The Basics of Turkish Contract Law: A Guide for Companies

Contract law is the legal foundation of every commercial relationship in Turkey. In supply, distribution, licensing or service relationships, the parties’ rights and obligations are determined by the terms they agree and by the statutory rules that supplement those terms. Turkish contract law belongs to the continental European legal tradition, and its principal source is the Turkish Code of Obligations No. 6098 (TCO).

The Turkish Code of Obligations and Freedom of Contract

The TCO is built on the principle of freedom of contract: the parties may freely determine the content of a contract within the limits set by law (TCO Art. 26). A contract that violates mandatory rules, morality, public order or personal rights, or whose subject matter is impossible, is null and void (TCO Art. 27).

The Code also sets out general rules that apply to every contract, including good faith, interpretation, performance, non-performance and termination.

Contract Types and Form Requirements

Under Turkish law, a contract is not subject to any particular form unless the law provides otherwise (TCO Art. 12). Where the law does prescribe a form, that form is, as a rule, a condition of validity: a contract concluded without it has no legal effect.

Some form requirements frequently encountered in practice:

• Sale of real property and promises to sell real property: Invalid unless executed in official form (TCO Art. 237).
• Sale of motor vehicles: Subject to the form prescribed by Turkish traffic legislation.
• Matrimonial property agreements: Subject to the form prescribed by the Turkish Civil Code.

Contracts for which the law prescribes no form may also be concluded orally or by implied conduct. In commercial relationships, however, written form is strongly preferable for evidentiary reasons.

Commercial contracts are governed by the Turkish Commercial Code No. 6102 in addition to the TCO, while administrative contracts are governed by administrative law.

Contracts Specifically Regulated by Law

The special part of the TCO separately regulates contract types such as sale, lease, loan, service, contract for work, mandate and simple partnership. Agency and insurance contracts are governed by the Turkish Commercial Code.

These special rules supplement or depart from the general provisions. The parties may amend or exclude rules that are not mandatory by mutual agreement.

Sources of Turkish Contract Law

The TCO entered into force on 1 July 2012 and draws heavily on the Swiss Code of Obligations. Turkish contract law is also shaped by:

• international conventions (for example, the CISG for the international sale of goods),
• special statutes influenced by EU legislation,
• the case law of the Court of Cassation and legal doctrine.

Even so, Turkish law has its own particular rules, and these must be taken into account when drafting or negotiating a contract in Turkey.

Formation of Contracts

A contract is formed when the parties express their mutual and corresponding intentions (TCO Art. 1). For a contract to be validly formed, the following elements are required:

• Offer and acceptance: The offer must be definite enough to cover the essential terms of the contract, and the acceptance must correspond to the offer and be unconditional.
• Capacity to act: The parties must have the capacity to reason, be of full age and not be under guardianship. For companies, the signatory’s authority to represent the company must also be verified.
• Lawful subject matter: The subject matter of the contract must not violate mandatory rules, morality or public order.

Breach of Contract under Turkish Law

If an obligation is not performed at all, or not performed properly, the obligor must compensate the obligee’s loss unless it proves that no fault is attributable to it (TCO Art. 112). The law therefore establishes a presumption of fault: the burden is on the obligor to prove it was not at fault.

In bilateral contracts, if the obligor is in default and fails to perform within the period granted, the obligee may exercise one of its optional rights (TCO Art. 125):

• claim performance together with compensation for delay,
• waive performance and claim compensation for the loss caused by non-performance,
• withdraw from the contract.

Unlike in common law systems, specific performance in Turkish law is not an exceptional remedy but the primary right.

Turkish law does not recognise punitive damages; compensation is limited to the actual loss suffered. The parties may, however, agree on a penalty clause for breach of contract (TCO Art. 179). In practice, the penalty clause is one of the most effective deterrents in commercial contracts.

Contract Management in Commercial Relationships

When drafting commercial contracts in Turkey, the key points are:

• compliance with form requirements,
• verification of signatory authority,
• alignment of liability limitations with mandatory rules,
• a balanced penalty clause,
• a clearly defined dispute resolution mechanism (court or arbitration).

Monitoring changes in legislation and case law throughout the contract’s lifecycle is also part of risk management.

The Approach of istlegal Attorneys at Law

This article provides general information on the core framework of Turkish contract law and does not replace a legal opinion on a specific contract.

istlegal Attorneys at Law, based in Istanbul, advises companies on the drafting, negotiation and dispute resolution of supply, distribution, technology licensing and international sale contracts.