Contract Management and Disputes (Sale, Service, Supply): A Practical Guide for Foreign Parties in Turkey

Foreign businesses trading with Turkish counterparties often find that contract management and disputes in sale, service, and supply relationships turn on a handful of recurring pressure points: INCOTERMS mismatches, price adjustment (FX indexation), delivery and defect liability (including latent defects), liquidated damages and termination mechanics, and force majeure–hardship. This guide distills the key legal levers under Turkish law and offers drafting and evidence tips to reduce dispute risk.

1) Governing framework and merchant standards
Commercial contracts in Türkiye are principally governed by the Turkish Code of Obligations (TBK) and, between merchants, the Turkish Commercial Code (TTK). The TTK’s “basiretli tacir” standard (prudent merchant) raises the bar for professional diligence, information duties, and usage of trade (teamül). Even where parties choose foreign law, Turkish mandatory rules (e.g., consumer, competition, public order) and Turkish procedural law will still matter in litigation or in the recognition/enforcement of awards. For cross-border deals, align applicable law and dispute resolution (court or arbitration) in a clear clause, and ensure the execution formalities (signature authority, corporate approvals) are clean to avoid later validity challenges.

2) INCOTERMS: risk transfer and documentary discipline
Disputes frequently start with ambiguous delivery terms. Avoid generic “FOB/CIF” shorthand and cite the exact INCOTERMS® rule and year (e.g., FCA 2020, CIF 2020) plus the named place/port. Map the INCOTERMS allocation to your Turkish documentation flow—e-Dispatch (e-İrsaliye), transport documents, U-ETDS entries, proof of delivery (POD)—so evidentiary packages match the contractual risk transfer point. Where cold chain or hazardous goods are involved, add SOP annexes (temperature bands, ADR compliance, sensor data retention) and make sensor output part of the evidentiary record.

3) Delivery, inspection, and defect liability (including latent defects)
Under TBK’s defect regime, the buyer must inspect within a reasonable time and promptly notify of defects, failing which claims may be barred. Draft the inspection window and notice mechanics explicitly (e.g., days, method, language, attachments). Distinguish apparent from latent defects; for the latter, grant a longer discovery-based notice period and obligate the seller to disclose known nonconformities. Tie remedies (repair, replacement, price reduction, rescission) to objective acceptance criteria (drawings, samples, certification). For high-value equipment, require factory acceptance tests (FAT) and site acceptance tests (SAT) with punch-list procedure, withholding rights, and re-test costs allocation.

4) “Price adjustment (FX indexation)” and payment risk
Volatile FX and input costs are a prime litigation driver. A static TL price with long lead times invites hardship claims; conversely, open-ended adjustment clauses invite buyer resistance. Use a transparent indexation formula (e.g., basket of USD/EUR, commodity indices, domestic PPI) with floors/caps, and define trigger frequency and documentation. Secure payment assurance via advance payments, stand-by letters of credit, or escrow; pair with retention or performance bonds for post-delivery risks. Late-payment interest and default interest should be expressly set; remember that courts may moderate excessive penalties under TBK.

5) Liquidated damages (cezai şart) and termination
TBK permits liquidated damages (cezai şart), but courts can reduce manifestly excessive amounts. Calibrate daily delay LDs to realistic critical-path impacts, set a cap (e.g., 10–20% of contract price), and clarify whether LDs are exclusive of further damages or without prejudice. Termination should be tiered: cure notice, step-in rights for services, suspension for non-payment, and final termination for material breach. For supply chains, add partial termination and cover purchase rights with a clear method for calculating price differentials and logistics costs.

6) Force majeure–hardship under TBK
TBK recognizes impossibility (Art. 136)—where performance becomes objectively impossible—and hardship (Art. 138)—where performance becomes excessively onerous due to extraordinary, unforeseen events beyond the debtor’s control. Do not rely on boilerplate. Define force majeure (e.g., war, epidemic, export bans, sanctions), notice deadlines, mitigation, and suspension periods. For hardship & price-adjustment, pre-agree a renegotiation window and escalation path (commercial committee → mediation → arbitration) and set objective adjustment mechanics (index-based recalibration) before either party may terminate for excessive burden. Exclude mere market fluctuations that fall within ordinary commercial risk.

7) Limitation of liability and carve-outs
A balanced limitation of liability (aggregate cap, exclusion of indirect/consequential loss) reduces tail risk, but carve out willful misconduct, gross negligence, IP infringement, confidentiality/KVKK breaches, and bodily injury. In logistics or international carriage, align caps with mandatory regimes (e.g., CMR/SDR).

8) Evidence, notices, and dispute resolution
Most disputes are won on documents. Hard-wire notice channels (registered e-mail/UETS, courier) and deeming provisions. Require counterparties to preserve e-mails, telemetry, QC records, and test reports. For cross-border deals, consider arbitration (ISTAC/ICC) for speed, expertise, and enforceability; pair with interim relief rights in Turkish courts for urgent measures (attachment, evidence preservation). Seat, language, and rules should be unambiguous; add a multi-tier clause (good-faith negotiation → mediation) to filter noise.

Practical checklist
• Precise INCOTERMS® 2020 term + place; align with e-documents and POD.
• Express inspection/notice windows; latent defect tail and FAT/SAT.
• Clear price adjustment (FX indexation) formula with caps/floors; payment security.
• Proportionate liquidated damages with caps; structured termination.
• Tailored force majeure–hardship with hardship & price-adjustment pathway.
• Balanced liability cap with mandatory law carve-outs.
• Robust evidence and notice mechanics; arbitration/court + governing law fixed upfront.

Handled with this architecture, contract management and disputes in sale, service, and supply relationships in Türkiye become predictable: risks are priced, remedies are operable, and surprises are minimized.