1. Introduction
“Barter,” a word of English origin, refers to the exchange of goods or services (barter in the economic sense). The most important feature of the barter system is that goods or services can be exchanged without using currency. The foundation of this system is formed by barter contracts between the parties involved. In modern economies, the importance of the barter system, and consequently barter contracts, is increasing day by day. The primary reason for this is that during times of economic crises, market stagnation, or when the cost of money rises, it becomes possible to meet needs without the use of currency. The barter system can involve not only exchanges between two parties but also complex transactions involving multiple parties. This article will examine the barter system, the legal nature of barter contracts, the differences between similar concepts, and the advantages and disadvantages of barter transactions.
2. Barter System
The barter system is one of the oldest trade methods, widely used before the invention of money. In ancient times, people first exchanged animals for their needs, and later, they began exchanging agricultural products, as Kırlıoğlu (2016) observes. The development of the modern barter system began during the Great Depression of 1929, one of the largest economic crises in history. During this period, when the value of money nearly disappeared and there was a severe cash shortage, interest in alternative economic systems grew. The modern barter system gained importance as a system in which money was not used. The oldest known barter organization was the bank established in Switzerland in 1934 under the name WIR Genossenschaft. Over time, the barter system became widely used both in Europe and America. In Turkey, barter gained traction later, becoming widespread in the 1990s.
There are two types of barter systems: bilateral barter and multilateral barter. Bilateral barter is the exchange of two goods or services between two individuals or companies. Today, examples of bilateral barter systems include the exchange of technology, weapons, oil, and grain between countries. Another example is the construction projects carried out on a “land-for-flat” basis between contractors and property owners, which is often preferred when the prices of construction materials are subject to unpredictable increases.
A multilateral barter system is more complex, involving multiple transactions. To facilitate these multilateral transactions, a barter company acts as an intermediary, recording transactions and ensuring that mutual obligations are met. The multilateral barter system, by definition, is an alternative form of financing that enables more than two companies, through a barter company, to exchange goods or services without using cash. Over time, bilateral barter has been replaced by multilateral barter, and today, this method has become more widespread (Toroslu, 2010). Hence, the term “barter system” in this article will refer to multilateral barter.
The barter system has three fundamental components: the barter system itself, the barter company, and its members. The operation of the barter system begins with membership. Upon joining, a membership fee is paid to the barter company, granting the right to participate. Additionally, a form of collateral is required. A new member company must deposit collateral to benefit from the system. If the company fails to provide goods or services within the period specified in the barter contract—usually one year—the collateral is transferred to the organization company. This collateral can take the form of bonds, treasury bills, a letter of guarantee, or a sale. Once the required documents are submitted, a current account is opened for the new member, and transactions within the system are tracked through this account.
Current account agreements consolidate mutual debts and credits into a single account after a specified period. In the barter system, these agreements track the exchange of goods or services between member companies. Transactions performed by a member, whether receiving or offering goods or services, are recorded in their current account, which is periodically consolidated to calculate their balance. The organization company’s primary role is to monitor members’ supply and demand, matching them with other members in the system. Each member notifies the barter company of the goods or services they wish to offer or need, which is then recorded in the company’s supply and demand list.
The exchange of goods or services between members is recorded using barter checks, which act as both payment and proof of transaction. After completing the membership procedures, a company becomes a creditor in the system by receiving a barter check for the goods or services sold. The company can then use this credit to acquire goods or services it needs from the system. If a member has not yet provided goods or services, they can still acquire what they need by providing collateral. However, creating a credit limit by offering goods or services before making purchases is more advantageous, as it eliminates the need for collateral.
In conclusion, the barter system allows companies to conduct trade without using money. The system’s efficiency depends on the variety and value of goods and services provided by the members. Close cooperation with the barter company, accurate reporting of supply and demand, and adherence to the system’s rules are essential. Through this system, member companies can ease their financial burden and meet their needs without spending cash.
3. Barter Contracts and Legal Nature in the Multilateral Barter System
Barter contracts form the basis of the barter system. These contracts are established for membership, purchases, and the authorization of barter companies to monitor current accounts, as well as to regulate the commercial transactions of real or legal persons in the system (Kırlıoğlu, 2016). Barter contracts are not specifically regulated under Turkish law and are thus considered unnamed and atypical contracts. They incorporate elements from both named and unnamed contracts. Although barter contracts share traits with exchange, barter, assignment of receivables, transfer of debt, current account, commission, agency, and surety agreements, they are not identical. For example, barter contracts differ from traditional exchange or barter agreements because they typically involve an intermediary and often entail multilateral transactions.
Barter contracts contain several essential elements:
- The existence of member companies producing various goods or services,
- An intermediary company facilitating the exchange,
- The absence of cash flow during the exchange, and
- The lack of a direct reciprocity relationship between the two companies exchanging goods or services (Aksoy, 2021).
In barter contracts, if a member company fails to fulfill its obligations, it becomes indebted to the barter company, not to the company whose goods or services it has benefited from. Furthermore, there is no obligation to provide another good or service directly to the company from which goods or services are received. Instead, a company can contribute its own products to the barter pool, allowing other members to benefit.
Since barter contracts are not subject to specific legal regulations, in the case of disputes, general provisions apply. The barter company often acts as a mediator, helping parties reach a fair resolution by considering their rights and obligations.
4. Differences Between the Barter System and the Concepts of Set-off and Exchange
Although the barter system shares similarities with the concepts of set-off (“takas”) and exchange (“trampa”), there are significant legal differences. Set-off, as defined in Article 139 of the Turkish Code of Obligations, involves mutual payment of identical debts, typically money. In contrast, the barter system does not operate on a principle of reciprocity or equivalence of value, but rather through a credit system (Tosun, 2014).
Exchange contracts, governed by the Turkish Code of Obligations, involve mutual transfers of ownership. In barter, however, goods or services can be acquired from a pool, without direct reciprocity between the two parties. Additionally, while exchange contracts involve only goods, barter allows for the exchange of services as well (Tosun, 2014).
5. Advantages and Disadvantages of the Barter System
The barter system offers several advantages. It reduces the financial burden on member companies by enabling them to acquire goods or services without spending cash. It also helps companies clear excess inventory and utilize idle capacity. Furthermore, the system opens up new markets and enhances visibility for member companies through barter transactions, increasing brand awareness without the need for cash.
However, there are also disadvantages. The lack of specific legal regulation can lead to uncertainty in disputes. Additionally, there is a risk of low-quality or outdated products entering the system, and the system may struggle if there are too few members or too little product variety. Although described as a cash-free system, some cash transactions, such as mandatory fees or deposits, may still occur.
6. Conclusion
At its core, the barter system is a commercial system in which money is not used, serving only as a tool for assigning value. Especially during economic crises or times of extreme cash shortages, the barter system offers a viable alternative. Although it currently lacks specific legal regulations, it operates based on established principles and can be a practical option for companies when supported by a well-managed organization company.
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