Penalty clause in accordance with the decisions of the Turkish court of appeals

In this study, penal clause regulated by the Turkish Code of Obligations was examined in accordance with the decisions of The Turkish Court of Appeals. The penal clause is one of the guarantees of the creditor, allowing the debtor to act in accordance with the debt relationship. The penal clause can be decided not only in terms of the obligations arising from the contract but also in terms of non-contractual liabilities. In general, the subject of the penal clause is decided as money, but it can also be decided as something to be given, to be done or not to be done. Depending on the type of penal clause agreed between the parties, the creditor can demand the fulfillment of either the primary obligation or the penal clause, or both. Even if the creditor does not incur any losses, the penalty must be paid. As a rule, under the principle of freedom of contract, the parties are allowed to agree upon the amount of the penal clause freely. However, the judge has the authority to reduce the excessive amount of the penal clause subject to Article 182/3 of Turkish Code of Obligations. Keywords: penal clause, types of penal clause, reduction of penal clause,