1. The creditor’s fault in the improper fulfilment of debtor’s obligation serves as the basis for the reduction or complete denial of the compensation of contractual penalties.

The Supreme Court’s position

The supplementary agreement No 6 stipulated that a penalty is paid in the amount of 10% of the lump-sum price. However, the claimant delayed the delivery of employer-owned materials [daval materiallar] to the respondent. These materials were used in [the construction] of the facility. That is, the claimant itself was the reason for the delay of the commissioning of the facility.

In addition, according to Clause 5.1 of the main contract, the claimant shall transfer the construction site to the respondent by deed within 10 days from the date of signing the contract for the commencement of construction works. However, the claimant transferred the facility to the respondent in two parts, namely under deeds of 24 April and 3 August 2018. Additionally, design estimates of the construction project have been changed several times by the claimant, and the contract amount has [also been] changed.

For this reason, in view of the noted fault of the claimant in the late fulfilment of [the respondent’s] obligations, the courts have come to the correct conclusion that, based on Arts 326 [reduction of penalty] and 335 [the creditor’s fault] CC, the claim for payment of penalty is denied.