Commercial Contracts in Turkey: Default, Defects, and Arbitration

yazarı lawyerfbc

açık Kasım 10, 2025

Executive Summary

Doing business in Turkey requires precise contracts, fast reaction to default (temerrüt) and defect (ayıp) issues, and smart dispute-resolution choices. This guide distills the must-have clauses for B2B agreements, explains how to preserve your rights when performance is late or defective, and shows how to leverage mandatory commercial mediation, ISTAC/ICC arbitration, interim measures, and New York Convention enforcement. Use the checklists, model notices, and sample clauses to prevent surprises and win disputes efficiently.

The Legal Landscape & When This Guide Applies
Contract Formation & Structure Under Turkish Law
Core Clauses That Win (or Lose) Cases
Default (Temerrüt): How to Trigger, Cure, and Terminate
Defects (Ayıp): Inspection, Notice, and Remedies
Late Payment & Interest in B2B Deals (TTK 1530)
Multi-Tier Dispute Resolution: Negotiation → Mediation → Arbitration
Arbitration in Turkey: ISTAC/ICC Strategy, Seat, and Enforcement
Interim Measures, Evidence Preservation & Expert Strategy
Compliance Pitfalls: Stamp Tax, FX Restrictions, Data & Sanctions
Industry Scenarios & Playbooks
Model Language: Notices & Arbitration Clauses
Due-Diligence & Dispute Readiness Checklists
FAQ
Conclusion
FAQ & Article Schema Markup

1) The Legal Landscape & When This Guide Applies

This guide focuses on commercial (B2B) contracts governed by Turkish law—typically applying the Turkish Code of Obligations (TBK) and Turkish Commercial Code (TTK). While most principles below are broadly applicable, several features are distinctly Turkish:

Good faith governs negotiations and performance.
No general form requirement for most commercial contracts (but some contracts—e.g., real estate sales—have strict formalities).
Mandatory mediation is a condition to file many commercial monetary claims (since 2019).
Arbitration is widely used; ISTAC in Istanbul and ICC are common choices.
Turkey is party to the New York Convention (1958)—key for enforcing foreign arbitral awards.
TTK 1530 contains protective rules on late payment in commercial transactions.
Stamp tax (Damga Vergisi) and FX restrictions can bite if ignored.

Practice note: Turkish courts and arbitral tribunals expect disciplined contract management—timely notices, evidence-rich files, and consistent commercial behavior. Delays in inspection or notice can forfeit otherwise strong defect rights.

2) Contract Formation & Structure Under Turkish Law

Offer & Acceptance

A contract forms by matching declarations of will (offer + acceptance).
Silence rarely equals acceptance, but course of dealings and trade usage can matter.
Pre-contractual liability may arise for bad-faith negotiations (misleading reliance, sudden withdrawal without justification).

Authority & Representation

For companies, check the trade registry for signatory powers (TTK corporate representation rules).
Use specimen signatures and board resolutions where needed; qualify counterparts’ authority in the reps & warranties.

Governing Law & Language

Parties may choose Turkish law or a foreign law; if performance is in Turkey or the forum is Turkish, local mandatory rules may still apply.
Language clauses matter—if the Turkish version prevails, courts will lean on it; if English prevails, ensure high-quality translations of technical schedules.

Incorporating Standards & Incoterms

Incoterms 2020 can align delivery, risk, and costs. Tie them explicitly to transfer of risk and insurance obligations.

3) Core Clauses That Win (or Lose) Cases

1) Scope & Deliverables

Define specifications, KPIs, acceptance tests, and documentation.
Use change-control mechanics for evolving specs.

2) Price, Indexation & Currency

Clarify currency and indexation formulas (CPI/PPI).
Watch FX restrictions for certain domestic contracts; carve exceptions or fallback to TRY if legally required.

3) Payment Terms & Security

Advance payment, letters of credit, performance bonds, and retention.
Set-off rights and no-set-off carve-outs (e.g., for undisputed or finally adjudicated sums).

4) Delivery & Risk Transfer

Link to Incoterms. Specify title transfer and retention-of-title (ROT) until full payment, plus repossession procedures consistent with Turkish law.

5) Warranties & Defect Regime

Technical warranties, conformance to specs, and compliance with law.
Tie warranties to inspection & notice obligations and remedies (repair/replace/reduce price/terminate + damages).

6) Time of Performance & Default

Firm dates (or “time is of the essence”) and cure periods.
Liquidated damages for delay; ensure they are proportionate and not punitive under TBK rules on contractual penalties.

7) Limitations of Liability

Exclude consequential losses (define them!) but carve back for gross negligence, willful misconduct, IP infringement, confidentiality breach, and personal injury—aligning with TBK’s mandatory rules.

8) Force Majeure & Hardship

FM aligned with TBK objective impossibility; hardship aligned with TBK excessive difficulty (rebalance, renegotiate, or adapt).
Include notice, mitigation, continuity plans, and termination rights.

9) Compliance & Data

Export controls/sanctions, anti-corruption, AML, data protection (KVKK/GDPR) clauses with audit rights.

10) Dispute Resolution

Staged negotiation → mediation → arbitration, designating seat, institution, rules, language, number of arbitrators, expedited procedures, and emergency relief.

4) Default (Temerrüt): How to Trigger, Cure, and Terminate

What Is Debtor Default?

In Turkish law, default (temerrüt) arises when an obligation is due and the debtor fails to perform after being duly called upon, unless the contract or the nature of the obligation makes the debtor automatically in default (e.g., fixed-date performance where time is essential).

Key routes to default:

Demand-based default: A written notice demanding performance within a reasonable period.
Automatic default: If a date certain is missed and time is of the essence, or performability is tied to a fixed event (e.g., “delivery 30 June”).

Consequences

Default interest accrues on monetary debts.
The debtor may become liable for subsequent impossibility.
The creditor may withhold performance, seek specific performance, claim damages, or terminate if non-performance is material.

Practical Steps

Calendar the due date and send a default notice immediately, stating the breach, cure period, and consequences.
Reserve all rights (including damages).
If cure fails, terminate per the contract (and TBK rules), call on guarantees, and preserve evidence for damages quantification.

Litigation/arbitration tip: Contracts with a clear cure mechanism and liquidated damages for delay create predictable outcomes and support injunctions or emergency arbitrator relief.

5) Defects (Ayıp): Inspection, Notice, and Remedies

What Counts as a Defect?

A defect (ayıp) exists when goods/services do not conform to contractual quality, specifications, or ordinary use—covering apparent and hidden defects, legal defects (e.g., third-party rights), and economic defects (e.g., performance below promised capacity).

Buyer’s Obligations

Inspect promptly on delivery and notify the seller of defects within a reasonable time after discovery (hidden defects upon discovery).
Failure to inspect/notify on time can bar your defect claims.
In B2B practice, “reasonable time” is short; align your contract with explicit deadlines (e.g., 10–15 business days for hidden defects after discovery).

Remedies (Structure Them in the Contract)

Repair or replacement (first resort).
Price reduction aligned with defect severity.
Termination (rescission) for material defects.
Damages in addition to primary remedies if loss exceeds the remedial fix.

Drafting Levers

Define acceptance tests and documentation for “deemed acceptance.”
Provide warranty periods, spare-parts availability, and on-site response times.
Clarify exclusions (misuse, third-party integration) but do not attempt to exclude liability for intent/gross negligence—contrary to TBK policy.

Practice pointer: Turkish courts and arbitral tribunals put weight on timely, specific, written notices attaching photos, test reports, serial numbers, and expert records.

6) Late Payment & Interest in B2B Deals (TTK 1530)

For commercial transactions, the TTK introduces protective rules:

Payment deadlines must be reasonable; excessively long terms can be curtailed.
If the buyer delays payment, default interest accrues without need for formal notice in many cases once due date passes, especially when the date is certain.
Contracts may set a higher default rate (within legal limits); otherwise statutory/commercial rates apply.
Creditors may claim collection costs in addition to interest (align your clause with TTK 1530 logic).

Drafting tips:

Fix a due date, state that interest accrues automatically after due date, and shift collection and legal costs to the defaulting party.
Insert pay-when-paid carefully; Turkish law scrutinizes clauses that unduly deprive the creditor of timely payment.

7) Multi-Tier Dispute Resolution: Negotiation → Mediation → Arbitration

Mandatory Commercial Mediation

For many commercial monetary claims, mediation is a precondition to filing a lawsuit in Turkey. While an arbitration agreement generally diverts disputes to arbitration (so court-based preconditions don’t apply), parties may voluntarily adopt pre-arbitral mediation to settle faster.

Why include mediation anyway?

It preserves relationships and can be completed quickly (typically within weeks).
Settlement agreements can be made enforceable through the mediator/court process.

Drafting a Smart Multi-Tier Clause

Tier 1: Good-faith negotiation (10–15 business days).
Tier 2: Mediation (a named institution or ad hoc, 30 days, extendable once).
Tier 3: Arbitration (seat, rules, language, number of arbitrators, expedited track, emergency relief).

Enforceability cues: Make tiers clear, time-bound, and non-futile. Avoid open-ended obligations that create jurisdictional challenges.

8) Arbitration in Turkey: ISTAC/ICC Strategy, Seat, and Enforcement

Why Choose Arbitration?

Speed & expertise (technical arbitrators).
Confidentiality and procedural flexibility.
Cross-border enforceability under the New York Convention.

Institutions & Rules

ISTAC (Istanbul Arbitration Centre): modern rules, Fast-Track, Emergency Arbitrator, Turkish and English language options, competitive costs.
ICC, LCIA, SCC, etc., are also popular for international deals.

Seat, Law & Language

If seat = Istanbul, Turkish arbitration law (for international cases, Law No. 4686) governs the annulment regime and court support.
Choose a language (EN or TR) and governing law (Turkish or foreign).
Align evidence rules (IBA Rules on the Taking of Evidence) and document production.

Interim Measures

Provide for emergency arbitrator; still allow applications to state courts for interim relief without waiving arbitration.

Award Enforcement

Domestic awards (seat in Turkey) are enforceable via local procedures; foreign awards benefit from NYC recognition/enforcement.
Common defenses: invalid arbitration agreement, due process violations, excess of mandate, non-arbitrability, public policy. Draft to minimize set-aside risk.

9) Interim Measures, Evidence Preservation & Expert Strategy

Evidence fixation (e.g., court-assisted determination, notary minutes, time-stamped videos/photos) can be decisive in defect and delay cases.
Preserve emails, delivery records, test logs, and change orders in a structured repository.
Experts: Pre-dispute expert reports (independent labs, engineers) enhance leverage at mediation/arbitration.
Consider contractual audit rights for quality and compliance.

10) Compliance Pitfalls: Stamp Tax, FX Restrictions, Data & Sanctions

Stamp Tax (Damga Vergisi):

Most written contracts trigger stamp tax calculated on the monetary value stated. If you sign multiple copies, you may multiply exposure—use one original plus certified copies or electronic signature where appropriate.
Include a tax clause allocating responsibility (often 50/50 in practice or borne by the buyer).

FX Restrictions & Decree No. 32:

Certain domestic contracts must be denominated in TRY (with exceptions). Cross-border elements can broaden flexibility. Seek counsel before fixing USD/EUR in purely domestic arrangements.

Data Protection (KVKK/GDPR):

If personal data is processed (employees, contacts), add data processing agreements, cross-border transfer bases, and security measures.

Sanctions/Export Controls & AML:

Include sanctions compliance representations and termination rights for breaches.
For high-risk sectors (defense, dual-use), integrate end-use and screening obligations.

11) Industry Scenarios & Playbooks

A) Machinery Supply with Late Delivery

Before dispute: Acceptance tests, liquidated damages/day for delay, step-in rights for installation.
On breach: Send temerrüt notice, start LD clock, coordinate spare supplier, gather downtime logs to claim consequential losses if contract allows.
DR path: Mediation with quantified claim; if unresolved, arbitration with emergency relief to compel delivery.

B) Software License with Hidden Defects

Before dispute: Staged UAT, milestone payments, escrow for source code, SLA credits.
On breach: Defect notice with reproducible steps and logs; suspend payment under exceptio non adimpleti contractus (withholding for non-performance) if structured.
DR path: Tech-savvy tribunal; appoint forensic IT expert via tribunal; seek specific performance/repair plus damages.

C) Construction Materials: Quality Non-Conformance

Before dispute: Batch testing, third-party certification, lot traceability, sample retention.
On breach: Immediate inspection & notification, secure lab test; segregate defective lots; request replacement or price reduction.
DR path: Accelerated procedure due to project timeline; interim measures to secure evidence.

12) Model Language: Notices & Arbitration Clauses

Disclaimer: Samples below are illustrative and should be tailored to your deal.

A) Notice of Default – Model

Subject: Notice of Default and Cure Period – [Contract/PO No.]

Dear [Counterparty],

We refer to the [Agreement dated …]. The [deliverables/payment] due on [date] remains unperformed.
Under the Agreement and Turkish law, you are in default .
Please cure by fully performing within [7/10/15] business days of this notice.

Failing timely cure, we will exercise all rights, including termination, liquidated damages, specific performance, and full damages, without further notice. All rights are reserved.

Sincerely,
[Company/Authorized Signatory]

B) Defect Notice – Model

Subject: Defect Notification – [Delivery/Batch No.]

Dear [Seller/Supplier],

Upon inspection of goods delivered on [date], we identified defects detailed in Annex-1 (photos, test results, serial numbers).
Pursuant to our Agreement and Turkish law, we hereby notify these defects without delay and request [repair/replacement] within [X] days.
We reserve our rights to price reduction, damages, and termination if defects are not remedied timely.

Sincerely,
[Buyer/Authorized Signatory]

C) Multi-Tier Clause (Negotiation → Mediation → Arbitration) – Model

Dispute Resolution. The Parties shall first attempt to resolve any dispute arising out of or in connection with this Agreement by good-faith negotiation between authorized representatives for 15 business days following a written dispute notice.
If unresolved, the dispute shall be submitted to mediation administered by [ISTAC Mediation Rules / Turkish Mediation Law or agreed institution] for a period of 30 days, extendable once by mutual agreement.
If still unresolved, the dispute shall be finally settled by arbitration administered by [ISTAC / ICC] under its [arbitration rules] in force when the Notice of Arbitration is submitted. The seat of arbitration shall be [Istanbul/…]. The tribunal shall consist of [one/three] arbitrator(s). The language shall be [English/Turkish].
Emergency and Interim Relief. Either party may seek emergency arbitrator relief or apply to competent state courts for interim measures without waiving arbitration.
Confidentiality. The arbitration and award shall be confidential, except for enforcement/annulment proceedings.

D) Late Payment & TTK 1530 – Model

Payment & Late Payment. Invoices are due [30] days from the invoice date unless otherwise stated. Any late payment bears default interest at [contractual rate] per annum (or statutory/commercial default rate if higher under applicable law) from the due date until full payment. The debtor shall bear reasonable collection, legal, and enforcement costs.

E) Defect Remedies – Model

Warranty & Remedies. Supplier warrants that Deliverables conform to the Specifications and are free from defects for [12/24] months from acceptance (or first commercial use, whichever occurs earlier). Buyer’s timely inspection & notice obligations apply. Buyer may, at its option, request repair or replacement; if not remedied within [X] days, Buyer may seek price reduction, cover, or terminate for material breach, without prejudice to damages.

F) Force Majeure/Hardship – Model (Short Form)

Force Majeure. Neither party is liable for failure caused by events beyond its reasonable control (including natural disasters, epidemic, embargo, sanctions changes preventing performance, war, governmental acts). The affected party shall notify promptly, mitigate, and resume performance as soon as possible.

Hardship. If extraordinary events fundamentally upset the equilibrium of this Agreement making performance excessively onerous, the parties shall renegotiate in good faith; absent agreement within 30 days, either party may seek adaptation or termination consistent with applicable law.

13) Due-Diligence & Dispute Readiness Checklist

Deal-Phase Checklist

☐ Verify authority and registry details of signatories.
☐ Align scope/specs, KPIs, acceptance tests, and change control.
☐ Lock payment terms, security, ROT, and interest.
☐ Define delivery, risk, Incoterms, and title.
☐ Calibrate warranties, inspection/notice deadlines, remedies, and LDs.
☐ Insert force majeure/hardship aligned with supply-chain reality.
☐ Choose governing law, language, and DR path (mediation + ISTAC/ICC).
☐ Address compliance (stamp tax, FX limits, data protection, sanctions).
☐ Prepare e-signature and document control (versioning, annexes).

Dispute-Phase (Default/Defect) Playbook

☐ Send prompt written notice (temerrüt/ayıp) and reserve rights.
☐ Start cure or LD clocks; gather logs, photos, lab tests.
☐ Consider interim measures (evidence fixation, injunctions).
☐ Attempt mediation with quantified claims and settlement brackets.
☐ File arbitration (emergency relief if needed) with a focused SoC and expert plan.

14) FAQ

Q1: Can we exclude all liability for defects in a commercial B2B deal?
Generally no. Clauses purporting to exclude liability for intent or gross negligence are not enforceable. Reasonable warranty limitations are possible but must respect mandatory rules and public policy.

Q2: If the due date is missed, do we still need a default notice?
Often no when the date is fixed or “time is of the essence”—default may be automatic. Even so, sending a written notice is best practice to start cure/termination mechanics and stop debates later.

Q3: How fast must we notify defects?
Promptly. Turkish practice expects short timelines; write concrete deadlines into your contract. Hidden defects must be notified after discovery without undue delay.

Q4: Do we have to attempt mediation before arbitration?
Not by law—mandatory mediation is a court precondition for many lawsuits, not arbitrations. But parties can contractually require pre-arbitral mediation for speed and cost control.

Q5: Is ISTAC suitable for international disputes?
Yes. ISTAC offers modern rules, fast-track, emergency arbitrator, bilingual administration, and competitive costs. For some deals, ICC remains preferred for brand familiarity.

Q6: How are foreign arbitral awards enforced in Turkey?
Under the New York Convention and Turkish private international law. Defenses include invalid arbitration agreement, due-process issues, excess of mandate, non-arbitrability, and public policy.

Q7: Can we claim consequential losses for late delivery?
Only if your contract allows it (or if Turkish law would otherwise permit given causation/foreseeability). Many agreements exclude consequential or indirect losses—draft these definitions with precision.

Q8: Can we invoice in USD/EUR?
Often yes, especially with cross-border elements, but certain domestic contracts face FX restrictions. Take advice early and add fallback currency mechanics if needed.

Q9: Who bears stamp tax?
Allocate it in the contract. Practice varies (split 50/50 or payable by the buyer). Consider minimizing copies and using electronic execution to control exposure.

Q10: Can we seek interim measures despite an arbitration clause?
Yes. You may go to state courts for interim orders or to the emergency arbitrator if your institutional rules provide for it.

15) Conclusion

Well-crafted commercial contracts in Turkey live or die on discipline: precise scope, hard deadlines, rigorous inspection/notice, calibrated remedies, and a dispute-resolution ladder that starts with mediation and, if needed, moves to arbitration designed for speed, confidentiality, and enforceability.
Use the models and checklists above to boost claim value and minimize surprises—from the day you sign, not the day you sue.

Categories:

Genel