The questions below offer a general framework on key provisions in commercial contracts, termination and rescission, contractual penalties, and types of contracts. In a specific case, time limits, documents and the regulations in force are assessed separately.
Showing 1–6 of 6 questions
Which provisions should be given priority when drafting a commercial contract?
The provisions on the parties, the performances, the price, the term, the performance and delivery criteria, security, breach and dispute resolution should be clear.
In commercial contracts, the price and a description of the work alone are not sufficient. The scope of the work, the delivery and acceptance procedure, the remedying of deficiencies, the payment schedule, sanctions for delay, confidentiality, intellectual property rights and the consequences of termination should be written in an enforceable manner. The parties’ powers of representation and the mandatory formal requirements should be checked in advance. Mandatory provisions of legislation and general terms and conditions may prevent every provision written into the contract from being treated as valid.
Can termination and compensation be considered together in the event of breach of contract?
Yes, but the conditions for termination, the basis of the compensation and the heads of loss that may be claimed must be examined separately.
The nature of the breach, whether a formal notice (ihtar) and an additional period are required, whether performance is still possible, and any special termination procedure provided for in the contract are important. Exercising a right of termination or rescission does not eliminate all claims for compensation in every case; however, the heads of loss that can be claimed may vary depending on the legal consequence chosen. Payments made, work delivered, the fate of the security and the nature of the contractual penalty should be assessed together.
What should be considered when drafting contractual penalty and security provisions?
Which breach gives rise to the contractual penalty and how the security will be used should be regulated in a manner that is specific, measurable and lawful.
A contractual penalty may have different consequences depending on whether there is delay, defective performance or no performance at all. For each of a letter of guarantee, suretyship, pledge, deposit or other forms of assurance, the conditions of validity and of realization differ. The relationship between the contractual penalty and actual loss or interest should be clearly regulated. Whether the debtor is a merchant, an objection that the penalty is excessive and the mandatory provisions that apply should also be researched separately.
Does a force majeure clause extinguish all payment obligations?
No; the definition of the event in the contract and its effect on the specific performance are assessed separately.
Force majeure, excessive difficulty of performance and impossibility are different legal institutions. The notice period, the affected performance, the causal link and the debtor’s duty to prevent the event must be examined.
If a commercial contract contains an arbitration clause, is it impossible to apply to court at all?
A valid arbitration agreement may require certain disputes to be taken to arbitrators; however, there are exceptions and court support.
The arbitrability of the dispute, the scope of the arbitration clause, interim relief and the avenues of recourse against an arbitral award should be distinguished. An arbitration clause does not automatically extend to every kind of dispute.
Is an unlimited exclusion-of-liability clause in a commercial contract valid?
Not every exclusion-of-liability clause is valid; gross negligence and mandatory provisions in particular impose limits.
The limits of an advance exclusion-of-liability agreement are examined under Article 115 of the Turkish Code of Obligations (TBK) and the relevant special provisions. The parties’ status as merchants, the principle of good faith and the conditions for the formation of the contract are also important.