Commercial Agency Contracts in Turkey

In article 102 of Turkish Commercial Code (Türk Ticaret Kanunu, referred to as “TTK” or “TCC”) the term "agent" is defined. Accordingly, an agent is a person acquiring the profession to act as a permanent intermediary in contracts involving a company/merchant (hereinafter called as the “principal”) within a territory or to conclude the contracts on the principal's behalf without holding an official title such as a commercial agent, commercial representative, sales officer, or employee. There are two types of agents: Intermediary agents and agents authorized to con-clude contracts. Both legal and natural persons may act as an agent. In Türkiye, agents are usually the legal persons such as companies.

Agency contract is stipulated under the section between the articles 102 and 123 of TCC. In cases where there is no provision in this section, below listed provisions are applicable:

• the provisions of the brokerage contract set by the articles 520 – 525 of Turkish Code of Obligations (Türk Borçlar Kanunu, referred to as “TBK” or “TCO”);
• the provisions of the commission contract set by the articles 532 – 546 of TCO (limited to the agencies authorized to conclude contracts);
• the provisions of the mandate contract in cases where there is no provision in these (TBK. Articles 502 – 514) are applicable.

Between the articles 102 and 123 of TCC regarding the agency contracts, the definition of the agency (TCC. Art. 102), the application scope (TCC. Art. 103), monopoly (TCC Art. 104), powers of the agent (TCC. Art. 105 – 108), obligations of the agent (TCC. Art. 109 – 112), rights of the agent (TCC. Art. 113 – 119), obligations of the merchant (TCC. Art. 120), termination of agency agreement (TCC. Art. 121 – 123) are regulated.

There are also special provisions regarding subjects such as transportation, maritime trade, insurance, and tourism. Some of important special legislations regarding agency agreements are as follows:

• Communiqué on Insurance Agencies published on Official Gazette dated 22.04.2014 and numbered 28980.
• Communiqué on Ship Agencies published on Official Gazette dated 05.03.2012 and numbered 28224.
• Communiqué on Travel Agencies published on Official Gazette dated 05.10.2007 and numbered 26664.
• Law on Land Carriage, Law No. 4925, dated 10/07/2003, published on Official Gazette dated 19.07.2003 and numbered 25173.
• Communique on Land Carriage published on Official Gazette dated 08.01.2018 and numbered 30295.

To conclude an agency agreement in matters within the scope of the special regulations on agency, it is generally required to obtain a certificate of authorization from competent gov-ernmental bodies. Furthermore, requirements such as residing in Türkiye, having the agency's headquarters in Türkiye, and being registered in the Trade Registry Offices in Türkiye are sought in order to obtain a certificate of authorization for acting as agency.

Independency

Agent is an independent assistant to the principal and is not under the control, supervision, or order of the principal. Therefore, agent operates its own business, not the principal’s.

Agent could be instructed by the principal in a limited way, but this does not compromise agent’s independence. To ascertain the independency of the agent, the form of remuneration can be examined. If agent gets paid on a consistent basis, it disproves the idea of dependence and rules out agency in the relationship between the parties. If the payment is proportional rather than on a regular basis, agent can be regarded as independent.

Fee

The fact that the fee is not mentioned in the definition of agency regulated in Art. 102/1 of TCC, may suggest that paying a fee is not a fundamental element for agency contracts. However, there are further provisions mentioning fees, agency is a profession, and agent’s business is often a commercial enterprise show that paying a fee is a required element in the agency contracts.

Intermediary activity

In the contracts related to the business of the principal, the agent either acts as an intermediary or concludes the contracts directly on behalf of the principal. If the activity for the principal is not intermediary but another activity, it is not deemed as an agency contract.

Continuity

The agency is continuous. The agency does not operate for a single contract or for one or more contracts with a predetermined number.

The agency must be conducted as a profession

The agency must also be conducted as a profession depending on the continuity element. A temporary intermediary activity is not deemed as an agency.

The agency has similarities with brokerage, commission, sole seller, franchising agreements. The distinguishing features of agency from these contracts will be explained below.

• Brokerage contract – Agency contract: The broker – principal relationship is not continuous, and the broker has a relationship with several different principals. On the other hand, in agency contracts, the relationship with the principal is continuous. In addition, the broker is not under any obligation for the conclusion of the contract he works on. However, the agent is under an obligation to act as an intermediary.
• Commission contract – Agency contract: The commission, like brokerage, creates a non-permanent and temporary relationship with the principal. In agency, on the other hand, the relationship with the principal is continuous.
• Sole seller contract – Agency contract: The sole seller purchases the goods to be sold from the principal and sells them to his own customers on his own behalf and account. Its profit is the difference between the purchase price and sale price. However, the agent does not act on its own name and account. It either acts as an intermediary or concludes a contract on behalf of the principal. A key component of the sole seller agreement is the monopoly right. The monopoly right in agency, however, is not a fundamental element and can be eliminated if desired. According to the Art.104 of TCC, the Agency is paid a specific amount for the service completed, and the amount is determined by the amount of work completed. It receives this payment straight from the principal. The sole seller is not paid by the principal. He sells the products he purchased from the principal, and the profit he makes equals the difference between the purchase price and sale price. The agent's mobility and independence are somewhat more limited than that of a sole seller. The principal has the authority to give instructions to the agent on certain issues, albeit limited. Since the sole seller buys and sells goods on his own behalf, he is more independent.
• Franchising contract – Agency contract: In franchising contracts, a merchant(franchisor) provides a privilege and an authority to another merchant (franchisee) in the marketing and distribution of his own goods and services within the framework of a contract. And there is also the matter of the franchisee's personnel training and supervising them. More importantly, it grants the franchisee the right to use its own business name, brand, identification marks, production procedures and secrets, and technical and commercial know-how. It is sui generis contract. It is a merged contract that contains elements of different types of contracts. In terms of purchasing and selling goods, it is similar to sales and sole seller con-tracts. There are also elements of the mandate and license contracts.
  The main differences from agency are as follows:
  - the franchisee acts on its own behalf and account. Its income is the difference between the purchase price and the sale price, as in sole seller contract;
  - the franchisee pays a fee to the franchisor, because he uses the franchisor’s brand the company name, other promotional signs and especially his technical and commercial knowledge;
  the right to monopoly in franchising, as in sole seller contract, is a fundamental element in the franchising contract. However, the monopoly right can be removed in the agency contract.
  the agent cannot benefit from the technical and commercial know-how of the merchant. However, the franchisee benefits from it.
  

Pursuant to article 12 of the TCO, there is no special form requirement for the validity of con-tracts, unless otherwise stipulated by law. There is no special form requirement in the TCC for agency contracts either. For this reason, agency agreements can be made in writing or verbally.

However, the rule of written evidence requirement is stipulated in the Code of Civil Procedure No. 6100. Accordingly, receivables above a certain monetary limit can only be proven with written evidence. For the year 2023, this limit is TRY 14,800. In other words, when there is a dispute regarding an agency relationship exceeding TRY 14.800, the party claiming the existence of the contract will have to prove the existence of the written contract and provide written evidence in amounts exceeding the specified amount. This written evidence may be the agency contract itself, as well as any written promissory note, acknowledgment of debt, addendum to the con-tract etc.

It is regulated in the TCC that agency agreements on the following issues must be made in writing:

• pursuant to Art. 104 of TCC, it must be agreed in writing that the principal cannot appoint more than one agent at the same time and in the same place or region for the same business activity;
• pursuant to Art. 104 of TCC, it must be agreed in writing that the agent cannot act for the accounts of more than one commercial enterprise competing in the same place or region;
• pursuant to Art. 106 of TCC, for the Agent to collect the price of the goods which are not delivered by the Agent, a written contract must be made, or a power of attorney must be provided to agent for delivery power;
• pursuant to Art. 106 of TCC, a written contract or a power of attorney must be provided for the Agent to receive the goods for which the price has not been paid by the agent;
• pursuant to Art. 106 of TCC, for the Agent to postpone the receivable arising from the transactions numbered 3 and 4 above and to reduce/decrease the amount of the receivable, a written contract or a power of attorney must be provided in this regard.

In addition, Pursuant to 107 of TCC, the Agent must obtain a special and written authorization to enter into a contract on behalf of its principal.

It is obligatory for the agents to register and announce the documents that providing authori-zation to the agents to conclude contracts on behalf of their principals.

Article 108 of TCC regulates the results of unauthorized transactions conducted by the Agency. Accordingly, if the Agent enters into a contract on behalf of the principal without being dully authorized or exceeding the limits of his authority, principal has right to authorize the transaction as soon as the awareness of such unauthorized transaction; if not, the agency will be re-sponsible for the contract itself.

According to article 24 of Act on Private International and Procedural Law (referred to as MOHUK), contractual obligations are subject to the law explicitly chosen by the parties. The parties may decide that the chosen law will be applied to the whole or part of the contract. The choice of law can always be made or changed by the parties. The choice of law after the conclusion of the contract is valid retrospectively, without prejudice to the rights of third parties. If the parties have not chosen a law, the law most closely related to that contract is applied to the relationship arising from the contract. This law is the law of the residence of the debtor at the time of the conclusion of the contract, the workplace of the debtor in the contracts established due to commercial or professional activities, the law of the place of residence if there is no charac-teristic performance debtor, and the law of the place of residence if the debtor has more than one workplace, in the most close relationship with the contract in question. However, if there is a law that is more closely related to the contract according to all the conditions of the situation, the contract becomes subject to this law.

Pursuant to the article 47 of Act on Private International and Procedural Law, the parties may agree that the dispute between them, which has a foreign element and arises from debt relations, will be heard in a court of a foreign state, in cases where the jurisdiction in terms of location is not determined on the basis of exclusive jurisdiction. The agreement is valid if it is proved with written evidence. The case will be heard in the competent Turkish court only if the foreign court considers it to be incompetent or if there is no objection to jurisdiction in Turkish courts.

In disputes arising from employment contracts, Consumer Contracts and Insurance Contracts, the jurisdiction of Turkish courts cannot be eliminated by agreement of the parties.

Pursuant to the article 4 of Act on Private International and Procedural Law, an arbitration agreement is an agreement between the parties to resolve all or some of the disputes that have arisen or may arise from an existing legal relationship between them. The arbitration agreement can be concluded with an arbitration clause in the main contract or in a separate contract.

The arbitration agreement is made in writing. In order for the written form requirement to be fulfilled, the arbitration agreement must be transferred to a written document signed by the parties, or to a communication tool such as letter, telegram, telex, fax, or electronic platform exchanged between the parties, or if the existence of a written arbitration agreement is claimed in the petition shall not have been objected to in the reply petition filed by the defendant. A valid arbitration agreement is also deemed to have been concluded in case of reference to a doc-ument containing an arbitration clause in order to become a part of the main contract.

The procedure regarding the recognition of foreign court decisions in Türkiye is governed by Turkish law on private international law and procedural law. As per the article 58 Turkish law on private international law and procedural law, for the recognition of foreign court decisions in Türkiye, following criteria must be met:

• the foreign court decision must be final;
• the foreign court decision must be regarding a subject that does not fall under the exclusive jurisdiction of Turkish courts;
• the foreign court decision should not be contrary to public order in Türkiye;
• in the country where the foreign court decision was made, the counter party must be duly summoned to the court, represented fairly in the court, and the decision should not have been made in counter party’s absence.

Regarding the enforcement of foreign court decisions in Türkiye, the conditions in the provisions of the law on Turkish private international law and procedural law are considered.

According to the article 54 of Turkish law on private international law and procedural law, For foreign court decisions to be enforced in Türkiye, in addition to the above conditions, there must be reciprocity agreement between the Republic of Türkiye or de facto practices regarding enforcement of the court decisions.

In accordance with the article 121/1 of TCC, the indefinite-term agency agreement may be terminated by one of the parties by giving 3 months' notice.

In accordance with the article 121/2 of TCC, fixed-term agency contracts can be terminated by one of the parties at the end of the contract term. If the parties remain silence despite the expiry of the contract term, the contract becomes indefinite-term contract.

Pursuant to the article 121/2 of TCC, in case of death, bankruptcy or interdiction of one of the Parties, article 513 of TCO is applied and the contract is terminated ipso iure, unless the nature of the work or the contract indicates otherwise. According to the article 513/2 of TCO, if the immediate termination of the contract for the aforementioned reasons endangers the interests of the principal, it is regulated that the agent or principal’s successors are obliged to continue to fulfil obligation arising from the contract for a temporary period.

In addition, the agency agreement may be terminated by the parties at any time for justifiable reasons, regardless of whether it is for an indefinite period or for a fixed period. The just cause is not necessarily based on fault or that the damage has been caused. Within the framework of good faith principle (bona fides), it should be evaluated whether the continuation of the agency relationship is acceptable for the parties. The following situations are considered justifiable reasons: constantly failing the duty, delivering the principal’s credit late or not delivering it at all, being sick in a long time in a way that hinders the duties, the agent's revealing the trade secrets of the principal, constantly sending defective goods.

Compensation under certain conditions

Turkish Code of Obligations and the Turkish Commercial Code allow claiming compensation subject to certain conditions:

• pursuant to the article 112 of TCO, if the termination of the agency agreement is caused by the fault of one of the parties, the other party may request compensation from the other party due to the breach of the contract;
• pursuant to the article 121/4 of TCC, the party that terminates the contract without just cause or without complying with the three-month notice period is obliged to compensate the other party for the loss due to the incompleteness of the works started;
• pursuant to the article 121/5 of TCC, If the agency agreement is terminated due to the death, incapacity or bankruptcy of the principal or the agent, an appropriate compensation to be determined in proportion to the amount of the fee to be paid to the agent upon completion of the works shall be given to the agent or his successors.

Equalization request/Portfolio compensation

In fact, no matter what reason the agency contract ends, the principal will continue to benefit from the customers formed by the agency, namely the portfolio. Therefore, it was generally accepted that portfolio compensation should be paid to the agent. Before 2011, there was no clear provision regarding portfolio compensation in the former TCC. The case law of the Supreme Court allowed the agency to claim portfolio compensation. With the provision added to the new TCC in 2011, the portfolio compensation of the agency is regulated clearly and in detail.

Firstly, the relationship between the foreign principal and local agent residing in Türkiye should be examined thoroughly. At this stage, foreign principal’s commercial needs are of great im-portance to understand and determine the type of the contract to be concluded for the agen-cy-related matters in Türkiye. As we discussed in the question 2 above, there are another contract types similar to agency contracts in several ways. Namely, commission contract, brokerage contract, sole seller/exclusive distributorship contract or franchising contract may be the best fit for the foreign principal other than agency contract and each alternative contract should be analysed case by case.

Secondly, preparing and executing the written contract is another important aspect of agency contracts in Türkiye. There are several statutory written form requirements for agency con-tracts in Türkiye, foreign principal should follow these requirements to refrain from possible future disputes. Please refer question 3 above for detailed explanations about the written form requirements.

With regard to the execution/signing of the agency contract should be strictly monitored and supervised during the signature. Most clauses in the contracts such as forum selection clause, arbitration clause etc. must be signed by dully authorized persons. This is more important if parties are legal entities since signatory persons’ signature authorities should be checked before and during the signature. In Türkiye, there is several ways to make this signature power control and the documents called “signature circulars” is the main and common official document showing the signature powers of such signatory persons of the companies. Signature circulars is a document approved by a Turkish Notary Public, and Turkish Trade Registry Gazette excerpt, signature samples and ID card copy of signatory person are annexed to the signature circulars. So, signature circular control is crucial to understand if signatory person is duly authorized to sign contracts and other clauses. Yet this control is on paper/physical review of the signature circulars and sometimes these documents are not valid or are expired. Thus, sig-natory power control/examination should always be made through Turkish Ministry of Com-merce and Trade Registry Directorates online registry records.

Another way to execute/signature a contract on behalf of a company or person is to use power of attorneys and it should be confirmed its authenticity by Notary Public before signature pro-cess.