An installment sale agreement in Turkey (taksitle satış / vadeli satış sözleşmesi) is common in business—especially when one party cannot pay the full price upfront. You see it in:
- sale of company shares (seller financing),
- sale of equipment and inventory,
- business acquisitions where price is paid over time,
- partner buyouts in shareholder disputes,
- large B2B supply relationships with deferred payment.
The problem is that many installment agreements are drafted like “friendly IOUs”: vague dates, unclear default rules, no collateral, no release mechanism, and weak evidence. When the buyer misses a payment, the seller realizes the agreement provides no real leverage.
This 1500-word SEO-focused guide explains how to draft a strong installment sale agreement in Turkey with clear payment terms, enforceable security, and default protection.
1) What Is an Installment Sale Agreement?
An installment sale agreement is a contract where:
- the seller transfers goods, rights, or shares (or agrees to transfer them),
- the buyer pays the purchase price in installments over a defined period,
- the agreement includes mechanisms to protect the seller if the buyer defaults.
Key point: In installment deals, the seller becomes a “creditor.” So the contract must be drafted like a creditor protection tool—not like a simple sales contract.
2) Choose the Right Installment Sale Structure (Before Drafting)
There are two basic structures:
Structure A: Transfer Now, Get Paid Later (Higher Seller Risk)
Ownership transfers at the start, but payment continues over time.
Seller risk: buyer controls the asset immediately and may stop paying.
Use when: you have strong security (pledge/mortgage/guarantee) and monitoring.
Structure B: Pay First, Transfer Later (Higher Buyer Risk)
Buyer pays installments first; ownership transfers after full payment or after milestones.
Buyer risk: buyer pays but does not control asset fully until later.
Use when: seller wants maximum protection, or buyer credit risk is high.
Practical takeaway: Most business deals choose Structure A for operational reasons—but only if seller security is strong.
3) Payment Terms: Make Them Unambiguous
Your payment section should include:
- total purchase price (and what it includes/excludes)
- installment schedule: exact dates + exact amounts
- currency and FX rule (if foreign currency exposure exists)
- payment method and bank account
- VAT/invoice rules (for goods/services deals)
- allocation rule for partial payments (interest vs principal)
- early payment option and whether it changes price/discounts
Best practice: Attach the installment schedule as a table in an annex and reference it as “binding.”
4) Delivery, Transfer, and Acceptance (The Evidence Engine)
Installment disputes often start with: “I didn’t receive what I paid for.”
For goods/equipment:
- define delivery terms and location,
- define acceptance procedure and deadline to object,
- define defect handling without freezing payments unfairly,
- define who bears risk during transport.
For shares/business transfers:
- define closing deliverables,
- define who controls management/signing authority and when,
- define post-closing actions (registry updates, banking, governance).
Best practice: add an acceptance clause: “Accepted unless written objection within X days.”
5) Security Package: How Sellers Protect Themselves
A seller should treat security as non-negotiable when the amount is meaningful.
Common security tools in Turkey:
A) Pledge (Rehin)
- pledge over movables (equipment/inventory),
- pledge over receivables,
- share pledge (very common in installment share sales).
B) Mortgage (İpotek)
Mortgage over real estate is powerful for large installment obligations.
C) Corporate Guarantee
A parent or group entity guarantees buyer’s obligations.
D) Personal Guarantee
Founder/shareholder guarantees payment.
E) Retention of Title / Conditional Transfer (Where Suitable)
For goods sales, retaining title until payment completion can reduce risk if properly designed.
Best practice: use layered security (pledge + guarantee, or mortgage + reporting).
6) Monitoring and Covenants (Prevent “Asset Value Collapse”)
Sellers lose leverage when the buyer damages the asset or extracts value during installments.
Add covenants like:
- no sale/transfer of the asset without seller consent,
- no new liens or pledges,
- maintenance/insurance obligations (for equipment/vehicles/property),
- reporting obligations (for share sales / business transfers),
- restrictions on related-party transactions (for company acquisitions).
Monitoring turns the installment period into a controlled process instead of blind waiting.
7) Default Clauses: The Heart of Seller Protection
Default clauses should be mechanical and enforceable:
A) Default Triggers
- missed installment (even partial),
- breach of covenants (new liens, unauthorized transfer),
- insolvency events (bankruptcy/concordat filing),
- material misrepresentation.
B) Cure Period (If Any)
If you allow a cure period, keep it short and define that it can be used only X times.
C) Acceleration
If default happens:
- all remaining installments become immediately due,
- default interest applies,
- seller can enforce security immediately.
D) Termination and Repossession Logic (If Relevant)
For goods/equipment, define:
- when seller can terminate,
- how repossession works,
- valuation and cost allocation,
- what happens to amounts already paid (refund vs penalty vs set-off).
Best practice: avoid vague “seller may terminate” language without procedure—make it step-by-step.
8) Release Mechanism: Protect Buyer Once Paid
Buyers also need protection: when the debt is paid, security must be released quickly.
Include:
- release timeline and steps (e.g., within X business days),
- which documents must be signed,
- who bears costs,
- partial release rules (if installments are large and collateral is heavy).
Clear release rules reduce disputes and build trust.
9) Authority and Evidence: Prevent “Invalid Signature” Defenses
Installment deals often collapse when the buyer later claims: “That person wasn’t authorized.”
Include:
- authority confirmation clause,
- attach proof of authority (signature circular/authorization),
- require board/shareholder approvals if relevant,
- define notice addresses and valid communication channels.
Evidence and authority controls reduce procedural defenses and improve enforceability.
10) Dispute Resolution and Enforcement Strategy
Draft dispute clauses with enforcement in mind:
- governing law,
- jurisdiction/arbitration,
- service of notices,
- language,
- costs clause.
If your agreement includes security, align dispute resolution with the enforcement path so you don’t get stuck in contradictory procedures.
FAQ
Is an installment sale agreement enforceable in Turkey?
Yes, but enforceability depends on clear payment terms, strong evidence of delivery/transfer, and well-drafted default/security clauses.
What is the most important seller protection in installment deals?
Default + acceleration clause combined with a real security package is the strongest protection.
Should buyers accept broad security rights?
Buyers should accept reasonable security but require clear release mechanisms and avoid unlimited scope.
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