CONTRACT LAW

At its simplest, the contract at the centre of contract law is a set of declarations of intent, protected by the legal order, made by two or more natural or legal persons to govern the legal relationship between them and determine their rights and obligations. Whether a contract is validly formed, that is, concluded, depends on certain constitutive elements. The process typically begins with an offer by one party expressing the will to enter into a legal relationship and is completed by the other party's unconditional acceptance of that offer. The essential condition for legal validity is that the intentions of two or more parties are mutual and correspond to each other, that is, that mutual assent is reached. The variety of Turkish terms for a contract can point to different legal contexts. While the basic technical term adopted by the Turkish Code of Obligations is "sözleşme", the more traditional "akit" survives in academic writing today. The Western-derived "kontrat" is used in practice in fields such as tenancy law, while "protokol" usually describes preliminary texts drawn up in preparation for the main contract. "Şartname" refers to documents detailing the technical and administrative conditions of a job. Ultimately, whatever the title of the text, what matters to the legal order is the parties' true intentions and the content of the text.

The performance risks, document security issues and third-party costs encountered in traditional contracts have produced a new solution where technology meets law, introducing the concept of smart contracts. A smart contract is a set of digital transactions whose rules and conditions are set in advance by the parties and which execute automatically, without any human intervention, once those conditions are met. In this system, the contract exists not on paper but as mathematical and cryptographic code. The blockchain technology on which smart contracts rely decentralises the contracting process, providing transparency and immutability. This removes the need for trusted third parties such as banks or notaries and turns the process into a peer-to-peer structure. Smart contracts work on an "if-then" logic, a digital reflection of the condition precedent in our law. This mechanism technically eliminates the risk that one party performs while the other does not, guaranteeing complete and simultaneous performance.

When drafting a contract, the fundamental principles of Turkish law of obligations cannot be ignored. Chief among them are privity, under which a contract binds only its parties and cannot impose obligations on third parties; freedom of contract, under which the parties may freely determine the content of the contract provided it does not violate mandatory provisions of law, morality or public order; and good faith, which requires the parties to act honestly when exercising their rights. A professional contract must contain not only the main performance but also clauses that act as armour by managing risk. A penalty clause committing the debtor to pay if it fails to perform on time or properly; a force majeure clause governing impossibility of performance due to unforeseeable events such as natural disasters or war; confidentiality and NDA provisions protecting trade secrets; and the choice of arbitration instead of state courts for resolving disputes form the skeleton of the contract. A contract also consists of more than its main text: technical specifications and additional protocols are integral parts of it. To guard against conflicts between the main text and its annexes, an order-of-precedence clause must always be included to determine which text prevails.

In sales and supply contracts, the most common relationships in commercial life, the principle of simultaneous performance applies: unless otherwise agreed, the buyer may refuse to pay the price until the seller delivers the goods. Supply contracts take this relationship to a strategic level, also covering quality control, timing and cost management. In international sales, where risk and costs pass is standardised by the INCOTERMS rules.

Risk management in commercial sales is also directly linked to the choice of payment method. Methods such as advance payment, where the entire risk lies with the buyer, cash against goods, where the entire risk lies with the seller, or letters of credit, where banks step in as guarantors, are chosen according to the parties' commercial positions. From a corporate law perspective, the Shareholders' Agreement (SHA) comes to the fore. Going beyond the articles of association, these private law contracts govern the partners' rights and obligations towards each other and, under the principle of privity, bind only the partners who sign them. Our law firm provides clients with strategic advice at every stage, from the formation and performance of contracts to risk analysis and dispute resolution.