Background
The parties entered into a subcontractor agreement for conventional formwork and steel reinforcement work on a commercial center construction project in Diyarbakır. The contract specified a start date for the work. The defendant, the contractor, failed to begin work by the agreed date, causing delays to the overall project.
To avoid defaulting to its own customers, the plaintiff’s partnership subsequently entered into a new contract with a third party to perform the same work at a higher cost. The original contractor’s rights under the first contract were later assigned to the plaintiff through a formal assignment document. The plaintiff subsequently claimed recovery of the cost difference between the two contracts through execution proceedings.
The defendant objected to the execution proceedings. The first instance court rejected the plaintiff’s claim, finding that both parties bore fault for the contract termination. The plaintiff appealed, arguing that the defendant was solely responsible for failing to commence work and therefore liable for all resulting damages.
The Court’s Holding
The appellate court affirmed the first instance decision, holding that the plaintiff was not entitled to recover damages because both parties were at fault in the termination of the contract. The court found that although the defendant failed to start work on time (constituting a breach), the plaintiff terminated the contract improperly by failing to provide the notice period required under Article 13 of the contract. Article 13 required that before termination, the principal contractor must send a notice (ihbarname) to the subcontractor and provide a reasonable time period to cure the breach. The plaintiff instead terminated the contract without any cure period.
The court reasoned that under Turkish contract law, a party seeking damages for contract termination must establish that the other party was at fault and the terminating party was not. Since both parties committed breaches—the defendant through non-performance and the plaintiff through improper termination—neither could recover damages from the other. The plaintiff’s failure to comply with the notice and cure procedures in the contract constituted a material breach that vitiated its right to claim damages for the defendant’s earlier delay.
Key Takeaways
- A party cannot recover damages for contract termination if it also committed a material breach in effecting that termination, even if the other party breached first.
- Subcontracting agreements must be performed in accordance with their express terms, including procedural requirements for notice and cure periods before termination.
- Turkish law distinguishes between positive damages (loss from non-performance) and negative damages (reliance losses from contract formation); recovery of either requires fault on the other party’s part alone.
- Failure to provide timely notice and opportunity to cure before terminating a work contract may constitute comparative fault that bars damages claims.
Why It Matters
This decision reinforces the principle that Turkish courts will not permit a party to profit from its own breach, even where the other party also breached. Principals and subcontractors in construction must strictly observe contractual termination procedures—notice requirements and cure periods are not mere formalities but essential conditions precedent to the right to terminate for cause. Failure to follow these procedures can forfeit the right to recover damages even where the other party’s non-performance caused real losses.
The decision also clarifies that work contracts under Turkish law require careful proof of damages and strict adherence to fault-based recovery principles. A party that bypasses contractual procedures—such as by terminating without notice or cure opportunity—risks losing its claim entirely, even if the other party’s breach was the initial cause of loss. Contractors and project owners must balance the need to mitigate losses against the legal requirement to give notice and opportunity to cure before termination.