In Turkey, due to the frequent changes of construction regulations and plans, the performance of an agreement may become unfulfilleable or impossible, because of the failure to obtain required licenses after the conclusion of the contract or cancellation of the construction works by the local authorities. In such cases, the answers to the questions “What will be the liability of the contractor?” or “Who will indemnify for the losses of client?” or “How will this incident affect the agreement between the undersigning parties?” shall vary upon two different schemes. The schemes determining the answers to those vital questions are, first, whether the unfulfilleability was evident before the conclusion of the agreement and second, whether the impossibility is caused by the legal negligence of the parties.

According to the abovementioned classification;

The party who is aware of the fact that the subject of a construction agreement is impossible during the conclusion phase but does not warn the opposing party is liable for “culpa in contrahendo”; in other words, the “fault occurred during contractual negotiations.” The jurisprudence generally accepts that, in case a party is aware of the fact that the subject of the agreement is impossible to attain, therefore the agreement is invalid but fails to warn the opposing party, then he should be liable to indemnify for the opposing party’s losses and damages . The “Culpa in contrahendo” liability can be faced in various aspects. Some of them are provided by the Law (Turkish Obligations Code, Art. 31/para.2, Art. 26, Art. 39), and some of them take place in the practice through case law, in parallel with the doctrinal opinions .

As early as the contractual negatiations phase, the subject of the construction agreement may be against the construction regulations or plans. In this case, the acknowledgement of a party shall appear to be “culpa in contrahendo” liability and the agreement shall be considered to be invalid. In case both parties are unaware of the impossibility, then the agreement will be null and void, due to the “objective impossibility from the very beginning,” pursuant to Art. 20 of Obligations Code . Therefore, the agreement shall not arise any obligations and/or rights for the client. Another point to be stressed on is, for an impossibility present during the agreement’s conclusion to affect the contract’s validity, it should be an “objective impossibility” . That is, the subject of the agreement should not be impossible only for the undersigning parties, but for everybody. If the construction agreement is null and void due to the objective impossibility from the very beginning, then it is accepted both by the doctrine and the case law that, the parties cannot claim any reparations from each other and each party shall return whatever they have taken from each other, in terms and conditions of the unjust enrichment. In case of a “subjective impossibility” specifict to the parties, this shall not affect the validity of the construction agreement qualifying as an indebiting agreement .

If the legal impossibility appears after the valid conclusion of the agreement, then, both the agreement itself and the parties are affected from the impossiblity, depending on whether the impossibility happened to be the case due to any party’s fault or not.

Accordingly, if the inability to arrange the zoning status or construction license is caused by the contractor’s fault, (for example, if the contractor has applied in such a manner to contradict the Article 22 of the Law on Construction #3194, providing the conditions for obtaining a license or the contractor does not perform its duties according to the project determined by the construction agreement and caused failure to obtain upper building foundation license or cancellation of the already started construction) then, the performance impossibility is out of question. The contractor has to correct the contradictory sections to the project and the construction regulations and duly perform its obligations. Otherwise, it shall be liable pursuant to Art. 96 of the Obligations Code . Besides, in terms of a delay caused by the contradiction to the project of the construction agreement or construction regulations, the client shall be entitled to have the contractor in default and recede from the agreement, pursuant to Art. 106-108 of the Obligations Code .

It should be noted that, in Turkish Obligations Code, the performance impossibility caused by the debtor is not explicitly provided for. Therefore, the liability to indemnify the creditor’s losses and damages shall be subject to the provisions of Art. 96 of Obligations Code. At such cases in which the debtor is not responsible from the impossibility, Art. 117 of Obligations Code shall apply and the debt shall come to an end . But, we notice that, at Article 371 of Obligations Code, on the service contracts, the case of faultless impossibility is especially provided. According to the Article, in case the contractor dies or fails to complete the works without any faults attributable to himself, the service contract is terminated automatically if it is concluded considering the contractor’s personality. The phrase of “fails to complete the works without any faults attributable to himself” means the faultless impossibility. However, the second paragraph of the same article provides that “in this case, if the built section is usable, then the client is obliged to accept and pay for it.” This expression is an exception to the general impossibility clauses stated by second paragraph of Article 117 of Obligations Code, which provides the parties returning their acquisitions from each other, upon provisions of unjust enrichment . This exception is to be considered especially important for the construction agreements. Because, since the housing permit cannot be obtained for an unfinished building, the abovestated article shall always remain “inapplicable.” However, such an implication is against the purpose of second paragraph of Article 371 of Obligations Code. Therefore, here the “usability” should be extensively interpreted and understood as “to be value of the client.” In case of a faultless impossibility, if the completed section is somehow to the value of the client, then the proportional contract amount should be paid to the contractor.

If the conractor fails to obtain the license for the construction works or the already started works is cancelled by the administration because of to the violation of the project, due to any fault attributable to himself, then, the client’s opportunity to have the contractor in default or choose to denounce the agreement, out of his optional rights, depend on the maturity of the debt forming the subject of the construction agreement . In other words, since a deferred debt cannot be subject to any violation, except for the provisions stated by Article 82 of Obligations Code (providing the denouncement right for cases in which the opposite party is insolvent, bankrupt or the execution proceedings happen to be unsatisfied), the due date should be waited for, upon the general provisions of Obligations Law.

If the works are cancelled permanently for any construction due to a change at ground plans, which has initially started according to the upperground license obtained throught the present construction regulations, in other ternms, the act becomes infulfilleable after a legal impossibility which occurred after the conclusion of the agreement, then, two different consequences should be considered thoroughly: first, the effects of present impossibility on the parties and second, the relations between the administration which has changed the ground plans.

Article 117 of the Obligations Code provides that, in case of a legal impossibility which occurs after the conclusion of the agreement, without any fault or error attributable to any of the parties, the debt of the party whose act happens to be impossible shall come to an end . Moreover, the second paragraph of the mentioned article states that, if debt of a party comes to an end due to the impossibility of fulfillment, the opposite party shall also be released, in other words, the party who is released from its obligations due to the impossibility of the act shall also lose his claims from the opposite party. If the party, whose debt’s fulfillment is impossible, has collected his credit in advance, then he is obliged to return the acquired amount upon the provisions of unjust enrichment . According to the case law provided by the Turkish Supreme Court, upon the provisions of unjust enrichment, for the actions filed by the contractor, the contractor is entitled to claim the surplus value created at the property of the client, but he cannot claim for deprived profit. .

As for the relations between the administration which changes the ground plan and the parties, we can declare that, the status of the rights acquired by the parties before the change and the validity of the already taken construction licenses are important issues to be considered of. First, we have to say that, the administrative deeds lead to propelled effects and results. An exception of this rule is the “recovery” deed and in this case, the posterior administrative deed causes retrospective effects and results, whereas in general, when a change is made by an administrative deed, the “change” is valid after the execution date. Since the ground plans are regulatory deeds, they do not grant any rights as a general rule. In other words, any vested right cannot be claimed based on a previous ground plan. The right arising deeds (such as giving a construction license) are individual administrative deeds. If the change of the ground plan affects the individual administrative deeds, then only in this case the principle of respecting the vested rights shall apply. In practice, the Turkish State Council had conflicting decrees about this issue for such a long time. At a decree given by the State Council in 1983, it had decided that “… since the building which was built according to the previous plan and whose two storeys constitute a vested right happens to be relocated at a public zone due to the new ground plan, the cancellation of the license for the third storey is not inaccurate …” , but at a decision given in 1984, it had decided that “… since a change is made at the gronud plan and the number of storeys have been decreased, there is not any inaccuracy for the termination of the works for the building which was built according to the license given before the plan’s change, whose 4th storey’s column was built …”.

Recently, the State Council’s judgments on this issue have been regularized and it is assumed that, the actually built sections and floors that are built according to the present construction and occupancy licenses shall be protected, upon the principle of respecting the acquired rights. While determining the scope of the acquired rights, the State Council does not only consider the fact whether the construction license is obtained according to the valid construction regulations or not, but the amount of the actually built parts of the building, which is constructed according to the construction license .

Besides, the State Council emphasizes that, the financial and moral losses suffered by the parties due to a change of the ground plan has to indemnified by the related municipality, because of the principle of administration’s obligations, but in case a construction license given by the administration and construction Works which have started accordignly are nonexistent, then the Council dismisses the claim for indemnification arisen by the value loss due to a change of the zoning status .

As it can be observed from the State Council judgments; the construction works may not be performed as it was provided by the construction agreement, due to the changes zoning status. However, who shall be liable to indemnify for the losses arising due to this change?

In this case, it is evident that, the conditions influencing both the conractor’s and the client’s willpowers to conclude the agreement change significantly. Because, with a probable ground plan change, the final building forming the subject of the agreement between the parties may not be accomplished, or can only be built being subject to significant limitations and restrictions. At such an event, although no action impossibility in terms of Article 117 of Obligations Code is present, it may be evident that, if the changed conditions were present before the conclusion of the contract, then they wouldn’t have executed the affected construction agreement. Then, they cannot be forced to be bound by the agreement. On the other hand, considering the Pacta Sund Servanda (treaties are binding) Principle which is one of the basic principles of the Obligations Law, then there may be a conflict between loyality to the agreement and the fairness of the agreement. This conflict is legally overcame by the “Clausula Rebus Sic Stantibus - Unexpected Conditions Clause and Adjustment of the Agreement to the Changed Conditions” principle, which is arisen from the Integrity Rule . In this case, any of the parties can claim adjustment of the agreement to the changed conditions. The principle of adjusting the agreement to the changed conditions is accepted by the legal doctrune and the Turkish Supreme Court acts positively to the adjustment claims, which may be considered as a must because of the contemporary legal practice .

As a result of the adjustment, the Turkish Supreme Court alters the sharing ratios of the parties at the residuary or incomplete building .