Calculating additional damages means determining the difference between default interest and the damage the creditor actually suffered. Because this calculation requires both legal and technical knowledge, it is generally done through an expert report.
Basis of the calculation
The additional damages calculation consists of three basic steps:
- Determining the principal claim: The amount of the principal claim subject to default is determined.
- Calculating default interest: Statutory default interest is calculated on the principal claim.
- Determining the alternative return: The return the creditor could have earned in the same period is established.
Additional damages are found by deducting the default interest from the second step from the return in the third step.
Basic formula
Additional Damages = Alternative Return − Statutory Default Interest
Both terms in the formula must be calculated over the same period (duration of default) and on the same principal claim.
Information
Statutory default interest is determined according to the legislation in force on the date of default. In commercial transactions subject to advance interest, the rate is higher. Additional damages are damage also exceeding advance interest.
Types of alternative return
The main types of alternative return used in calculating additional damages in Court of Cassation practice:
| Type of Alternative Return | Area of Application | Description |
|---|---|---|
| Deposit interest | Banking, deposits | The interest the creditor would have earned by placing the money on deposit |
| Government bond return | Commercial transactions | DİBS return in the same period |
| Inflation difference | General practice | Increase in the TÜFE/ÜFE rate |
| Exchange rate difference | Foreign currency-based claims | The difference arising from the increase in exchange rates |
| Loan interest | Commercial loan users | Loan interest in cases where the creditor had to take out a loan |
Which alternative return is taken as the basis varies according to the features of the case file and the creditor's situation. The Court of Cassation requires the most suitable indicator to be selected according to the features of the specific case.
Example 1: Deposit interest comparison (7 years)
A bank did not pay its customer's demand deposit of 100.000 TL for 7 years. During this period:
- Statutory default interest (annual average): %12 / year
- Average deposit interest (annual average): %35 / year
- Duration of default: 7 years (2.555 days)
In this example, the creditor may claim both 84.000 TL in statutory default interest and 161.000 TL in additional damages. The total claim is 345.000 TL. Because of fluctuations in inflation and deposit interest, the long 7-year period has significantly increased the share of additional damages in the total claim.
Example 2: Inflation difference (5 years)
An employer paid the employee's severance pay of 250.000 TL 5 years late. During this period:
- Statutory default interest (annual average): %12 / year
- TÜFE increase (annual average): %40 / year
- Duration of default: 5 years (1.825 days)
In this example, because the employee received the severance pay 5 years late, the employee suffered a serious loss of purchasing power against inflation. Additional damages are the part of this loss exceeding default interest. Over the 5-year period, the effect of the inflation difference on additional damages is very pronounced.
Example 3: Banking practice — credit card refund (6 years)
A bank delayed for 6 years a refund of 15.000 TL owed to its credit card customer. During this period, because the customer did not receive the refund, the customer could not pay off the credit card debt and paid high interest:
- Statutory default interest (annual average): %12 / year
- Credit card cash advance interest (annual average): %50 / year
- Duration of default: 6 years (2.190 days)
Because the customer did not receive the refund for 6 years, the customer could not pay off the credit card debt in that period and paid high interest. Additional damages are therefore the difference between credit card interest and statutory default interest. Over the 6-year period, additional damages reached 2,3 times the principal claim.
Caution in Long-Term Calculations
When calculating additional damages for periods of 5 years or more, the following points are critical:
- Annual average rates: The weighted average of interest/inflation rates in different years must be taken.
- Simple interest: In Court of Cassation practice, simple interest is taken as the basis as a rule.
- Periodic update: In some cases, a periodic (annual) breakdown is made.
- Statute of limitations: For claims of 5+ years, the statute of limitations period (TCO Art. 146 — 10 years) must be checked carefully.
- Inflation accounting: Over long periods, a separate assessment may be made for the creditor's loss of purchasing power.
An expert report must be obtained for a definitive calculation.
Attention
The additional damages calculation varies according to the features of the specific case. The Court of Cassation assesses the case file as a whole in deciding which alternative return to take as the basis. An expert report must be obtained for a definitive calculation.
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Open the calculatorFrequently asked questions about calculating additional damages
How are additional damages calculated?
Additional damages are calculated by deducting statutory default interest from the damage the creditor actually suffered during the period of default (alternative return). Formula: Additional Damages = Alternative Return − Statutory Default Interest.
How is the alternative return determined?
The alternative return is the return the creditor could have earned in the same period. In Court of Cassation practice, indicators such as banks' deposit interest, government bond return, inflation rate and exchange rate difference are taken into account.
Is an expert report required in an additional damages action?
Yes. Because the additional damages calculation requires technical knowledge, it is generally done by a banking, finance or actuarial expert.
Does interest accrue on additional damages?
Statutory interest accrues on the additional damages claim from the date of default. However, because additional damages themselves already derive from interest, the Court of Cassation makes a special assessment of the interest start date.
Which documents are required for additional damages?
The following documents are useful for an additional damages action: contract, invoice, notice letter, bank account statements, deposit/interest data, TCMB exchange rates, TÜFE/ÜFE data.