INKO LEGALINKO LEGAL Attorneys at Law
COMMERCIAL AND COMPANY LAW

Commercial Contracts

A commercial contract is read not while the relationship is going well but when it breaks down; the text should be written for that day. Review before signature shows from the outset how the penalty, limitation of liability and termination clauses will operate at the moment of dispute, and reveals which clause is worth negotiating.

As a rule, the validity of commercial contracts is not subject to any form requirement (Article 12 of the Turkish Code of Obligations No. 6098, TBK); the real question is how the clauses will operate at the moment of dispute. A debtor who is a merchant cannot, as a rule, ask the court to reduce a penalty clause on the ground that it is excessive (Article 22 of the Turkish Commercial Code No. 6102, TTK); the penalty clause should therefore be negotiated before signature. Between merchants, notices of default, termination and rescission are served through a notary, by registered letter or via the registered electronic mail system (KEP) (Article 18/3 TTK).

What we do in this area

Commercial contract work reaches us at two separate moments: before signature and after a dispute has arisen. In the first, we draft the text or review the draft received from the other party; in the second, what the signed text says is now in dispute. In both cases the question asked is the same: how will this clause be read before a court once the relationship breaks down?

On the drafting and review side, the main contract types we work on are: supply and sale, dealership and distributorship, service and works contracts, confidentiality (NDA), franchise and long-term cooperation agreements. We also provide support at the negotiation stage; which clause is worth negotiating, and which looks important but is in practice inconsequential, becomes clear at this stage. The legal basis is the general provisions of the Turkish Code of Obligations No. 6098 (TBK) and the merchant-specific rules of the Turkish Commercial Code No. 6102 (TTK).

This page is a sub-topic of the commercial and company law tree; for businesses with a continuous flow of contracts, the same work is carried out on a monthly basis within the corporate legal advisory model.

Minimum headings examined in a review

Heading Question asked
Definition of performance What is to be delivered, of what quality, on what date; is the acceptance and inspection procedure defined
Price and payment Maturity, default interest, security; in a long-term contract, is there a price adjustment mechanism
Penalty clause Which breach is it tied to; is it independent of performance; has the bar on reduction for merchants been taken into account
Liability Which heads of loss are excluded; have the cases in which the cap becomes invalid been considered
Termination and rescission In which cases, with what notice period and form; are the consequences regulated
Confidentiality and non-compete Are the duration, subject and geographic limit proportionate; what is the effect after the contract ends
Dispute resolution Competent court or arbitration; has the governing law been chosen

Every heading left vague turns into an interpretation risk at the moment of dispute. In standard-form texts drafted unilaterally, the review of general terms and conditions (Article 20 et seq. TBK) also comes into play.

Penalty and liability clauses

The penalty clause is regulated in Article 179 et seq. TBK; it provides an amount that can be claimed in the event of breach without having to prove loss. The critical difference in commercial contracts is this: under Article 22 TTK, a debtor who is a merchant cannot, as a rule, ask the court to reduce a penalty on the ground that it is excessive. Signing up to a high penalty in the expectation that "the court will reduce it anyway" is therefore a real risk for a merchant; the amount and the breaches that trigger the penalty are negotiated before signature.

Limitations of liability also have a ceiling: a prior agreement that the debtor will not be liable for gross fault is absolutely void (Article 115 TBK). Clauses contrary to mandatory provisions of law, morality or personal rights are invalid under Article 27 TBK; the fact that a clause is written in the contract does not keep it standing.

Breach, termination and dispute

When the other party fails to perform, the order of the steps determines the outcome: placing the party in default, granting an additional period where required, and exercising the optional remedies. Between merchants, notices of default, termination and rescission are served by the means listed in Article 18/3 TTK: notary, registered letter, telegram or the registered electronic mail system (KEP). A notice served by other means is not always deemed invalid; but the burden of proof lies with the party serving the notice, and failure to observe the form weakens the file.

In long-term contracts, a request for adaptation (Article 138 TBK) may arise where circumstances change extraordinarily; the article requires a fundamental change that was unforeseeable and not attributable to the parties. Subject to statutory exceptions, Article 5/A TTK requires mediation before commercial actions concerning monetary receivables and compensation, annulment of objections, negative declarations and restitution. For the recovery stage of a receivable, see the enforcement and bankruptcy law page.

How we work

In one-off matters, the contract text is delivered together with a reasoned list of proposed amendments: which clause should change and why, and which alternative can be proposed to the other party. For businesses with heavy contract traffic, standard contracts and their annexes are set up once, and incoming drafts are reviewed against that framework. At the initial consultation, the scope of the text and the model under which the work will proceed are clarified together.

The page where we describe the process in detail: Our working process.

FREQUENTLY ASKED

What people ask about this area

Is it really necessary to have a contract received from the other party reviewed before signing it?
Review before signature identifies risks in performance, payment, liability, penalty and termination clauses while changes can still be negotiated. The review produces concrete amendment proposals. The necessary scope depends on the transaction, its documents and the risks involved.
If I sign a penalty clause, will the court reduce it later?
For a debtor who is not a merchant, the judge may reduce a penalty considered excessive (Article 182 of the Turkish Code of Obligations No. 6098, TBK). A debtor who is a merchant cannot request a reduction (Article 22 of the Turkish Commercial Code No. 6102, TTK); the exception is where the penalty is deemed contrary to morality to the extent of causing the debtor's economic ruin, and it is interpreted narrowly. The amount should therefore be negotiated before signature.
We made an oral agreement; is it valid?
As a rule, the validity of contracts is not subject to any form requirement (Article 12 of the Turkish Code of Obligations, TBK); an oral agreement is also binding. The problem is not validity but proof: if the scope of performance, the price and the maturity are not in writing, each party argues its own understanding in a dispute. In a commercial relationship, at least the order, confirmation and invoice routine should be set up so as to leave a written trail.
Does having an NDA signed provide sufficient protection?
A confidentiality agreement works if it concretely defines what counts as confidential information, with whom it may be shared and what happens in the event of breach. An NDA written in general terms makes proving a breach difficult; a penalty clause that sets the monetary consequence of a breach from the outset is the practical way to overcome the difficulty of proving loss. For information in the nature of a trade secret, the unfair competition provisions also apply outside the contract.

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IMPORTANT NOTICE

This page is general information only and does not constitute legal advice. Every file is assessed on its own documents, dates and parties; the general explanations here cannot be applied directly to your own situation. Prepared in line with the Union of Turkish Bar Associations’ advertising restrictions. This English text is a courtesy translation prepared by the firm; in case of any discrepancy the Turkish text prevails.

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