Commercial contracts in Turkey live at the intersection of a Roman–Germanic civil law tradition and a fast-moving, trade-driven economy. On paper, everything starts with the Turkish Code of Obligations and the Turkish Commercial Code; in real life, it ends with emails, unpaid invoices, defective goods, and a dispute resolution clause that suddenly matters more than the rest of the agreement.
This guide looks at three pressure points that foreign businesses and Turkish companies constantly encounter:
- what happens in default (delay and non-performance),
- how Turkish law treats defective performance and non-conforming goods, and
- how arbitration fits into the picture when things go wrong.
1. Legal framework: where do Turkish rules come from?
Most commercial contracts in Turkey are governed by:
- the Turkish Code of Obligations (TCO) – general rules on formation, interpretation, default, impossibility, defects, damages;
- the Turkish Commercial Code (TCC) – special rules for merchants, commercial sales, agency, carriage, etc.;
- sector-specific legislation (banking, insurance, energy, public procurement, etc.);
- and, in international sales of goods between parties in contracting states, the CISG, which Türkiye has ratified.
Parties may choose foreign law in many B2B situations, but mandatory Turkish provisions (for example, on agency, competition, consumer protection, or certain limitation periods) can still apply. And if the contract is silent, Turkish conflict rules will often point back to Turkish law when the performance has its closest connection to Türkiye.
For drafting and risk allocation, the practical question is usually not “which code applies?” but rather “how will a Turkish court or tribunal actually treat default, defects and remedies under this framework?”
2. Default in commercial contracts: delay vs non-performance
2.1. What is default under Turkish law?
In Turkish doctrine, default (borçlunun temerrüdü) is the debtor’s culpable failure to perform on time. In commercial contracts, it is usually about:
- late delivery of goods,
- late payment,
- or late performance of a service.
To speak of default, three elements typically appear together:
- A due and enforceable obligation (e.g., delivery date passed, invoice due).
- The debtor’s failure to perform in time.
- In many cases, a notice of default (ihtar) from the creditor, unless the contract or the nature of the obligation makes time of the essence automatically (fixed-date obligations, “if not performed on the day, performance no longer makes sense”, etc.).
Once default arises, a commercial creditor usually gains a bundle of rights.
2.2. Rights of the creditor in case of default
Depending on the kind of obligation and the seriousness of the delay, the creditor may:
- insist on performance and claim compensatory damages for the loss caused by the delay (for example, storage costs, lost resale profit);
- set a reasonable grace period (mehil) and, if performance still does not occur, terminate the contract and claim damages;
- in some fixed-date contracts, terminate without extra notice once the date has passed and performance has become commercially pointless.
In commercial contracts, default automatically triggers default interest on late payments. The interest rate is often:
- either contractually agreed (within statutory limits), or
- if silent, determined by statutory default interest rules for commercial debts.
Because merchants are held to a higher standard of care, courts tend to look critically at excuses for non-performance; vague references to “economic hardship” or “logistics problems” rarely succeed unless they rise to the level of impossibility or hardship in the sense of the Code of Obligations.
2.3. Force majeure and hardship
Turkish law distinguishes between:
- Impossibility (ifa imkânsızlığı) – objective events that make performance permanently impossible (e.g., destruction of specific goods, legal impossibility). In such cases, the obligation may be extinguished and parties released to a certain extent.
- Hardship (aşırı ifa güçlüğü) – circumstances that do not make performance impossible, but excessively burdensome compared to what parties reasonably contemplated (severe exchange-rate shocks, export bans, war, pandemics).
Most well-drafted commercial contracts in Turkey contain bespoke force majeure and hardship clauses that allocate these risks more precisely: notice periods, mitigation, suspension, renegotiation, and the right to terminate if the event persists.
3. Defective performance: non-conforming goods and services
In B2B practice, the most common disputes are not simply about delay, but about defects – goods that do not conform to the contract, or services performed poorly.
3.1. When is a performance “defective”?
Under Turkish law, performance is defective (ayıplı ifa) when:
- the thing delivered or service performed does not have the qualities promised in the contract,
- it does not possess the ordinary qualities that the buyer or client can reasonably expect,
- or it is not fit for the agreed purpose.
Examples:
- Machinery that cannot reach agreed production capacity.
- Software that fails to provide core functionalities and is unstable.
- Construction work done with lower-grade materials than promised.
For movable goods, both the TCO and TCC implement a regime similar to many European civil codes and, in international sales, largely compatible with the CISG.
3.2. Buyer’s duties: inspection and notice
A crucial feature of Turkish law is the duty to inspect and notify:
- The buyer must inspect the goods within a period that is usual in the course of business, or at least as soon as possible.
- If a defect is discovered, the buyer must notify the seller without undue delay, specifying the defect.
- For hidden defects that could not be discovered with ordinary inspection, the buyer must notify promptly after discovery, subject to an overall limitation period.
Failure to inspect and notify in time can lead to loss of defect rights. Turkish case law tends to be strict with merchants: a commercial buyer who sits on complaints for months may find that most of the toolbox (price reduction, rescission) is lost, leaving only a narrow damages claim.
3.3. Remedies for defects
If the notification requirements are satisfied, the buyer generally has several options:
- Rescission (contract termination) – returning the goods and reclaiming the price.
- Price reduction – keeping the goods but paying less, proportionate to the defect.
- Repair – asking for the defect to be removed at the seller’s expense.
- Replacement – delivery of conforming goods.
On top of these, the buyer can claim damages for further loss caused by the defect (lost profit, production downtime, reputational damage), provided causation and amount are proven.
In practice, many commercial contracts in Turkey re-shape these remedies:
- Some limit the buyer’s rights to repair and replacement within a warranty period.
- Others fix an exclusive remedy (for example, “repair only”) unless the repair fails repeatedly.
- Some specify a liquidated damages regime for quality failures or uptime levels in service contracts.
Careful drafting is essential; otherwise, the back-door of general contract law remedies can reopen obligations that the parties thought they had narrowed.
4. Arbitration in Turkish commercial practice
4.1. Why arbitration?
For cross-border or high-value commercial contracts in Turkey, arbitration has become the default choice for many sophisticated parties because it offers:
- Neutrality – particularly attractive when one party is foreign and prefers not to appear in the other party’s domestic courts.
- Expert decision-makers – ability to appoint arbitrators with sector-specific expertise (construction, energy, IT, finance).
- Confidentiality – arbitral proceedings are usually private, unlike court files.
- Enforceability – Türkiye is a party to the New York Convention, so foreign awards are generally enforceable, and Turkish awards are enforceable abroad in many jurisdictions.
4.2. Types of arbitration clauses
Commercial contracts in Turkey frequently use:
- Institutional arbitration – e.g. clauses referring to a recognised arbitration centre and its rules (including Turkish and international institutions).
- Ad hoc arbitration – the parties create their own procedure, often using a known set of rules as a model (e.g. UNCITRAL-style).
A good arbitration clause should clearly specify:
- the seat of arbitration (e.g. Istanbul, Geneva, London),
- the institution and rules (if any),
- the number of arbitrators (one or three),
- the language of proceedings,
- and the governing law of the contract.
Poorly drafted clauses (“arbitration may be considered in case of dispute”) invite jurisdiction fights and can cost more than they save.
4.3. Relation between arbitration and Turkish courts
Even when arbitration is chosen, Turkish courts still play supportive roles:
- Appointment assistance if the parties cannot agree on arbitrators under the chosen rules.
- Interim measures – freezing orders, evidence preservation, etc., especially before the tribunal is constituted.
- Setting aside procedures – limited review to ensure due process and public policy are respected.
- Recognition and enforcement of foreign awards under the New York Convention and local international arbitration law.
For parties, the practical takeaway is that a well-constructed arbitration clause in a commercial contract in Turkey generally yields predictable, enforceable dispute resolution, provided you also think about interim relief and local enforcement strategy at the drafting stage.
5. Practical drafting tips for commercial contracts in Turkey
To pull these threads together, consider the following when drafting or negotiating:
- Be precise about performance and time frames
- Clear delivery dates, milestones and payment terms avoid ambiguity about when default begins.
- Add notice mechanisms (e-mail addresses, deemed receipt rules) so that default and defect notices are provable.
- Design a defect and warranty regime consciously
- Align contractual inspection and notice periods with Turkish law, not against it.
- Decide whether you want repair, replacement, price reduction or rescission as primary tools, and express that clearly.
- For services, use service levels (SLAs) and credits that dovetail with general remedies.
- Address hardship and force majeure realistically
- List events (pandemic, export bans, sanctions, wars, extreme currency shock) and define consequences (suspension, renegotiation, termination).
- Avoid purely cosmetic clauses that do not match the sector’s real risks.
- Calibrate limitation of liability clauses
- Caps, exclusions for indirect damages, special rules for gross negligence and intent should be drafted with Turkish law’s mandatory boundaries in mind.
- Remember that some sectors and relationships (for example, consumers) allow far less contractual freedom.
- Craft an arbitration clause that matches the deal
- For high-value or technical projects, consider three arbitrators and an institution with experience in the relevant sector.
- Match the seat and governing law to your enforcement and neutrality needs.
Done well, commercial contracts in Turkey become an instrument of risk management rather than a pile of boilerplate. Default, defects and arbitration then cease to be surprises, and instead become mapped, priced and planned parts of the business relationship.
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