Introduction
The construction industry is one of the most dynamic and economically significant sectors in Turkey. Large-scale infrastructure projects, public-private partnerships (PPP), residential developments, energy facilities, commercial real estate, and urban transformation initiatives contribute substantially to national economic growth. Turkish contractors are also globally active, making Turkey one of the leading countries in international construction services.
Given the financial magnitude and technical complexity of construction projects, the legal structure of construction contracts in Turkey is critically important. These contracts determine risk allocation, payment mechanisms, delay consequences, defect liability, and dispute resolution pathways.
Construction contracts in Turkey are primarily governed by the Turkish Code of Obligations (TCO), supplemented by the Turkish Commercial Code (TCC) and sector-specific regulations. In international projects, FIDIC-based contracts are widely adopted.
This article provides an in-depth legal overview of construction contracts in Turkey, covering contract formation, types, risk allocation principles, delay and defect liability, termination rights, and dispute resolution mechanisms.
1. Legal Framework Governing Construction Contracts
Under Turkish law, construction contracts are classified as contracts for work (eser sözleşmesi) pursuant to Articles 470–486 of the Turkish Code of Obligations No. 6098.
The key legal sources include:
- Turkish Code of Obligations (TCO)
- Turkish Commercial Code (TCC)
- Public Procurement Law No. 4734 (for public projects)
- Zoning and building regulations
- Environmental legislation
- Occupational health and safety regulations
Construction contracts are governed by the principle of freedom of contract, subject to mandatory statutory provisions.
2. Definition and Essential Elements
A construction contract is defined as an agreement whereby:
- The contractor undertakes to create and deliver a specific work (building, infrastructure, plant, or structure),
- In exchange for payment by the employer.
The essential elements are:
- Obligation to produce a specific result
- Delivery of completed work
- Payment of an agreed price
The contractor is an independent party and not an employee of the employer.
3. Types of Construction Contracts in Turkey
Different project structures require different contractual models.
3.1 Lump Sum (Fixed Price) Contracts
Under a lump sum contract:
- The contractor undertakes to complete the project for a fixed price.
- Cost overruns are generally borne by the contractor.
This model is common in private real estate and infrastructure projects.
3.2 Unit Price Contracts
In unit price contracts:
- Payment is calculated based on measured quantities.
- Risk of quantity variation often shifts toward the employer.
This model is common in public procurement projects.
3.3 Cost-Plus Contracts
Under cost-plus arrangements:
- The employer reimburses actual costs plus a profit margin.
This structure provides flexibility but increases financial exposure for the employer.
3.4 Turnkey (EPC) Contracts
Engineering, Procurement and Construction (EPC) contracts require the contractor to:
- Deliver a fully operational facility.
The contractor assumes significant design and performance risk.
EPC contracts are widely used in energy and industrial investments.
3.5 Revenue Sharing Construction Agreements
This model is particularly common in Turkey.
- The landowner grants construction rights.
- The contractor builds the project.
- Instead of monetary payment, the contractor receives certain independent units (e.g., apartments).
This hybrid structure combines property and construction law elements.
4. FIDIC Contracts in Turkish Practice
International projects in Turkey frequently adopt FIDIC (International Federation of Consulting Engineers) contract templates.
Common forms include:
- Red Book (Employer-designed projects)
- Yellow Book (Design-build projects)
- Silver Book (EPC/Turnkey projects)
FIDIC contracts provide:
- Standardized risk allocation
- Clear variation procedures
- Extension of time mechanisms
- Dispute Adjudication Boards (DAB)
While FIDIC is contract-based rather than statutory, it is enforceable under Turkish law as long as it does not violate mandatory provisions.
5. Employer’s Obligations
The employer must:
- Deliver the construction site in suitable condition
- Obtain necessary permits (unless otherwise agreed)
- Make timely progress payments
- Provide access and cooperation
- Avoid unlawful interference
Failure to meet these obligations may entitle the contractor to compensation or extension of time.
6. Contractor’s Obligations
The contractor must:
- Complete the work in compliance with technical specifications
- Deliver the project within agreed time
- Use appropriate materials
- Follow safety and zoning regulations
- Deliver defect-free work
The contractor bears responsibility for construction quality and structural integrity.
7. Variations and Change Orders
Construction projects frequently undergo modifications.
Variation clauses typically regulate:
- Scope adjustments
- Price revisions
- Time extensions
Without clear contractual provisions, disputes may arise regarding additional payment claims.
Under Turkish law, significant changes may entitle the contractor to price adjustments if the change materially alters the scope of work.
8. Delay and Liquidated Damages
Time is a critical factor in construction projects.
Contracts usually include:
- Completion deadlines
- Liquidated damages (penalty clauses)
Under Turkish law:
- Penalty clauses are enforceable.
- Courts may reduce excessive penalties if deemed disproportionate.
If delay is caused by employer or force majeure, contractor may claim extension of time.
9. Defect Liability
The contractor is liable for defects in the work.
Defects may include:
- Structural weaknesses
- Non-compliance with design
- Material deficiencies
Under Turkish law:
- The employer must inspect and notify defects within reasonable time.
- Liability periods vary depending on the nature of the defect.
For immovable structures, liability for structural defects may extend up to 5 years or more depending on severity.
10. Force Majeure and Hardship
Force majeure refers to unforeseeable and unavoidable events such as:
- Natural disasters
- War
- Government restrictions
- Major economic crises
If performance becomes impossible, liability may be excluded.
Under hardship doctrine, if circumstances change fundamentally and performance becomes excessively burdensome, courts may revise or terminate the contract.
11. Termination of Construction Contracts
Termination may occur due to:
- Serious breach
- Persistent delay
- Impossibility of performance
- Mutual agreement
The employer may terminate if contractor fails to perform adequately.
However, wrongful termination may result in compensation liability.
12. Security Mechanisms
Construction contracts often include:
- Performance bonds
- Advance payment guarantees
- Retention amounts
- Parent company guarantees
These instruments secure contractual performance and reduce financial risk.
13. Insurance Requirements
Parties commonly require:
- Construction all-risk insurance
- Third-party liability insurance
- Workers’ compensation coverage
Insurance allocation should be clearly defined in the contract.
14. Public Procurement Projects
For public projects:
- Public Procurement Law applies.
- Tender procedures are strictly regulated.
- Administrative courts have jurisdiction over certain disputes.
Public contracts contain mandatory clauses.
15. Dispute Resolution
Construction disputes in Turkey are common due to complexity and financial scale.
Dispute resolution methods include:
- Turkish courts
- Arbitration (often preferred in international contracts)
- Mediation (mandatory for certain monetary claims)
Arbitration institutions frequently used:
- ICC
- ISTAC
- Ad hoc arbitration
Turkey is a party to the New York Convention, facilitating enforcement of foreign arbitral awards.
Conclusion
Construction contracts in Turkey operate within a structured legal framework that emphasizes contractual freedom, risk allocation, and statutory compliance. Given the financial and technical complexity of construction projects, careful drafting is essential to regulate delay liability, variation mechanisms, defect responsibility, and termination rights.
For domestic and international investors, understanding Turkish construction law principles—particularly in relation to FIDIC adaptation, penalty clauses, and dispute resolution—is critical for effective risk management.
Well-structured construction contracts not only minimize legal exposure but also enhance project stability and long-term commercial success.
Yanıt yok