A mandate agreement may be ended or terminated for general reasons in relation to obligations or for special reasons in relation to the mandate as regulated under Articles 512 and 513 of the Turkish Code of Obligations (TCO). One of the special reasons for ending a mandate agreement involves unilateral termination as regulated under Article 512 of the TCO; this forms the subject of the current study. According to this provision, a mandate agreement can be unilaterally terminated by the mandatee or the mandator at any time without need to propound upon a valid reason or grant a notice period. The mandator’s declaration for unilateral termination of an agreement is defined as a “dismissal,” whereas the mandatee’s declaration is defined as a “resignation.” The reason for introducing this provision pertains to the mutual trust that exists between the parties and lies at the foundation of the mandate agreement. Legislators have aimed to allow the parties of a mandate agreement to void a mandate relationship in the case of a reduction in the mutual trust between the parties for any reason.

The right granted to parties under Article 512 of the TCO is exercised by a unilateral declaration that terminates the contractual relationship upon its receipt by the other party. Therefore, the legal nature of this right is accepted as formative right. Similar to other formative rights, the right stated under Article 512 of the TCO no longer exists upon being exercised and cannot be revoked once exercised. However, applying Article 10 of the TCO by analogy allows one to revoke the declaration of termination of an agreement before it becomes effective by submitting a withdrawal of the notification of declaration of termination to the other party before the declaration of termination is delivered to the other party, or at the very latest, at the same time the declaration of termination reaches the other party.

Another consequence of the formative nature of the right expressed under Article 512 of the TCO is that this right cannot be exercised conditionally. However, scholars have correctly stated that formative rights can be exercised with a condition that contains no uncertainty for the other party. Within this scope, the right expressed under Article 512 of the TCO can thus also be exercised with a condition that does not leave the other party in uncertainty. Conditions that are subject to the other party’s will in particular are applicable for declarations of termination.

In addition, determining whether the right to unilaterally terminate a mandate agreement under Article 512 of the TCO has a proactive (ex tunc) or retroactive (ex nunc) effect importantly depends on whether the performance of obligation has started or not. In cases where performance has started but not yet been completed, the agreement will be terminated with proactive effect. In this case, the right exercised under Article 512 of the TCO will be defined as a termination. Meanwhile, in cases where the agreement has ended before the performance of work has begun, the mandate relation will cease to exist retroactively. In other words, the right being exercised will be defined as a rescission. In cases where the mandated performance has an instantaneous nature in particular, the agreement can only be ended with retroactive effect.

In cases where the mandate agreement is terminated with proactive effect, the demands that occurred up to the point of termination shall not be affected by the termination of the agreement. Therefore, the mandatee’s obligation for giving an account of its activities carried out up until the date of termination shall remain in force. Additionally, the mandatee is obliged to return anything received for whatever reason as a result of such activities. Termination of the agreement also does not eliminate the mandatee’s confidentiality obligation within the framework of duty of care.

From the aspect of the mandator’s obligations, if the parties agree on remuneration for the mandatee or if a custom is already in place in this regard, the mandatee shall be entitled to remuneration for the services conducted up until the date of termination. Another obligation of the mandator is to reimburse the expenses the mandatee has made in the course of services and release the mandatee from the obligations they bear in relation to the services. Commencement of services up until the date of termination shall be adequate for expenses demanded, and compliance with services shall no longer be required. As for the expenses made before the commencement of service, the mandatee in principle cannot demand remuneration for these expenses. However, if the right of termination is exercised at an inopportune juncture, these expenses can be demanded by the mandatee within the scope of compensation.

If the mandatee is authorized, required as per circumstances, or allowed by custom, the mandatee may delegate third parties to conduct the services wholly or partially through a sub-mandate agreement (qqv. Art. 506/1 of the TCO). When the primary mandate agreement is terminated, the benefit expected from the submandate agreement usually ceases to exist. However, because these two agreements are separate legal affairs that are distinct from each other, termination of a primary mandate agreement under Article 512 of the TCO does not ex officio end the submandate agreement.

As per Article 512 of the TCO, the party who terminates the mandate agreement is only liable for remuneration of damages in relation to the inopportunity of the termination. Dominancy among scholars states that the damages to be compensated as per Article 512 of the TCO are reliance damages. However, Ido not share this opinion. Reliance damages are those that would not have occurred had the agreement never been signed. However, the damages to be compensated under Article 512 of the TCO are not the damages that would not have occurred had the agreement never been signed but rather the damages that would not have occurred had the agreement been terminated at the nearest opportune juncture instead of at an inopportune juncture. Therefore, the general ruling regarding the types of damages considered as excess damages or reliance damages under Article 512 / p. 2 is not applicable here. Excess or reliance damages can be included depending on the matters involved in case.

Whether the parties can agree to a repeal of the termination right under Article 512 of the TCO, namely whether the wording in Article 512 of the TCO is a compulsory provision or not, is disputable. The consensus opinion, which is also shared by me, states that Article 512 of the TCO is not a compulsory provision. I accept that parties can revoke the right to unilaterally terminate a mandate as regulated under Article 512 of the TCO within the framework of the freedom of contract. This freedom shall be limited in cases where revoking or restricting this right constitutes a violation of personal rights. In cases where the agreement is fundamentally based on a trust relationship in particular, any provisions that hinder the application of Article 512 of the TCO may be considered to contradict the personal rights and deemed void as per Article 27/1 of the TCO. Similarly, the provisions that stipulate excessive penalty amounts with regard to termination of a mandate in these kinds of agreements must be deemed void as per Article 27/1 of the TCO due to the violation of personal rights.