What is a penalty clause (cezai şart)?
A cezai şart is a contractually agreed sum payable upon breach of an obligation (Turkish Code of Obligations Arts. 179–182). Its power: the creditor need not prove loss — breach alone triggers payment. This makes Turkish law friendlier to penalties than common law, which voids clauses characterised as punitive; the “penalty vs. liquidated damages” anxiety of English-law drafting largely does not translate.
Where it earns its keep in tech deals
Penalties carry the enforcement weight in exactly the places damages are hardest to prove: shareholders’ agreement covenants (transfer restrictions, funding obligations, vetoes), non-compete and non-solicit undertakings, NDA breaches, and side-letter promises. A SHA veto right without a cezai şart is a plea; with one it is a price list. Drafting essentials: tie the penalty to specific obligations rather than “any breach”; state that it is payable in addition to performance where you need both (Art. 179/2 mechanics for that choice); and reserve the right to claim excess loss beyond the penalty.
The two limits to respect
Judicial reduction: courts must reduce excessive penalties (Art. 182/3) — proportionality to the obligation, the parties’ economic positions and actual consequences guide the trim. The critical exception: merchants cannot demand reduction of excessive penalties under TCC Art. 22 unless the penalty is ruinous to the point of offending morality — so B2B and SHA penalties largely hold as written. Second limit: penalties tied to employees are constrained — one-sided penalties against workers are invalid; employment penalties must be mutual and balanced, which reshapes how non-competes are secured.
Can we combine a penalty with termination?
Yes, if drafted for it — specify whether the penalty survives termination and whether it applies per breach, per day or as a lump sum.
Is a penalty subject to stamp duty?
A penalty clause referencing a determinable sum can affect the agreement’s stamp-duty base; structure and cap with that cost in view.
Related: protective provisions.