1. The Maxim, Its Essence, and Islamic Foundations
The Maxim: الضرر يزال Damage shall be removed (Zarar izale olunur)
The Essence of the Maxim: This maxim dictates that a damage that has occurred cannot be left uncompensated legally; to establish justice, that damage must absolutely be removed (eliminated). The grievance of the injured party must be addressed, and the equilibrium that existed before the unlawful situation must be restored.
Islamic Foundations: This principle is derived from the Hadith “There is no harming and no reciprocating harm” (Lâ darara ve lâ dırâr), which forms the bedrock of Islamic tort law. As the great jurist Ali Haydar Efendi points out in his commentary Dürerü’l-Hükkâm (Vol. 1, p. 79), there is a subtle distinction between def-i zarar (preventing damage before it occurs) and izale-i zarar (removing damage that has already occurred). Article 20 focuses specifically on the compensation (daman/tazmin) of damage that has already materialized.
2. Strict Liability, Conditions, and Practical Examples
Ex Lege Effect (Liability Arising Without Explicit Contractual Terms): The most striking legal consequence of this rule is that the obligation to remove damage arises spontaneously from the mandatory nature of the law (ex lege), without needing to be explicitly written in the contract between the parties. Even if commercial parties forget to include an indemnity clause, this maxim fills the contractual silence when a tort or breach occurs.
Strict Liability (Absence of Fault): A critical aspect of this maxim is that it does not strictly require “fault” or “negligence” to trigger compensation. In Islamic law, tort liability is generally based on strict liability (objective responsibility). For instance, Mecelle Article 92 states that a person who directly destroys another’s property is liable for the damage even if it was not intentional. The focus is on the material loss suffered by the victim, not the mental state of the perpetrator.
Practical Examples:
- Option of Defect (Khiyar al-Ayb): A hidden defect in a purchased good that emerges later constitutes a damage to the buyer. As Ali Haydar Efendi indicates, this damage must be removed. Even without a specific warranty clause, the buyer automatically gains the right to return the good or demand a price reduction proportionate to the defect.
- Prevention of Interference: Physical damage to one’s property or unjust occupation is immediately halted, and the destruction is compensated, regardless of any prior agreement.
3. Legal Philosophy and the “Certainty” (Yaqin) Barrier
The limits of the “Damage is removed” maxim are drawn by another fundamental philosophical pillar of the Mecelle, Article 4: “Şek ile yakîn zâil olmaz” (Certainty is not dispelled by doubt).
For a damage to be legally removable (compensable), it must have actually occurred, its boundaries must be clear, and it must be certain (yaqin). While the Mecelle clearly states that damage shall be removed, it underlines that this damage must be an actual, certain one. The compensation of future, unrealized damages whose occurrence depends on probability (such as future lost profits) is fundamentally not possible. This principle is one of the pillars of Islamic law, prioritizing certainty and refusing to reward uncertainty (gharar/shakk). The Mecelle refuses to disrupt the certain material status quo for the sake of a doubtful future scenario.
4. Projections in Modern Law, Consequential Losses, and Arbitration
While Western legal systems and Turkish law theoretically allow for the recovery of lost profits (lucrum cessans) and similar items under “positive damages,” these systems, recognizing that this may contradict natural justice, have subjected forward-looking damages to a series of heavy criteria.
The Complexity of Proof and Calculation in Turkish Law: Although the compensation of “lost profit” (as positive damages) is possible in Turkish law, its method and calculation are subject to highly complex procedures.
- Definition of Positive Damages: The General Assembly of Civil Chambers of the Supreme Court of Appeals (Yargıtay HGK, E. 1990/13-392, K. 17.01.1990) defined positive damages as arising when the creditor waives performance and demands compensation, noting that the contract is not terminated; rather, the right to performance is replaced by the right to compensation for positive damages.
- Contractual Rescission (Dönme) Situation: In construction contracts, if the contractor fails to perform, the employer may rescind the contract (Turkish Code of Obligations Art. 473). Because this involves rescission, the recoverable damage is “negative damage” (menfi zarar), meaning the employer generally cannot claim positive damages. Conversely, if performance becomes impossible due to a reason attributable to the employer (TCO Art. 485/2), the path is opened for the contractor to claim positive damages upon rescission (as supported by the 15th Civil Chamber, Yargıtay 15. HD, E. 2014/3199, K. 2015/1875).
- The Calculation Labyrinth: The formula for calculating lost profit is virtually a labyrinth. The Yargıtay (HGK, E. 2010/244, K. 2010/260, T. 12.05.2010) formulated lost profit as: “found by deducting from all the probable income the injured party would have earned had the contract been fulfilled, all the mandatory expense items… the rights saved due to the premature termination, and the total amount of earnings the party made (or deliberately avoided making) from other work during this period.”
US and Anglo-Saxon Law: Expectancy Damages: In US contract law, positive damages are referred to as “expectancy damages,” consequential damages and lost profit is a fundamental component of this compensation. The legal system aims to close the gap between the creditor’s current position and the position they would have been in had the breached contract been fully performed. However, to legitimize this compensation, strict criteria are applied:
- Proving Lost Profits: Courts require that the profit be calculable with “reasonable certainty”; abstract or speculative estimates are rejected.
- The Foreseeability Rule (Hadley v. Baxendale): If the breaching party could not have reasonably foreseen this loss of profit at the time the contract was formed, the damage cannot be compensated.
- Duty to Mitigate: The injured party is obligated to minimize the damage by making reasonable efforts.
The Middle Eastern Context: Saudi Arabia and Iran: The Mecelle’s cautious approach to future damages remains highly relevant in modern Middle Eastern jurisdictions.
- Saudi Arabia: Historically, consequential losses have been rejected. With the Saudi Civil Transactions Law (CTL) enacted in 2023, the principle of pacta sunt servanda (freedom of contract) has been strengthened. Courts strictly adhere to contractual provisions where parties exclude consequential damages.
- Iran: In the Iranian legal system, damages must be direct and certain. The recovery of consequential losses and lost profits is highly restrictive, aligning with traditional Islamic legal principles.
Industry Practice: The Relevance of Mecelle’s Provisions: Today, in almost all energy, infrastructure, and EPC contracts globally, parties deliberately insert “Exclusion of Consequential Loss” (ECL) clauses. International corporations voluntarily waive these rights to avoid the protracted litigation and complex calculations caused by the uncertainty of “lost profits.” This proves that the Mecelle’s “only actual and certain damage is removed” approach is de facto applied through contracts in modern mega-projects and is accepted as the most reliable risk allocation method.
5. The Long Road Leading to the Same Conclusion and the Practicality of Liquidated Damages
Western legal systems have attempted to solve the “uncertainty (future profit)” that the Mecelle wholly rejects by navigating a long judicial road, but in most cases, they have reached the exact same conclusion (rejection). After all, how much profit will be made is a forward-looking uncertainty (shakk).
Particularly, the practical counterpart of the “foreseeability” rule put forward in the Hadley v. Baxendale decision in US law remains quite weak. While it might seem logical in one aspect for parties to explicitly consult and draft potential future damages and lost profits from the outset, in practice, it is nearly impossible to transfer this to a contract. It is difficult to draw the boundaries of such a clause that could be added as a “guarantee of mistrust,” and it is hard to find a counterparty who will accept these conditions; even if found, such a speculative risk would need to be insured, and its massive costs would ultimately be reflected back to the employer. Ultimately, in the event of a dispute, claiming compensation based on this clause will often not be directly possible and will require a long, complex trial filled with expert reports.
Therefore, instead of trying to design and impose hypothetical lost profits in a contract; setting a clear and calculable liquidated damages clause to achieve the goal of running the contract smoothly within the specified time is seen as a much fairer, more practical, and more certain solution in commercial life.
References
Freshfields Bruckhaus Deringer, The recovery of damages under Saudi law: understanding the basics.
Ali Haydar Efendi, Dürerü’l-Hükkâm Şerhu Mecelleti’l-Ahkâm, Vol 1.
Yargıtay HGK., E. 2010/244 K. 2010/260 T. 12.05.2010.
Yargıtay HGK., E. 1990/13-392 K. 17.01.1990.
Yargıtay 15. HD., E. 2014/3199 K. 2015/1875.
Turkish Code of Obligations (TCO), Articles 473 and 485/2.
CMS Expert Guide to Consequential Loss Clauses in the Energy Sector: Iran.
CMS Expert Guide to Consequential Loss Clauses in the Energy Sector: Saudi Arabia.
DLA Piper, Overview of the new Saudi Arabia Civil Transactions Law (August 2023).
Hadley & Anor – Baxendale & Ors [1854] EWHC J70
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