Construction Contracts Guide: Contract Types, Form, Obligations of the Parties, Termination and Settlement

What is a construction contract, and which legal rules apply?

A construction contract is a contract concluded for the purpose of carrying out a structure or specified construction works, in which the parties determine not only the physical works but also the relationships concerning design, organization, materials, price, time, supervision, acceptance and liability. The basic private-law foundation of construction contracts in the narrow sense is Articles 470 et seq. of the Turkish Code of Obligations (TBK) on the contract for work. Under TBK Art. 470, the contractor undertakes to produce a work and the owner undertakes to pay a price in return. These reciprocal performances distinguish a contract for work from mere service relationships or sales of goods. K1

Calling a contract “turnkey,” “contracting,” “flat-for-land,” “project development” or “build-and-sell” does not by itself settle its legal nature. Under TBK Art. 19, the true and common intention of the parties, the principal performances undertaken and the mandatory provisions that apply are decisive. In particular, the official form provisions apply to mixed contracts containing a promise to transfer title; Law No. 6502 is examined where a consumer’s acquisition of housing is involved; Laws No. 4734 and 4735 for public works; and public-law provisions for zoning acts. K1 K3

The boundary between a contract for work and other relationships

At the center of a contract for work is the agreed result, that is, producing a work that conforms to the contract. A service contract may rest mainly on a relationship of performing work and dependency; a sales contract on the transfer of ownership of an existing or future thing; and an agency (mandate) contract, depending on the nature of the specific task, on an obligation to carry out an activity or task. In the same large project, the contractor agreement, subcontracts, design and supervision contracts, equipment sales, and lease or financing relationships may be linked yet legally separate transactions.

The characterization of the contract is not merely an academic matter. It directly affects the competent court, the applicable notice and limitation rules, the burden of proof, liability for defects, and the calculation of termination and settlement. The mere fact that one of the parties is a company does not subject all claims to the same procedure; the relationship and the type of claim must be determined concretely.

Main types of construction contracts and how they differ

The table is not a classification that exhausts all the legal relationships of a single project. For example, in a tourism facility project, the acquisition of immovable property, zoning and coastal permits, the EPC construction contract, the hotel management agreement and credit security may exist in the same project but under different legal regimes.

The decisive difference between construction in return for a land share and turnkey

In a turnkey contract, the owner’s counter-performance is mostly a monetary debt. In construction in return for a land share, by contrast, the landowner’s obligation to transfer a share of ownership in the immovable or an independent unit stands against the contractor’s obligation to build. For this reason, in a land-share contract not only delivery and defects but also the timing of registration, the conditions on which the share is to be transferred, the acquisition by third parties and the security to be established at the land registry come to the fore. Because of the element of transferring immovable property, the form required for validity is also different. K2 K6

FIDIC and EPC contracts do not replace Turkish law

FIDIC’s Red Book, Yellow Book and Silver Book models offer different starting conditions with respect to risk, design responsibility and project management. There are reprints of the second editions of FIDIC 2017 with 2022 amendments. However, the name of a standard text does not by itself determine the outcome of a dispute: which edition was signed, how the particular conditions modify the general conditions, the governing law, the notice rules and dispute resolution are examined separately. K8

Formation of the construction contract and the form required for validity

TBK Art. 12 does not make the validity of contracts subject to a particular form unless the law provides otherwise. For this reason, a private-law construction contract containing only an obligation to produce a work and to pay a price is, as a rule, not subject to official form. Even so, failing to draw up a written, detailed contract and signed technical annexes creates a serious risk with respect to proving the scope of works, variations, payment and delivery. A special form agreed by the parties themselves may also be binding under TBK Art. 17. K1

Official form in a contract for construction in return for a land share

Because a contract for construction in return for a land share involves, together with the obligation to perform work, the transfer of ownership of immovable property or a promise of transfer, the official form provisions are assessed for the validity of the contract, above all TMK Art. 706 and TBK Art. 237. In practice, what matters is valid formation by a contract executed in notarial form or by a land registry transaction that the legislation permits; it cannot be assumed that a mere ordinary written document signed by the parties is generally sufficient. It must also be borne in mind that a later material amendment of a contract formed in official form may itself raise a form problem. K1 K2

The consequence of a lack of form and the assessment, under the principle of good faith, of invoking that lack of form in a particular case are not the same question. Automatic validity cannot be granted to all ordinary written documents on the ground that there are exceptional judicial assessments. The parties’ actual performances, the land registry movements and the claims must be dealt with on the basis of the file.

Who can sign the contract?

The capacity of a natural person, the identity of the owners of the immovable, co-ownership in shares or joint ownership, the authority of the person signing on behalf of a company, the scope of the power of attorney and the representation requirements needed for a special transaction must each be checked. It is risky to assume that general authority exists for a title transfer, a mortgage, the creation of a real right or a transaction that places the landowner under an obligation. The articles of association, the trade registry, the signature circular and current representation records should be examined together.

Integral parts of the contract: Design, technical specification and order of precedence of documents

If the work, quality and time the parties have undertaken cannot be understood from the body text alone, the resolution of the dispute becomes dependent on the technical documents. The status of each of the following should be stated: the approved architectural, structural, mechanical and electrical designs, the room schedule, the materials schedule, the bill-of-quantities summary, quantity takeoffs, the soil survey, the works program, performance descriptions, the permit, additional protocols, the tender and correspondence.

The statement “The technical specification will be determined later” may leave the parties’ essential performances uncertain if the basic characteristics have not been described at all. The legal backbone of the main contract should contain the parties, the counter-performances, delivery, security, sanctions and termination provisions; detailed technical data should be set out in expressly incorporated annexes. If a conflict arises among the annexes, the applicable order of precedence of documents, the relationship between the particular and general conditions and the authority to make changes should also be written down.

Additional work performed without a variation order

An increase or decrease in work, a change of materials or an architectural revision is, in most disputes, argued over at the point of whether there was a written instruction and an authorized approval. That a work was regarded as technically necessary does not always mean its price can be separately claimed. First, whether it was within the scope of the original contract is considered; then the variation instruction, acceptance, performance, price and the conduct of the other party. It is important that e-mails, drawing revisions, meeting minutes and attachment records during the works are tied to the same work.

Contract price, progress payments, advance payment and final account

A price clause does not consist merely of writing the total price. The currency, VAT and other financial burdens, the payment schedule, the set-off of the advance, approval of progress payments, the objection period, deductions, retention of security, index/price adjustment, calculation of additional work and closing of the final account should be provided for. TBK Art. 479 contains the general rule on when the price falls due; the progress-payment arrangements determined by the parties and those in special regimes are assessed separately. K1

A claim for a price increase under a lump sum

Under TBK Art. 480, if a lump sum has been agreed, the contractor is, as a rule, bound to produce the work for that price. That the works cost more than expected does not by itself give rise to a right to a price increase. However, if events that were unforeseeable at the outset, or that were foreseen but not taken into account by the parties, prevent the work from being done for the lump sum or make it extremely difficult, the possibilities of adaptation and termination provided by law may be discussed. In a specific case, one must distinguish between a change in the scope of the work and a mere increase in cost. K1

Unit price, quantity takeoff and proof of progress payments

In the unit-price model, the claim is mostly determined by multiplying the quantity of each work item actually performed by the price. However, which quantity takeoff is to be used, how concealed works are to be measured, the price of work that is dismantled or redone, and the effect of progress-payment approval on the final account should be clarified through written records. Signing a progress payment report may not, in every case, mean waiving all objections; reservations and the contract provision are examined together.

Document set for a progress-payment claim

In a dispute over progress payments and the balance of the price for work, the contract and additional protocols, quantity takeoffs and attachments, works program, site instructions, progress-payment approval, invoice, bank movements, minutes, final account, notices and the technical expert report should be matched up. The existence of an invoice alone, or a one-sided calculation table, does not in every case prove that the disputed works were actually performed in conformity with the contract.

Commencement, works program, extension of time and force majeure

The commencement date may be tied to handover of the site, obtaining the permit, payment of the advance or the submission of a particular document. For the delivery date, the distinction among calendar days, working days, phases and interim deadlines is important. The conditions under which design changes, the owner’s instructions, payment delays and waiting caused by administrative permits will give rise to an extension of time should be determined in the specific contract.

The presence of a force majeure or extraordinary-event clause does not by itself excuse all delays. The foreseeability and avoidability of the event, its effect on the contractor, the notice obligation, the actual effect on the works program and mitigation measures are examined. A mere increase in cost, factual impossibility and excessive difficulty of performance are separate concepts. If both parties contributed to the delay, the effects are separated.

Principal obligations of the contractor and duties of the owner

Under TBK Art. 471, the contractor must perform the obligations it has undertaken with loyalty and care, paying regard to the owner’s legitimate interests. The standard of care is assessed according to the professional and technical nature of the work. The scope of the responsibilities to comply with the design and technical specification, to give the necessary notices, to carry out the work with appropriate materials and expertise, to organize subcontractors, and to provide the documents required for safety and delivery is derived from the contract and from mandatory rules. K1

The owner, for its part, must perform its duties to pay the agreed price, to provide the necessary site and documents, to carry out the permit or approval procedures it has undertaken in the contract, and to cooperate reasonably and make decisions. The owner’s delay or contrary instruction does not necessarily leave the whole loss with the contractor. The provisions of TBK Arts. 472 and 476 on materials, warnings and causes attributable to the owner are important in this distinction. K1

If a risk of defects emerges during the works

TBK Art. 473 allows, in certain cases in which late commencement or delay of the work endangers delivery, recourse without waiting for the delivery date. The same article regulates the notice, where it is clearly foreseeable during the making of the work that it will be defective or contrary to the contract, of setting an appropriate period and having the work carried out by a third party. For this provision to apply, the type of deficiency, fault, the content of the notice and the time-limit conditions must be examined separately. K1

Delivery, actual use, provisional acceptance and final acceptance are not the same thing

Delivery concerns the agreed work being placed in fact under the owner’s control, whereas provisional and final acceptance may be technical-legal procedures that are contractual or belong to a special regime. Turnkey handover, the start of use of an independent unit, the acceptance record and the occupancy permit certificate do not, in every specific case, indicate the same legal event. If the contract ties the delivery condition to the occupancy permit (iskân), that provision is taken into account; general conclusions to the contrary are not accepted on their own.

It is useful for the provisional acceptance record to list the deficiencies and to provide for the period for their remedy and for deduction from security. At final acceptance, the warranty period, last defects, final progress payment and return of security come up. However, it cannot be assumed that the acceptance procedure of a public works contract applies as is to a private-law contract; references in the contract and special legislation must be checked.

Incomplete work and defective work: Why does the type of claim matter?

Incomplete work describes a promised work that has not been done at all or not to the extent agreed in the contract; defective work describes a work produced that does not have the agreed qualities or does not meet the conformity required by law. The distinction matters for the calculation of the price, notice, the elective rights and limitation. It may not be correct to lump all losses and deficiencies under the heading “defect.”

TBK Art. 474 regulates the rule on reviewing the work at an appropriate time after delivery and notifying defects. TBK Art. 475, in turn, provides, where its conditions are met, the options of rescission of the contract, a reduction of the price in proportion to the defect, or free repair that does not require excessive expense, and states that the general right to damages is reserved. It should not be forgotten that where the work has been made on the owner’s immovable property and its removal would cause excessive loss, there is a special limitation on rescission. K1

Notice of open and latent defects

Deficiencies that can be detected by reasonable inspection at delivery and latent defects that appear later are not subject to the same time for notice. TBK Art. 477 regulates the effect of acceptance of the work and the obligation to give notice without delay when a latent defect appears. Defects knowingly concealed by the contractor and the particular features of the case are assessed separately. Notice, the finding report, photographs and correspondence should complement one another. K1

Limitation is not a single period for every construction claim

In the limitation regime that TBK Art. 478 provides for actions arising from defects in the work, for immovable structures the period is, as a rule, five years from delivery; if the contractor is grossly at fault, twenty years regardless of the nature of the defective work. These periods cannot be applied automatically to every claim for damages or for the price of work without taking into account consumer law, the nature of the contract, the legal basis of the claim and the law applicable in time. K1

Delay, default, specific performance and damages

Where the contractor fails to perform its delivery obligation under the contract on time, the first question is whether there is an actually due performance and a proper default. The notice, the agreed date and the other conditions of default under TBK Art. 117 et seq. are assessed separately. Liquidated delay damages, lost rent, loss of use, additional financing costs and other losses should be assessed together with the legal basis, the loss and the conditions of set-off, so that they are not claimed twice for the same fact. K1

Within the framework of TBK Arts. 123–125, an appropriate additional period, exceptions and elective rights may be discussed. However, it is not correct to apply the same mechanical sequence to all construction contracts. In a contract for construction in return for a land share in particular, the level of works completed, the title transfers, third-party rights and the consequences of termination affect the claim chosen. K1 K2

Security, mortgage, suretyship, insurance and risk allocation

An advance guarantee, performance bond, performance security, retention, suretyship, corporate guarantee, bank letter of guarantee and mortgage have different legal functions. The contract should clearly provide which debt each secures, when it ends, the conditions for its return and how it will be called. Whether a letter of guarantee is unconditional or conditional can be decisive for demand and payment. If the same project has both a mortgage given to the bank and a security mortgage of the landowner, the ranking, the beneficiary and the effects on third parties are assessed separately.

As to insurance, CAR/EAR, third-party liability, professional liability and work-accident covers do not cover the same risks. Policy deductibles, exclusions, loss notification and the contractor’s contractual liability are not identical to the insurer’s obligation. The existence of a policy does not mean that all loss arising from breach of contract will necessarily be covered.

Land share and title transfer: The significance of the 2025 decision unifying case law

The decision of the Grand General Assembly for the Unification of Case Law of the Court of Cassation of 16.05.2025, E.2024/1, K.2025/2, accepted that, where the contractor, after the immovable that is the subject of a contract for construction in return for a land share has been registered in its name, sells it to third parties or creates a mortgage, the third parties’ claims of reliance on the land registry and good faith must be heard, notwithstanding the invalidity of the contract or its retroactive termination. The ownership or mortgage right of a good-faith third party may be protected; a different result may follow where it is found in the specific case that there was no good faith. K2

This decision does not mean that the settlement claim between the parties to the contract, or the contractor’s liability for non-performance, falls away. The contractual account between landowner and contractor and the protection of a third party who acquires a real right from the land registry are separate layers of examination. The court must discuss good faith, registration, transfer, mortgage and the knowledge at the time of acquisition on the basis of concrete evidence.

Rescission, termination, adaptation and settlement

The word used in ending a construction contract does not by itself determine the legal consequence. The stage of performance reached, the gravity of the defect, the conditions of default, the possibility of future performance, the basis of the owner’s right to end the contract and the parties’ common intention are examined together. TBK Arts. 473, 475, 480 and 484 regulate, under different conditions, the possibilities of early rescission, rescission in case of defects, adaptation, or termination against compensation. The financial and legal consequences of each differ from one another. K1

The settlement distinction between rescission and termination

In rescission, mutual restitution obligations may come to the fore; in termination with effect for the future, the part completed and benefited from is treated differently in the settlement account. By the nature of a construction contract, fully taking back works physically carried out is not always possible. The completion rate of the work, usable parts, defects, third-party transfers, earlier payments, land registry records and security should be combined in a single account file. Past judicial approaches should not be applied while ignoring the principles that the 2025 decision unifying case law has introduced with respect to third parties. K2

The owner’s right to terminate against compensation

TBK Art. 484 allows the owner, before the work is completed, to terminate the contract on condition of paying the price of the part already made and making good all of the contractor’s losses. This provision must not be confused with termination on account of the contractor’s serious breach of contract; the claim and the account differ according to the ground of termination. K1

What is taken into account in the settlement account?

In settlement, the amount of work completed, the approved and actual design, usability, the cost of remedying defective works, the advance paid, progress payments, security and the final account, the parties’ fault, the delay sanction in accordance with the contract and justified expense records are examined in detail. Both writing the price of unperformed work as if performed and disregarding all works the owner has actually benefited from may produce a wrong result. Where necessary, objective technical data should be generated through on-site examination, preservation of evidence and an expert report.

Preparing documents and evidence before litigation

Which part of the work the dispute concerns, the technical basis of the claim and the type of claim should be clearly determined. In particular, for works that can later be altered, the need for preservation of evidence, an expert examination or an on-site examination should be assessed early. One-sided schedules gain strong probative value only together with the underlying contract, minutes, photographs, payments and technical records.

Document checklist table

Competent court, mandatory mediation and arbitration

In a construction dispute, the competent court may vary according to the capacity of the parties and the legal nature of the transaction. For monetary claims and claims for damages that are commercial cases, the relevant provisions on mediation as a condition for bringing suit; in consumer transactions, consumer legislation and special procedural provisions; and in general private-law disputes, the subject-matter and territorial jurisdiction rules of the HMK are examined separately. The availability of mediation, arbitration, litigation and enforcement options also depends on the nature of the claim. Generalizations such as “A construction case is always brought before a single court” or “Mandatory mediation applies in all construction disputes” are not correct.

If there is an arbitration clause, the scope of the intention to arbitrate, arbitrability, the seat, the language, the selection of arbitrators, pre-arbitration notice or dispute board stages and the relationship with interim legal protection should be examined. Disputes in the field of public law over a permit or an administrative fine do not become subject to private-law arbitration merely because there is a construction contract.

Checklist applicable before signing the contract

Conclusion

Concluding a construction contract safely depends not merely on signing a legal template, but on regulating together the nature of the work, the technical scope, the materials and works program, the price and progress-payment system, the title and security, and delivery and termination. Because the applicable law differs among a contract for work, construction in return for a land share, a housing sale, a public works contract and FIDIC/EPC models, this distinction should be made at the start of the contract. In a dispute, the relationship between the level of technical completion and the legal claim should be explained with evidence; in particular, the real rights of third parties and the 2025 decision unifying case law must not be overlooked.

Frequently Asked Questions

Is a construction contract valid without a notary?

A private-law contract for work containing only an obligation to produce a work and to pay a price is, as a rule, not subject to official form. However, official form is important for contracts concerning ownership of immovable property, such as construction in return for a land share and a promise to transfer immovable property. The actual performances and the applicable statutory provisions, rather than the title of the contract, should be the basis. K1 K2

Is a contract for construction in return for a land share invalid unless annotated at the land registry?

An annotation and the form required for validity of the contract are not the same matter. An annotation, if its conditions are met, may strengthen the effect of a personal right against third parties; but it does not by itself remove the official form requirement for validity. The specific annotation, registration, transfer and entitlement records must be examined.

If a lump sum has been agreed, can an additional fee never be claimed?

No. The rule on lump-sum prices is TBK Art. 480; but additional works outside the original scope that were properly requested and accepted, a contract variation, or the extraordinary conditions in the law may call for a different assessment. One must distinguish between a mere cost increase and a change of scope. K1

Does turnkey handover eliminate all rights in respect of defects?

No. Turnkey handover, acceptance, the occupancy permit, an open or latent defect and notice of a defect are separate facts. The contract, the technical records, the nature of the work and TBK Arts. 474–478 are assessed together. K1

Can a construction contract be terminated before it is completed?

Yes, when the conditions are met. However, contractor default, defective performance, adaptation under TBK Art. 480 and termination against compensation under TBK Art. 484 differ from one another. The settlement of the works and payments on termination also varies with the legal basis chosen. K1

Is a title deed obtained from the contractor automatically cancelled by the landowner’s action?

No. The decision of the Grand General Assembly for the Unification of Case Law of the Court of Cassation of 16.05.2025 considered it necessary to hear the claim of reliance on the land registry and good faith of a third party who has acquired a real right from the contractor. Whether good faith exists is assessed according to the concrete facts at the time of acquisition. K2

Is mediation always mandatory in construction cases?

No. The conditions for bringing suit that may apply in commercial and consumer relationships differ from the procedure for other private-law or administrative disputes. No general obligation can be stated without determining the subject of the claim, the capacity of the parties and the special regulation that applies.

Sources

K1 Grand National Assembly of Türkiye, Turkish Code of Obligations No. 6098, Arts. 12, 19, 97, 113, 117–126, 237, 470–486. Text as adopted by the TBMM (with the caveat that it does not include later amendments): cdn.tbmm.gov.tr

K2 Court of Cassation Grand General Assembly for the Unification of Case Law, 16.05.2025, E. 2024/1, K. 2025/2, Official Gazette 18.07.2025, No. 32959; full decision: lexpera.com.tr

K3 Republic of Türkiye Ministry of Trade, Law No. 6502 and the Regulation on Pre-Paid Housing Sales, legislation page: ticaret.gov.tr

K4 Republic of Türkiye Ministry of Environment, Urbanization and Climate Change, Zoning and building inspection practices, yapiisleri.csb.gov.tr and meslekihizmetler.csb.gov.tr

K5 Public Procurement Authority, Public works regime and tender decisions, kik.gov.tr and ekap.kik.gov.tr

K6 Nihan Koyuncu Aktaş, “Arsa Payı Karşılığı İnşaat Sözleşmelerinde Arsa Sahibi Lehine Kurulan İpoteğin (İnşaat Teminat İpoteğinin) Hukuki Niteliği” (“The Legal Nature of the Mortgage Established in Favor of the Landowner in Contracts for Construction in Return for a Land Share (the Construction Security Mortgage)”), Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi, 2025, 29(1), 3–43: doi.org

K7 Gökhan Şahan – Merve Çağlak, “Usul Hukuku Açısından Arsa Payı Karşılığı İnşaat Sözleşmelerinden Doğan Davalarda Üçüncü Kişinin Hukuki Durumu” (“The Legal Position of the Third Party in Actions Arising from Contracts for Construction in Return for a Land Share from the Standpoint of Procedural Law”), Marmara Üniversitesi Hukuk Fakültesi Hukuk Araştırmaları Dergisi, 2025, 31(1), 640–666: doi.org

K8 FIDIC, 2017 Red, Yellow and Silver Book – 2022 reprints with amendments, official publications catalog: fidic.org