Essential Clauses in Commercial Contracts

A well-drafted commercial contract is the strongest evidence clarifying the parties' rights once a dispute arises. Overlooking the provisions below can lead to serious losses of rights later on.

Clearly Defining the Parties and the Obligations

The parties to the contract should be fully identified by their company name, address and authorised representative; each party's obligation (delivery of goods, performance of services, etc.) should be described in concrete, measurable terms. Vague descriptions of obligations are the main source of later disputes over whether performance actually occurred.

Price, Payment and Default Provisions

The amount of the price, the payment due date and method should be clearly stated, and the default interest rate applicable to late payment should be agreed in the contract. The Turkish Commercial Code provides that, in commercial matters, the advance interest rate applies if not otherwise agreed — but the parties may set a different rate by contract.

Force Majeure and Limitation of Liability

The contract should clearly set out how the parties' liability will be shaped (postponement, right to terminate, etc.) if unforeseeable events such as earthquakes, natural disasters or war prevent performance. Provisions limiting liability must also comply with the mandatory limits under the Turkish Code of Obligations — for instance, liability for gross fault cannot be excluded.

Penalty Clause, Confidentiality and Termination Provisions

The amount of the penalty applicable in the event of breach, the scope and duration of the confidentiality obligation, and the circumstances and manner in which the contract may be terminated (termination for cause, or ordinary termination notice period) should be clearly set out.

Governing Law and Jurisdiction

Particularly in contracts with a cross-border element, the law governing any dispute and the competent court or arbitral body should be determined in advance; without this clause, determining jurisdiction in the event of a dispute can become a problem in itself.

Practical Recommendations

Rather than using a standard template, tailor each contract to the specifics of the actual commercial relationship. For high-value or long-term commercial relationships, having the contract reviewed by a lawyer is a far smaller investment than the cost of a dispute that could arise later.

This article is for informational purposes only and does not constitute legal advice. Please contact our team regarding your specific situation.