In today’s world, the rise of global supply chains and cross-border collaborations has significantly increased the frequency with which Turkish companies enter into commercial contracts with foreign partners. However, in this process—where different legal systems, trade customs, and judicial practices intersect—careful drafting of commercial contracts is of critical importance to minimize contract-related risks.
1. Governing Law
The legal system applicable to a contract signed with a foreign party directly determines the parties’ rights and obligations. Therefore, the governing law must be explicitly stated in the contract, leaving no room for ambiguity.
If no such choice is made, in case of a dispute in Türkiye, the provisions of the Turkish International Private and Procedural Law (MÖHUK) will apply, and the judge will apply the law most closely connected to the dispute. This may lead to unpredictable outcomes for the parties.
2. Dispute Resolution: Courts or Arbitration?
A jurisdiction clause or arbitration agreement included in the contract will determine the forum and procedural rules applicable to any potential disputes.
In international trade, parties often prefer arbitration. The main reasons include:
- Confidentiality of proceedings,
- Faster resolution process,
- Arbitral awards being widely recognized and enforceable under the New York Convention.
3. Contract Language and Interpretation
If the contract is prepared in more than one language, it must clearly state which version will prevail. Otherwise, translation discrepancies may lead to serious interpretational disputes.
4. Delivery and Risk Allocation: Use of INCOTERMS
In international trade, the INCOTERMS 2020 rules should be adopted regarding delivery terms, and the selected delivery method (e.g., FOB, CIF, DDP) must be clearly specified in the contract. These terms govern:
- Place of delivery,
- Allocation of costs,
- Transfer point of risk,
and help clarify the division of responsibilities between the parties.
5. Force Majeure
Unforeseeable events such as pandemics, wars, natural disasters, or decisions by public authorities may prevent contractual performance. Therefore, a detailed force majeure clause should be included, clearly defining what constitutes force majeure.
The clause should also set out the notification requirements, applicable timeframes, and the impact of such events on performance (e.g., suspension, termination).
6. Payment Terms and Guarantees
To mitigate commercial risks and ensure payment security in dealings with foreign parties, secured payment methods should be preferred:
- Letters of credit,
- Bank guarantees,
- Combinations of advance payment and post-delivery payment.
In addition, the currency of payment, payment deadlines, and late payment interest provisions must be clearly stated.
7. Termination, Damages, and Penalty Clauses
The contract must detail the circumstances under which it may be terminated, as well as the consequences of breach—including liquidated damages and indemnity obligations.
8. Intellectual Property, Trade Secrets, and Data Protection
For contracts involving technological know-how, client databases, or designs, intellectual property rights, confidentiality of trade secrets, and data processing obligations should be safeguarded with dedicated clauses.
Definitions of data controllers and processors must be provided in accordance with the Turkish Data Protection Law (KVKK) and, where applicable, the GDPR. Explicit consent mechanisms should also be regulated.
Conclusion
Commercial contracts with foreign companies affect not only the business relationship but also the long-term investment and strategic goals of the parties. Therefore, contracts must be drafted in a clear, verifiable, and enforceable manner in compliance with international legal standards.
To ensure legal security, bilingual, arbitration-backed, and meticulously structured contracts—reflecting both Turkish and foreign legal systems—should be prepared with the support of professional legal counsel.
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