Contracts in Turkey

Most countries in the world use one of two basic systems when it comes to contracts: the Continental European (Roman Law/Napoleonic Law) system or the Anglo-American system. The system in Turkey is modelled on the Continental European system but has been updated and (in some respects) simplified.

Video guide to Turkish contract law

You can get a quick overview of contract law in Turkey by watching this video interview (below) with Turkish lawyer Başak Yıldız Orkun. Learn more by scrolling down and reading the detailed guide she has written with us.

 

Does a Turkish contract have to be in writing?

Contracts don’t have to be in writing, except for some special types of contract (e.g. contracts for the sale of property).

However, as in any country, it is much better if contracts are in writing. Though the centuries, wise lawyers have said that verbal contracts are usually not worth the paper they are written on! It is too easy for misunderstandings to occur and too hard to prove what was agreed.

There are two ways in which contracts are, generally, produced in writing.

The first is the ‘simple’ written contract. See below for the formalities.

The second is a contract prepared by or witnesses by a Notary public.

Does the contract have to be in Turkish?

No – but it is, in practical terms, highly desirable for the contract to be either in Turkish or in dual language format (Turkish in one column and your chosen language in the other). If it is in dual language format, you should make sure that the legally binding version is declared to be the Turkish version.

The reason that this is so desirable is that if there is a dispute, and the contract has to be interpreted by a judge, it will be much harder for the judge to do this if the contract is not in Turkish. The judge will probably require the intervention of an official translator. Not only is that potentially quite expensive but it also introduces a level of uncertainty in that you can never be quite sure that the interpreter’s translation will precisely reflect the subtlety of what has been agreed.

Do you need to use any special type of contract in Turkey?

Generally speaking, no. Turkey, like many countries, allows what is called “freedom of contract”. This means that the parties are – with a few exceptions – free to agree the terms, the format, and the jurisdiction to apply to their contract.

The exceptions may require special formats. For example, some might require the contract to be in writing, some might require it to be signed in front of a Notary, or some might impose the use of Turkish law and the jurisdiction of the Turkish courts to transactions of that type.

Examples of contracts that, under Turkish law, must be in writing include:

  • Contracts entitling estate agentsto commission
  • Promissory contractsfor the future sale of property (which should also be produced by the Notary)
  • Marriagecontracts (which must be signed in front of a town hall official)
  • Vehicle sales (which must be signed in the presence of a Notary)
  • Employment contracts
  • Buy-back agreements for land (which must be signed at the Land RegistryTapu Ofis)
  • Contracts for the sale of land (which must be signed at the Tapu Ofis)

For most of our clients, the most important exception to there being no requirement for any special form of contract relates to the sale of land located in Turkey. For this purpose, ‘land’ includes not only the land itself but also any buildings on it. Although there is no restriction as to the content of such contracts, they must be in writing. To be fully enforceable, they should be signed in front of a Notary and the contract must eventually be formalised by the signature of the property transfer document (tapu) at the Land Registry (Tapu Ofis). See our Guide to Buying Property in Turkey.

Even when they are not a legal requirement, written contracts will make a huge difference to your ability to prove your claims in the event of a dispute; therefore, written contracts are highly recommended by our firm, even when they are not legally required. See the various sections of this book for further relevant details.

These different types of contract look different and contain different clauses. They also often require the people entering the contract to go through different formalities for the contract to be legally valid.

In many cases, even where there is no specific legal requirement, it makes sense to use a Turkish format contract in preference to a document drawn up in accordance with the law of another country. There are several reasons for this:

  • The main subject matter of the contract is likely to be in Turkey and so, if there is a dispute, it may be most appropriate for it to be dealt with by the courts of Turkey.
  • In some cases, the law requires you to make the contract subject to Turkish law. The most common example of this is a contract for the sale of land (including houses and other buildings built on land).
  • If the contract is to be dealt with in Turkey in the case of a dispute, the judge will be much more familiar with the Turkish form of contract (and language) than he would be interpreting a different form of contract, especially if it is stated to be subject to the law of another country.

Are there any taxes payable when a contract is signed?

This depends. So-called ‘private’ contracts (contracts signed by the parties but not in front of a Notary) will not give rise to any obligation to pay Stamp Duty, but they might not be fully enforceable. ‘Public’ contracts (contracts signed in front of a Notary) will usually give rise to the payment of Stamp Duty (in 2018 0.189% to 0.948%).

In some cases, a contract could relate to an item that is subject to VAT (sales tax) or property transfer tax. In these cases, the VAT (typically 18%) or property transfer tax (usually 4%) would also be payable.

If you want to use a Turkish-style contract, what is required?

For a contract to be valid under Turkish law there are five main requirements. These are set out in the Turkish Code of Obligations and various other codes. They are:

  1. The free and informed consent of the parties to the contract
    This means that the parties must be clear that they are agreeing to a legally binding contract.
  2. The parties each having the legal capacity to enter a contract
    This means that they must be of legal age (18) and of sound mind.
  3. A certain and clear object
    The contract must be clear about what the parties intend, and you must be able to work this out at the time when the contract is signed.
  4. The contract must be to perform an act that is possible and lawful
  5. The contract must not be to do anything immoral or contrary to public policy

Thus, you will see, the formal requirements are very flexible. In particular, readers who are from an Anglo-Saxon background should note that there is no precise equivalent to the Anglo Saxon concept of consideration: i.e. that the promises made in the contract must be in return for something.

Contracts can be made by way of offer and acceptance. In this case, once an offer has been made, the contract will become binding when it is accepted by the other party.

Limitation periods in Turkey

Whatever rights your contract may give you, they’re likely to expire after a certain period of time. The date when this happens is variously known as the “limitation date” or the “prescription date”.

The general limit is ten years from the date when the action occurred and five years from when you learn about your rights to take action under the contract; or when you should have become aware of your rights to take action under the contract. However, claims based upon certain rights have different periods. For example, a claim based upon an allegation of unjust enrichment must be made within two years, and a claim in respect of employment payments due to you must be made within five years.

Formalities for ‘private’ written contracts in Turkey

There is no special formality.

The contract can either be in the handwriting of one of the persons making the contract or it can be produced in some other way. Typed contracts (produced on a word processor) are now almost universal.

A written contract needs, in any case, to be signed by or on behalf of the parties. See our Guide to Powers of Attorney in Turkey if it is proposed that one of the parties will not sign in person.

Signatures do not need to be witnessed, though it can be useful to do this for important contracts so that there is no doubt that the signature is authentic.

Signatures on behalf of a company are authenticated by the production of an official “signature circular”, confirming that the person signing is authorised to sign on behalf of the company in question.

It is desirable that the bottom of each page should be signed by both parties.

Formalities for ‘public’ notarial contracts in Turkey

A Notarial contract is a contract either prepared by or signed in the presence of a Notary. These contracts are usually prepared by the Notary.

It’s important to remember that, in Turkey, a Notary is a highly respected professional who started off as a fully-qualified lawyer before undertaking extra studies and being allowed to practice as a Notary. It is not at all the same as a Notary found in the US, or some other countries, whose sole job is to witness the signature of documents and who may have no qualifications at all.

In the case of a Notarial contract, the parties’ wishes will be conveyed to the Notary’s staff – often by way of a draft document – and they will produce a contract that incorporates those wishes whilst being clear and complying with any required formalities.

When the time comes to sign the contract, the parties must produce to the Notary proof of their identity (usually their passport) and any supporting documents for the contract: e.g. the ownership document for the promissory sale of a property.

Once the Notary is satisfied as to the parties’ identity, he will allow the parties to read the contract but he must then read it to them himself: word by word. This is a hangover from the days, not so long ago, when many people were illiterate.

If one of the parties does not speak Turkish, the Notary must arrange for an official translator to translate the contract for that person’s benefit. Notarial contracts are always in Turkish.

Once the contract has been signed, a fee is paid to the Notary and the original document is stored with the Notary’s archive.

One original is supplied to each of the parties. If required by law, the Notary will also arrange for a copy of the document to be filed with another specified entity. If requested by the parties he will also, at a small extra cost, produce additional copies of the document.

Powers of Attorney in Turkey

Sometimes it is not convenient for a person to attend in person to sign the contract.

In this case, they can appoint someone else to do so on their behalf. To do this they need to sign a Power of Attorney. See our Guide to Powers of Attorney in Turkey.

Which Turkish court deals with any dispute?

If the contract relates to the sale of land or buildings in Turkey, any dispute must be dealt with by the courts of Turkey and the contract must be interpreted in accordance with Turkish law.

In any other case, the parties to the contract are free to choose whichever way they like for dealing with any dispute and to make the contract subject to whichever legal system they prefer. So, for example, a contract for the sale of a business could be governed by the law of Turkey, the law of the US State of Maryland or by the law of England or Germany. Sometimes this can be useful, especially if both the parties to the contract are based in that place.

Generally, any dispute about the contract will be dealt with by the courts in the country whose law governs that contract but this is not a requirement. The parties can (in most cases) make whatever arrangements they choose. For example, it is possible to have a contract subject to the courts of Turkey but to the law of another country. However, this is generally not a good idea because of the expense and the complexity it brings into the case.

If the court is subject to the jurisdiction of the Turkish courts, it will be dealt with by the civil court.

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