The most important legal instrument of property development processes, construction contracts in return for independent units, are contracts of a mixed nature that carry serious obligations for landowners and contractors alike. In practice, when faced with difficulties, the parties frequently think of taking the route of “terminating the contract unilaterally and getting out of it”. The settled case law of the Court of Cassation (Yargıtay), however, lays down far stricter rules on this point than is generally supposed.
So, can a construction contract in return for independent units be terminated without taking a legal risk?
As a Rule, Unilateral Termination Is Not Possible
According to the practice of the Court of Cassation, mixed contracts containing elements of a “contract for work” and of a “promise to sell”, such as a construction contract in return for independent units, cannot be brought to an end by a unilateral declaration of intent by the parties (for example, merely by sending a formal notice). The basic rule for termination in contracts of this kind is:
- Mutual agreement of the parties
- A court decision
Situations frequently encountered in practice, such as a “change in the zoning plan” or a “cancellation of the zoning status”, do not automatically render the contract invalid. The criterion of the Court of Cassation on this point is quite clear: what is taken as the basis is whether the construction was feasible on the date the contract was concluded.
If the construction was in a feasible state at the time the contract was made, zoning obstacles that emerge later are not always accepted as “impossibility of performance”. This does not give the landowner a direct right to terminate the contract.
The presence of a “termination clause” in many contracts does not give the parties the power to end the contract whenever they wish. The Court of Cassation emphasises that, even where there is a termination clause, using that clause requires a formal notice to be served, a reasonable period to be granted and the grounds to be lawful. A termination that does not comply with the procedure not only fails to end the contract but may also place the parties under a serious burden of compensation.
Which Situations Create Legal Risk?
- Withdrawing from the project by saying “I did not like the project”,
- Changing the contractor using a zoning change as a pretext,
- Notifying termination of the contract while the process is ongoing, without the consent of the contractor.
Steps of this kind may result in the landowner being ordered to pay compensation for “breach of contract”.
Construction contracts in return for independent units are not merely a piece of paper; they are the legal security of projects that last for years and carry high costs. A mistake made at the contract stage may lead to losses that are difficult to make good during a termination process.
If you are experiencing a deadlock in a construction project or are considering terminating the contract, I recommend that you take advice from a specialist in property law before taking any step. In the management of legal processes, a professional strategy in conducting the case or in reaching a settlement can protect you from major financial losses.
This article is for information purposes only and does not take the place of legal advice specific to your particular case.
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