closed everything," when in reality they are only releasing a portion of the debt.

2. Hidden Damages and Scope of Release Release agreements cover damages that the parties were aware of and could foresee up . However, "hidden damages" that were not yet known or had not yet emerged at the time of signing the release agreement (for example, structural defects in the building's foundation, software background architecture crashing after one year) are not considered waived by a general release agreement. According to the Turkish Code of Obligations, a release for a situation where the existence of the right was unknown is considered legally invalid or at least limited by interpretation.

3. Distinction Between “Delivery” and “Release” for Foreign Investors: In commercial relationships involving foreigners, the “delivery of the goods” and the “signing of the release” are usually done on the same day. This is a very risky practice. Hidden defects not visible at the time of delivery are not covered by the release. If the release agreement , “This release covers deficiencies known at the time of delivery; hidden defects and legal liabilities arising after delivery are reserved,” the other party will defend themselves by saying, “You have already released us, what more do you want?”

4. The "Reserved Rights" Clause in the Release Agreement: The most effective way to protect against hidden damages is to add a "reserved rights" clause to the release agreement. Foreign investors must specify the following when signing the release document:

• "This release relates to existing receivables arising from clause X of the contract."

• "The parties reserve the right to claim compensation for any hidden defects not yet discovered and for any additional damages that may arise during the contract period." This clause is the strongest legal safeguard protecting a foreign investor in a dispute in Türkiye from the defense of "you signed the document, you can't claim anything anymore.".

5. Interpretation and Equity in Litigation: When a dispute is brought to court, the judge interprets the release agreement according to the rules of "objective good faith." If the resulting damage is a natural consequence of the contract, or if the parties could have foreseen that this damage would occur at the time of the release, the release is considered valid. However, if a foreign investor is not an expert in a technical/specialized field (e.g., an engineering project), and the hidden damage can be determined through expert examination, the court tends to exclude this damage from the release.

In summary, a release means "to settle the debt," but it does not mean "to end legal responsibility forever." Partial releases, when properly structured, increase commercial trust between the parties. However, release agreements that do not clearly define the boundaries regarding hidden damages can later turn into a major "battle for proof" for both local and foreign parties. Foreign investors should not neglect to include clauses in every document they sign before leaving Turkey to mitigate potential future "hidden damages."

Release from Joint Liability: How Does Releasing One Debtor Affect the Others?

In commercial life and large-scale contracts, we frequently encounter "joint and several liability," a situation where a debt is assumed by more than one person, and the creditor can demand the full amount from any of the debtors. However, within this complex structure, releasing only one debtor can severely disrupt the creditor's legal relationship with the others. Particularly in joint ventures or consortia involving foreign investors, ignorance of this technical detail can lead to the complete loss of the debtor's right to claim payment.

1. The Basic Logic in Joint and Several Liability: In joint and several liability, the creditor can demand the entire debt from any debtor they choose. When one debtor makes a payment, the other debtors are also released from their debt. However, the problem arises at this point: What happens to the other debtors if the creditor releases one debtor from their debt by "absolving" them? Article 165 of the Turkish Code of Obligations (TBK) specifically regulates this situation.

2. Release and Release of One Joint and Several Debtor : When a creditor releases one joint and several debtor from debt, does this also apply to the other debtors?

• What does the law say? According to Article 165 of the Turkish Code of Obligations, if a creditor releases one of the jointly and severally liable debtors, this releases the others as well; however, the "right of recourse" (the right to claim back the share paid) of the released debtor against the others continues.

• Important Exception: If the creditor, while drafting the release agreement, explicitly states, "I release only debtor A, but reserve all my rights against the other debtors (B and C)," the other debtors are not released from the debt. The creditor can continue to demand the remaining debt from the other debtors after deducting the released debtor's share.

3. "Recourse" Risk for Foreign Investors: Let's assume a foreign investor is jointly and severally liable in a project in Turkey (e.g., as a subcontractor or joint venture). If the creditor silently releases another partner (debtor) and does not explicitly state that they "reserve their rights," the foreign investor may be negatively affected. This is because even if the released debtor is freed from the debt, they may have avoided paying their share in the internal relationship (agreement between the debtors). In this case, the remaining debt burden falls entirely on the other debtors (the foreign investor).

4. "Reservation" Clause to be Included in the Release Agreement: In cases of joint and several liability, the creditor releasing the debt must include the following clause in the release agreement to ensure that they do not lose their rights against the other debtors:

“With this release agreement, only person [X] is released from the debt, and the creditor’s legal relationship with the other joint debtors [Y] and [Z] and all legal claims against them are reserved.” Without this clause, the creditor may become unable to claim the debt from the other debtors. Foreign investors should always check for this “reservation of rights” clause in partnership agreements or draft release agreements.

5. Sharing in Internal Relationships If one of the jointly and severally liable debtors has paid more than their share of the debt, they can claim it from the others. However, if one of the debtors has been "released" from liability by the creditor, who will pay the "share" of that debtor's liability to the others? This is where the "internal relationship agreement" between the debtors comes into play. While the foreign investor accepts joint and several liability in the partnership agreement, they should regulate, with a detailed clause, how the "distribution of debt" will be updated in the event of a release from liability for one of the debtors.

6. In summary; in joint and several liability, release is not merely an agreement between the parties, but a transaction affecting the entire chain of liability.

• If you are a creditor: When releasing the debtor from liability, remember to add a note saying "the liability of others continues."

• If you are a debtor (as a foreign investor): If the release of one of your partners increases your debt burden, balance this situation contractually.

Joint and several liability begins with a spirit of solidarity, but it can escalate into significant legal chaos if settlement processes are not managed correctly. In your investments in Türkiye, managing this "joint and several liability" among debtors is a crucial part of your commercial risk management.