With Which Questions Should a Contract Review Begin?
A contract’s importance for a company is not measured by how many pages it has. A short order confirmation can create a long-term supply obligation; a text that looks detailed may not explain when delivery will be completed. The starting question of the review is what the company wants to obtain and which obligations it is willing to take on. The text should be read together with this commercial purpose and with the way the work will actually be carried out.
In the first meeting, the subject of the transaction, the roles of the parties, the term envisaged, the price, the importance of the work to the company’s activity and the effect of delay are determined. The purchasing unit’s delivery expectation, the finance unit’s payment plan and the technical team’s acceptance criterion must be compatible with one another. Sending only the draft contract may not allow an adequate review unless the commitments given in the offer and annexes are seen.
The title of the contract is also not decisive by itself. A sale of goods, a contract for work, a continuing service or a relationship combining these may call for different rules. The Turkish Code of Obligations bases the interpretation of contracts on the parties’ real and common intention. Without determining the legal nature of the work, the same delivery, defect, termination and liability provisions cannot be applied to all transactions.[1]
This article focuses on the pre-signing review in companies’ ordinary customer and supply relationships. Acquiring shares or a business requires a wider review of the company as a whole; for that scope, the legal due diligence guide may be assessed separately. The working suggestions below are not a single control model required by law for every contract.
How Are the Right Party and Signing Authority Determined?
The trade name should be distinguished from the brand or group name
The party to the contract may not be the same as the brand on the offer, the person conducting the negotiations or the well-known company of the group. The trade name, registry and address details and the person to whom payment is to be made should be checked together. That one company conducts the sales negotiation does not show that it automatically guarantees the debt of another group company. Because commercial companies have separate legal personalities, it must be written clearly which company undertakes which performance.[2]
If the manufacturer, the seller, the company doing the installation and the maintenance provider are different, tasks should be separated. In particular, whom the company will turn to when a problem arises, the possibility of different providers pointing to one another, and from which counterparty the customer will ask for which work, are examined. That they operate under the same brand does not remove the distinction between debtors in the contract.
Internal approval and authority to represent the company should be reviewed separately
Current trade registry records, representation resolutions, the signature arrangement and any power of attorney should be read together. Based on an old signature document, it should not be assumed that the person still has the same authority. Joint signature, branch scope and the special limits of a power of attorney should be checked according to the nature of the transaction.[2]
Internal budget or purchase approval and authority to represent against third parties are not the same assessment. TTK Article 371 specifically regulates the effect on third parties acting in good faith of a limitation on representation authority; for limited companies the reference in Article 629 is taken into account. Failure to obtain internal approval does not by itself lead to the conclusion that the contract definitely does not bind the company. The legal review should show external representation and internal responsibility separately.[2]
If a transaction is to be made with a related company, shareholder or manager, conflicts of interest and the necessary organ resolutions are also assessed. This area is addressed in detail in the article on related-party transactions with the company.
Why Do Pre-Signing Correspondence and the Final Version Matter?
Under the Turkish Code of Obligations, a contract is formed by reciprocal and corresponding declarations of will; unless the law provides otherwise, there is no general requirement of form. The legal assessment therefore cannot be limited to the last page sent for signature. Acceptance of an offer, placing an order, starting the work or earlier correspondence may produce binding consequences in a specific case. Form requirements imposed by law or agreed by the parties are examined separately.[1]
The offer, order form, technical specification, price list, additional protocols and the standard terms the other side refers to should also be included in the review. It should be understood which dated version of conditions shown by an internet link has been incorporated into the contract. A clause stating that an annex that has not been seen is accepted may lead to assuming an obligation whose scope is unknown.
At the end of negotiations, the clean text and the text showing changes should be compared. It is checked whether the payment or liability arrangement agreed has been carried into the final version. If annexes conflict, it is determined which document will apply on which matter. The sentence “the annexes are an integral part” does not by itself explain two conflicting delivery dates.
It is recommended to identify the version the parties will sign by its date and version information and to check blank fields, missing annexes and sections to be filled in later. The version reviewed should also be stated in the legal opinion. An opinion given on one draft should not be used as if it belonged to another text that has changed.
How Are the Scope of Work, Delivery and Acceptance Clarified?
The work to be delivered should be made concrete
What expressions such as “turnkey”, “full service” or “delivered in working order” mean in the specific transaction should be explained. Quantity, technical specifications, capacity, place of delivery, installation, training, user documentation and necessary access can be specified separately. Whether the work is complete merely because the seller sends the product is assessed according to the real performance of the contract.
In a service relationship too, the activity to be carried out, the result to be delivered and the reporting arrangement should be understandable. In monthly advisory, maintenance or support services, which tasks are included in the price, and how additional work will be requested and its fee approved, should be stated. The criterion should be one the company can actually monitor. Technical expressions that will not be applied lengthen the text while leaving uncertainty in place.
The delivery record and the act of acceptance should be separated
Arrival of the goods at the warehouse, completion of installation and passing the performance test may be different stages. The contract should show which record will be prepared at which stage and who will sign in what capacity. Whether a warehouse worker’s signature confirming the number of cartons is given the meaning of acceptance of technical conformity as a whole should be specifically examined.
The relationship of acceptance to payment, the start of the warranty and notice of non-conformity should be established. The recording of deficiencies, the method of remedying them and the re-inspection arrangement should be explained. Because the rules on inspection and notification may differ in sales, contracts for work and other contracts, a single time period or a single acceptance consequence should not be written for all transactions.[1][2]
If the scope changes during performance, its effect on price and schedule should also be decided. The person authorized to send an additional request should be distinguished from the person who only handles daily coordination; who will approve a change and by which document it will be recorded should be determined.
How Are Payment, Price Changes and Security Reviewed Together?
The payment schedule should be linked to the progress of the work
As important as the amount of the price is the event on which it falls due. Order, start of production, shipment, delivery, acceptance or submission of a report are different payment stages. If issuing an invoice and the fulfillment of the payment condition are to be treated as the same, its compatibility with the nature of the work should be assessed. The payment arrangement where there is partial work or disputed items should also be explained.
It is examined what the advance payment is allocated to, how the unused part will be calculated and how it will be treated when the contract ends. A request for payment into an account other than that of the contracting party should be investigated separately. A request to change an account should be confirmed through a previously known authorized person and a verified communication channel; reliance should not be placed only on account details in a new e-mail.
Whether taxes, transport, installation, license and maintenance costs are included in the price should be clear. If a price change is envisaged, the criterion, the accounting period, the notification and the procedure in case of dispute should be determined. In transactions involving prices in foreign currency or linked to foreign exchange, the current restrictions applicable to the parties and the type of contract should be verified separately; this article does not draw any conclusion of freedom or prohibition for all commercial contracts.
The scope and term of security should match the real risk
A letter of guarantee, suretyship, pledge and other forms of security are not the same legal instrument. Which debt it secures, its amount, the condition for a demand, its term, the extension arrangement and the time of return should be examined together. If the security will expire before delivery is delayed, the protection in the contract may in practice weaken. Who will hold the original security, verify it and follow it should be determined.
A company manager’s signature on behalf of the company and giving personal security in their own name are separate transactions. For suretyship, the requirements of form and handwriting in TBK Article 583 are assessed, as are the rule in Article 584 on the spouse’s consent and the commercial exceptions. Article 603 is also taken into account where natural persons give personal security under another name. Changing the heading does not mean that the protective provisions that apply are automatically avoided.[1]
How Are Ready-Made Contracts and Unilateral Right of Amendment Assessed?
Provisions prepared in advance by the other side for use in many similar transactions can bring the review of general terms and conditions into play. This review matters for contracts between companies too. The way the provisions were prepared, the opportunity to become aware of them, their acceptance and their content should be assessed concretely. Merchant status does not mean that these questions are never examined.[1][2]
TBK Articles 20–25 regulate the incorporation of terms into the contract, unusual provisions, interpretation of unclear clauses, unilateral right of amendment and content review. Writing a sentence in the contract that all the articles were negotiated does not by itself take the provisions out of the category of general terms and conditions. On the other hand, a provision’s being against the company does not mean that it is invalid in every case; the conditions of the relevant review are examined separately.[1]
For example, a clause granting the supplier a unilateral right to change scope, price or service level should be handled together with the limits of the change and the company’s related obligations. In a provision that updated online terms apply immediately, how any change is to be learned may also be unclear.
The negotiation request should be made concrete: making the change subject to mutual approval, accepting a particular calculation method or providing for the company’s option not to continue may be proposed. Which solution is suitable is determined with regard to the economic balance of the work and the mandatory provisions that apply.
What Distinctions Should Be Made in Liability Limits and Penalty Clauses?
Not every provision limiting liability produces the same result
Limiting liability to the contract price or a certain amount should be read together with which losses are left outside its scope. Instead of unexplained expressions such as “indirect loss”, the risks that the parties wish to regulate should be made concrete. Stoppage of production, a commitment given to a third party or loss of data may call for different review.
Under TBK Article 115, an agreement made in advance excluding liability for gross negligence is absolutely void. Other limitations the law provides with regard to activities carried out under a license and to the contract of service are also taken into account separately. The law’s concept of a contract of service should not be treated as identical to every relationship called “service” in everyday language between companies. TBK Article 116 is examined separately for the acts of auxiliary persons.[1]
The relationship of the penalty clause to performance and compensation should be set out clearly
For which breach a penalty clause arises, how it is calculated, its upper limit and its relation to other claims should be understandable. TBK Article 179 distinguishes a penalty stipulated for non-performance or improper performance from a penalty stipulated for failure to perform at the time or place determined. Reservation, acceptance and the order of the contract can affect the possibility of claiming. It should not be assumed that all sanctions can be claimed together without limit in the same event.[1]
The provision in TBK Article 182 on reduction of an excessive penalty clause should be read, for a debtor who is a merchant, together with TTK Article 22. A company should not accept a high penalty on the thought that it will surely be reduced later. The limit in TTK Article 22 does not make unnecessary the review of mandatory provisions and general conditions of validity. In negotiation, the real aim is to make the sanction, the breach, the period and the economic effect visible before signing.[1][2]
How Should Term, Renewal and Exit from the Contract Be Planned?
The start date, the condition for entry into force, the initial term and the renewal arrangement should be read together. If the signing date and the date the service starts differ, its effect on payment and obligations should be explained. In automatic renewal, the notice time, the addressee and the method should be determined and passed to the person responsible for follow-up inside the company. Long-term exclusivity or a minimum purchase commitment should be assessed separately for the company’s future business options.
Expiry of the term, ordinary termination, ending because of breach of contract and ending by mutual agreement can be different situations. For which breach a notice or cure period is provided, and on what conditions suspension of the work depends, should be examined. Writing “termination” in the contract does not produce the same effect, retroactive or prospective, in every relationship. The details of default and the optional rights are addressed in the review of the creditor’s rights on the debtor’s default.[1]
The termination clause should also regulate settlement of accounts for open orders and completed work. Unused advances, specially produced stock, equipment to be returned, access rights and maintenance that must continue can be determined separately. It should be clear whether confidentiality or certain rights of use will continue after the end.
Listing events under the heading of force majeure is not sufficient by itself. The event’s effect on the specific performance, notification, loss-mitigating measures, the period of suspension and the option of termination should be examined. Impossibility of performance and excessive difficulty of performance are regulated in TBK Articles 136–138 with different conditions. It cannot be accepted that an increase in cost or difficulty in supply gives an automatic right of termination or adaptation in all events.[1]
How Should Data, Confidentiality and Dependence on Third Parties Be Regulated?
If trade secrets, customer records or personal data will be shared for performance of the contract, the purpose and limit of access should be determined. The definition of confidentiality, the persons who may have access, notification of unauthorized sharing and the arrangement for return or deletion after the contract should be made concrete. For personal data, the parties’ actual roles and statutory obligations do not change automatically according to the capacity chosen in the text.
Data security obligations under KVKK Article 12 are not regarded as satisfied by adding a confidentiality sentence. If data is processed through a service provider, the necessary technical and administrative measures, the access arrangement and incident notification should be addressed together. The Authority’s explanation stresses the responsibility of the data controller, together with persons processing data on its behalf, for security measures.[5]
In works where software, designs or reports are obtained, what rights of use, modification or assignment the company will acquire should also be examined separately. Payment of the price should not by itself be made the basis for concluding that all intellectual property rights and third-party licenses have been acquired. Under Article 52 of the Law on Intellectual and Artistic Works, contracts and dispositions concerning economic rights require written form and the rights must be specified individually. The owner of the rights, their scope and the legal nature of the work concerned should be researched separately.[6]
If a subcontractor will be used, which part of the work may be assigned and the obligations of the main counterparty should be determined. If a technical system or account is tied to another provider, how the business will continue operating when the service ends should be explained. Data export, administrative access and transition support can, where needed, be made part of the delivery and exit arrangement.
How Are Provisions on Notice, Evidence and Dispute Resolution Reviewed?
Daily correspondence should be separated from legal notice
E-mail used for daily coordination of the work and a notice of default, termination or withdrawal do not serve the same function. TTK Article 18/3 regulates, for these notices between merchants, the routes of notary, registered letter, telegram or registered electronic mail with a secure electronic signature. The addressee and method in the contract should be examined together with the subject of the notice and the rules that apply. This provision should not be extended to mean that all commercial correspondence must be made only by these routes.[2]
A record-keeping arrangement should also be set up in advance. Order changes, delivery and acceptance records, complaints, correction entries and payments should be able to be linked to the same transaction. Provisions under which only the other side’s records would be regarded as conclusive evidence should be assessed separately. HMK Article 193/2 treats as invalid evidence agreements that make it impossible, or extraordinarily difficult, for a party to exercise its right to prove.[3]
Court, arbitration and governing law are not the same choice
A competent-court clause can affect the cost of access and follow-up when a dispute arises. Under HMK Articles 17–18, the capacity of the parties, written form, the specific legal relationship and mandatory jurisdiction limits are examined. Writing the name of a court does not show that a valid jurisdiction agreement has been formed in every case.[3]
If arbitration is considered, the intention to arbitrate, its scope and the arbitration regime that will apply should be clarified. Preferences such as the number of arbitrators, the institution, the seat, the language and the cost should be assessed according to the nature of the work. If there is a foreign element, the governing law, the place of dispute resolution and enforcement of the award are separate headings. These matters should not be regarded as completed by adding the name of a foreign country to a domestic contract template.
Hypothetical Example: A Machine Supply Contract Including Installation
Suppose a manufacturing company is preparing a contract for a machine to be installed on its existing line. This example does not belong to a real client or file. Suppose that, although installation appears to be included in the offer, the draft provides that delivery is completed by leaving the machine at the warehouse; that most of the price is to be paid in advance; and that the acceptance test and the scope of training are not explained.
The review is not completed merely by marking these provisions. Options are made concrete with information from the purchasing, technical and finance units. The table below shows a recommended form of assessment; it does not envisage a single, unchanging legal solution for each row.
| Subject reviewed | Effect on the business | Arrangement to be discussed | Information needed |
|---|---|---|---|
| Delivery being completed by leaving at the warehouse | Installation and commissioning would have to be argued separately | Separating the stages of delivery, installation and acceptance | Technical scope and persons responsible for installation |
| High advance payment and short security term | Risk between payment and completion of the work | Staged payment and security with a suitable term | Production schedule and text of the security |
| Acceptance test not explained | Different expectations about performance | A measurable test and a deficiency-remedy arrangement | Production need and technical test criteria |
| Uncertainty on settlement at termination | Dispute over the advance, stock and delivered parts | Transaction-by-transaction liquidation and return arrangement | Production stages and delivery records |
Management’s decision is taken together with cost and the work schedule. If the supplier does not accept a particular security, options such as changing the payment plan or a more limited first order can be considered. Accepting a commercial risk that the law permits should be distinguished from entering into an arrangement contrary to a mandatory rule.[1]
The final opinion should show the uncertainties that remain as well as the changes accepted. For example, the fact that the technical test annex has not yet been completed explains in which part of the contract no definite assessment could be made. Instead of giving an opinion on the assumption that the missing document will be sent later, completion of the document and a fresh review of the relevant provision should be planned.
How Are the Final Decision Before Signing and Follow-up After Signing Set Up?
The final assessment put before management should be short and actionable. The legal opinion should separately show validity or authority problems to be corrected, commercial risks that may be negotiated and information to be completed. Technical, financial or tax verifications outside the scope of the review should also be directed to the right persons.
Six questions should be answered before signing:
• Are the party to the contract and the person who will sign on behalf of the company correct and authorized?
• Are the work the company will receive and the delivery and acceptance criteria clear?
• Are the arrangements for payment, additional costs and security compatible with the work schedule?
• Is the effect of the liability, penalty clause, renewal and exit provisions understood?
• Are the final text, all annexes and the changes accepted in negotiation consistent with one another?
• Is it clear which unit will follow which notification, payment and document after signing?
The signed text and its annexes should be kept together; the relevant units should be given a practical summary showing their own obligations. Notification dates, the term of the security and renewal periods should be matched with the responsible person. This follow-up ensures that the contract is not merely archived but applied in the company’s daily operations.
Conclusion
Contract review for companies is preparation that links the obligations in the text with commercial decisions. The right party and representation, a clear performance, verifiable delivery, understandable payment and security, and workable notice and exit arrangements should be assessed together. The decision to sign should rest on the final text reviewed, the completed annexes and the options explained to management.
Careful work is not limited to naming the risks. It explains what information is missing, how a provision can be changed and who inside the company will apply the arrangement accepted. In this way the legal review becomes a trackable working arrangement from the formation of the contract to completion of the work.
Frequently Asked Questions
Can a contract become binding even before it is signed?
It can. Subject to statutory or agreed form requirements, a contract can be formed by reciprocal and corresponding declarations of will. Offer, acceptance, order and conduct of starting work are examined together in the specific case. The thought that “the main contract has not yet been signed” does not by itself remove the effect of earlier commitments.[1]
Do I have to sign the other side’s standard contract?
First it should be determined which terms are open to negotiation and what special rules apply. That a standard text is presented does not mean that all of its provisions are valid in every case. For general terms and conditions, the scope, interpretation and content review in TBK Articles 20–25 may come into play. The final decision should be made by assessing the legal limits and the commercial terms of the transaction together.[1]
Is a signature circular alone enough instead of a trade registry record?
It is not appropriate to rely on a single document. The current representation arrangement, the relevant registry records, resolutions and the scope of any power of attorney should be assessed together. The rules on joint signature and the scope of authority to represent matter for the transaction. The internal approval arrangement is also examined separately.[2]
Does signing on behalf of the company mean I have given a personal suretyship?
A signature in a representative capacity for the company and personal security are different legal acts. However, the security section of the contract, the capacities used and the scope of the signature must be read. For personal suretyship, form requirements, statutory exceptions regarding the spouse’s consent and the provisions on personal security given under another name are assessed separately.[1]
Does every contract signed electronically have the same legal effect?
No. A secure electronic signature, a scanned image of a signature and an ordinary electronic confirmation are not the same thing. Article 5 of Law No. 5070 regulates the effect of a secure electronic signature and the exceptions relating to official form, special formalities and certain security transactions. The form and authority to represent that apply to the transaction should be checked separately.[1][4]
Will a high penalty clause for a merchant surely be reduced later?
No. TBK Article 182 and TTK Article 22 must be assessed together. A merchant debtor should not assume that a reduction will be made merely on the claim that the penalty is excessive. The validity of the penalty clause, its scope, the conditions for its arising and its relation to other claims are separate subjects of review; pre-signing negotiation is therefore important.[1][2]
Does signing a delivery record end all rights?
Such a conclusion cannot be drawn without assessing the content of the record, the signatory’s authority, the type of contract and the specific event. Delivery of quantity, technical acceptance and recording of deficiencies may serve separate functions. How reservations and notifications are to be arranged should be determined under the relevant contract and statutory provisions.[1][2]
Which documents should be sent to the lawyer for review?
Together with the final draft, earlier offer and acceptance correspondence, orders, all annexes, the technical scope, the payment plan and any text of security should be sent. Information on the parties and their representation, earlier contracts and provisions on which agreement has not yet been reached should also be indicated. If documents are incomplete, it should be explained what information is missing; the limit of the review that depends on this should be kept visible.
Sources
- Law No. 6098, Turkish Code of Obligations (Türk Borçlar Kanunu) — text published by the Ministry of Labor and Social Security. Arts. 1, 12–19, 20–27, 115–116, 136–138, 179–182, 219–223, 474–477, 583–584 and 603: formation, form, interpretation, general terms and conditions, exclusion of liability, impediments to performance, penalty clause, delivery and acceptance, personal security.
- Law No. 6102, Turkish Commercial Code (Türk Ticaret Kanunu) — Ministry of Justice UYAP Legislation. Arts. 18/3, 22, 23/1-c, 125, 370–371 and 629: commercial notice, reduction of a merchant’s penalty clause, features of commercial sale, legal personality and representation.
- Law No. 6100 on Civil Procedure (Hukuk Muhakemeleri Kanunu) — Ministry of Justice UYAP Legislation. Arts. 17–18 and 193/2: limits of jurisdiction agreements and of evidence agreements excessively restricting the right to prove.
- Electronic Signature Law No. 5070 (Elektronik İmza Kanunu) — Ministry of Justice UYAP Legislation. Art. 5: legal effect of a secure electronic signature and exceptions to its fields of use.
- Personal Data Protection Authority (Kişisel Verileri Koruma Kurumu) — Obligations Concerning Data Security. Authority explanation of the technical and administrative measures under Article 12 of Law No. 6698 and the security responsibility of the data controller and of the person processing data on its behalf.
- Law No. 5846 on Intellectual and Artistic Works (Fikir ve Sanat Eserleri Kanunu) — Legislation Information System (Mevzuat Bilgi Sistemi). Art. 52: contracts and dispositions concerning economic rights must be in writing and the relevant rights must be specified individually.