7 Essential Aspects of Turkish Contract Law Every Investor Should Know

In the dynamic landscape of international business, understanding the complexities of Turkish Contract Law is crucial for investors and entrepreneurs looking to establish or expand their presence in Turkey. As a pivotal component of Turkey’s legal framework, contract law governs the formation, execution, and enforcement of agreements, playing a vital role in shaping business relationships and transactions.

Table of Contents

In this comprehensive guide, we’ll explore the key aspects of Turkish Contract Law that every investor should be aware of to navigate the Turkish business environment successfully.

Understanding Turkish Contract Law

Turkish contract law, governed primarily by the Turkish Code of Obligations, is a complex yet vital aspect of legal practice in Turkey. Since its establishment, the legal framework has evolved to accommodate modern business practices and international standards.

1. Definition and Scope of Contracts

Under Turkish law, a contract is defined as a legal transaction resulting from the mutual consent of at least two parties. The Turkish Code of Obligations (TCO) establishes that contracts can arise from explicit or implicit declarations of intent. This means that even informal agreements can be legally binding if they meet certain criteria set forth in the TCO.

Key Elements of a Valid Contract

For a contract to be valid in Turkey, it must satisfy several essential conditions:

• Legal Capacity: Parties must possess the legal capacity to enter into contracts.
• Mutual Consent: There must be a clear agreement on the essential terms, even if secondary points are left unaddressed.
• Legality: The purpose of the contract must not violate any laws or public policy.

These foundational elements ensure that contracts serve their intended purpose and protect the rights of all parties involved.

2. Types of Contracts

Turkish law recognizes various types of contracts, which can be broadly categorized into three groups:

• Civil Contracts: These include agreements related to personal rights, such as wills and gifts.
• Commercial Contracts: These pertain to business transactions, including sales, leases, and service agreements.
• Administrative Contracts: These involve agreements related to public administration and government operations.

Each type has its specific regulations and requirements under Turkish law, making it crucial for parties to understand which category their agreement falls into.

3. The Importance of Written Contracts

While oral contracts can be enforceable under Turkish law, written contracts are highly recommended, especially for significant transactions. A written document provides clear evidence of the terms agreed upon and can help prevent disputes. Certain contracts, such as those involving real estate transactions or long-term leases, are legally required to be in writing.

Notarization

In many cases, especially for real estate transactions, notarization is advisable. Notaries in Turkey play a crucial role in ensuring that contracts are executed properly and that the rights of all parties are protected. A notarized contract can also serve as stronger evidence in case of disputes.

4. Electronic Contracts

With advancements in technology, electronic contracts have gained legal recognition in Turkey. The Turkish government considers electronic signatures as valid as traditional handwritten signatures, provided they comply with specific legal standards. This development facilitates remote transactions and aligns Turkish law with international practices.

5. Termination and Breach of Contract

Contracts may be terminated by mutual agreement or unilaterally under certain conditions specified within the contract itself or by law. In cases where one party fails to fulfill their obligations (breach), the other party may seek remedies such as damages or specific performance.

Penalty Clauses

Turkish law allows for penalty clauses within contracts to ensure compliance. These clauses stipulate predetermined penalties for breaches, providing an additional layer of security for parties entering into agreements.

6. Dispute Resolution

Disputes arising from contractual relationships can be resolved through various means:

• Negotiation: Parties may choose to negotiate directly to reach an amicable solution.
• Mediation: An impartial third party can assist in facilitating discussions between the disputing parties.
• Arbitration: Many commercial contracts include arbitration clauses, requiring disputes to be settled outside the court system.
• Litigation: If other methods fail, parties can resort to litigation in Turkish courts.

Choosing the appropriate dispute resolution method depends on the nature of the contract and the preferences of the parties involved.

7. Seeking Legal Assistance

Given the complexities involved in drafting and executing contracts under Turkish law, it is advisable for individuals and businesses to seek legal assistance. A qualified contract lawyer can provide invaluable guidance on:

• Drafting clear and enforceable contracts.
• Understanding rights and obligations under Turkish law.
• Navigating potential risks associated with contractual agreements.

Legal professionals can also help ensure compliance with local regulations and represent clients in dispute resolution processes when necessary.

Details of Turkish Contract Law

Understanding Turkish contract law is essential for anyone engaging in business or personal agreements within Turkey. By familiarizing oneself with key principles such as contract definition, types, validity requirements, and dispute resolution methods, individuals and businesses can better protect their interests and foster successful contractual relationships.

1. The Foundation of Turkish Contract Law

Turkish Contract Law finds its roots in the Turkish Code of Obligations (Türk Borçlar Kanunu), which was enacted in 2011 and came into force on July 1, 2012. This code is heavily influenced by Swiss law and incorporates modern legal principles aligned with European Union standards. The primary aim of this legislation is to provide a robust framework for contractual relationships, ensuring fairness, clarity, and legal certainty for all parties involved.

2. Formation of Contracts

Under Turkish law, a contract is formed when the parties reach a mutual agreement on the essential elements of the contract. This typically involves:

• An offer: A clear proposal made by one party to enter into a contract.
• Acceptance: The unequivocal agreement to the terms of the offer by the other party.
• Consideration: Something of value exchanged between the parties.

It’s important to note that Turkish law generally does not require contracts to be in writing to be valid, except for specific types of agreements such as real estate transactions or employment contracts. However, having a written contract is highly recommended for clarity and evidentiary purposes.

3. Freedom of Contract Principle

One of the fundamental principles of Turkish Contract Law is the freedom of contract. This principle allows parties to freely determine the content of their agreement, provided it does not violate mandatory provisions of law, public order, personal rights, or morality. This flexibility enables businesses to tailor their agreements to their specific needs and circumstances.

4. Good Faith and Fair Dealing

Turkish Contract Law places significant emphasis on the principles of good faith and fair dealing. Article 2 of the Turkish Civil Code stipulates that every person must act in good faith in the exercise of their rights and in the performance of their obligations. This principle extends to the negotiation, formation, and execution of contracts, requiring parties to deal honestly and fairly with each other throughout the contractual relationship.

5. Interpretation of Contracts

When disputes arise regarding the interpretation of contractual terms, Turkish courts follow specific principles:

• The actual common intention of the parties is prioritized over the literal meaning of the words used.
• Ambiguous terms are interpreted in favor of the party who did not draft the contract (contra proferentem rule).
• Custom and usage in the relevant industry or locality are taken into account.
• The contract is interpreted as a whole, considering all clauses in context.

Understanding these interpretation principles is crucial for drafting clear and enforceable contracts under Turkish law.

6. Performance and Breach of Contract

Turkish Contract Law provides a comprehensive framework for the performance of contractual obligations and the consequences of breach:

• Specific Performance: In case of non-performance, the aggrieved party can demand specific performance of the contract.
• Damages: The breaching party may be liable for damages resulting from non-performance or improper performance.
• Termination: In cases of material breach, the aggrieved party may have the right to terminate the contract.

It’s worth noting that Turkish law recognizes the concept of force majeure, which can excuse non-performance under certain extraordinary circumstances beyond the control of the parties.

7. Remedies and Dispute Resolution

When contractual disputes arise, Turkish law offers various remedies and dispute resolution mechanisms:

• Litigation: Parties can seek resolution through the Turkish court system, with commercial courts handling most business-related disputes.
• Arbitration: Turkey is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, making arbitration an attractive option for international contracts.
• Mediation: Recent legislative changes have made mediation mandatory for certain commercial disputes before litigation can be initiated.

Choosing the appropriate dispute resolution method and including well-drafted dispute resolution clauses in contracts can significantly impact the efficiency and cost-effectiveness of resolving potential conflicts.

Contacts us for Turkish Contract Law Services

As Turkey continues to attract international investment and business, a solid understanding of Turkish Contract Law becomes increasingly valuable. By familiarizing yourself with these seven essential aspects, you’ll be better equipped to negotiate, draft, and execute contracts that protect your interests while complying with Turkish legal requirements.

Remember, while this guide provides a general overview, the complexities of Turkish Contract Law often require expert legal advice. At Akkas & Associates Law Firm, our experienced team of lawyers specializes in guiding international clients through the intricacies of Turkish business law. Whether you’re entering into a new agreement or facing a contractual dispute, we’re here to ensure your business interests are protected under Turkish law.

For personalized legal advice on Turkish Contract Law or any other aspect of doing business in Turkey, don’t hesitate to contact Akkas & Associates Law Firm. Our expertise is your advantage in navigating the Turkish legal landscape.