ANALYSIS
What Should Foreign Companies Consider Before Signing Their First Contract in Turkey?
What Should Foreign Companies Consider Before Signing Their First Contract in Turkey?
The first commercial contract signed in Turkey is not only a document that initiates the commercial relationship between the parties, but also the fundamental legal framework that defines their rights and obligations. A proper legal assessment before signing the contract helps manage many risks before they arise, including collection issues, disputes, tax risks, and lengthy litigation processes. This guide outlines the key legal considerations that foreign companies should evaluate before signing their first commercial contract in Turkey.
27 June 2026
Reading Time: 10 min
Content
- Executive Summary
- Why Is This Topic Important?
- Legal Framework
- Five Key Legal Risks to Assess Before Signing the First Commercial Contract
- Legal Due Diligence Before Signing the Contract
- The Most Common Scenarios in Practice
- The Most Common Mistakes
- Frequently Asked Questions
- Aetra Legal Perspective
- Conclusion
1. Executive Summary
Turkey is an important investment and trade hub for foreign companies thanks to its strategic geographic location, production capacity, and regional trade network. However, the first commercial contract signed in Turkey is not only the starting point of a business relationship but also the fundamental document defining the legal rights and obligations of the parties. Provisions overlooked during the drafting or review of the contract may lead to numerous risks, including collection disputes, lengthy litigation, unexpected tax liabilities, and administrative sanctions.
One of the most common mistakes made by foreign companies is assuming that the standard contract templates used in their home jurisdictions will produce the same legal effects in Turkey. In reality, each country has its own contract law, commercial practices, and dispute resolution mechanisms. Certain mandatory provisions under Turkish law may limit the application of contractual terms agreed upon by the parties or result in unexpected legal consequences.
For this reason, the first commercial contract should not be viewed solely as a document setting out commercial terms. It should also be subject to a comprehensive legal assessment covering the applicable law, authority of representation, payment security, tax obligations, allocation of liability, and dispute resolution mechanisms.
This guide examines the key legal risks that foreign companies should assess before signing their first commercial contract in Turkey, as well as the practical issues that require particular attention.
Turkey is an important investment and trade hub for foreign companies thanks to its strategic geographic location, production capacity, and regional trade network. However, the first commercial contract signed in Turkey is not only the starting point of a business relationship but also the fundamental document defining the legal rights and obligations of the parties. Provisions overlooked during the drafting or review of the contract may lead to numerous risks, including collection disputes, lengthy litigation, unexpected tax liabilities, and administrative sanctions.
One of the most common mistakes made by foreign companies is assuming that the standard contract templates used in their home jurisdictions will produce the same legal effects in Turkey. In reality, each country has its own contract law, commercial practices, and dispute resolution mechanisms. Certain mandatory provisions under Turkish law may limit the application of contractual terms agreed upon by the parties or result in unexpected legal consequences.
For this reason, the first commercial contract should not be viewed solely as a document setting out commercial terms. It should also be subject to a comprehensive legal assessment covering the applicable law, authority of representation, payment security, tax obligations, allocation of liability, and dispute resolution mechanisms.
This guide examines the key legal risks that foreign companies should assess before signing their first commercial contract in Turkey, as well as the practical issues that require particular attention.
2. Why Is This Topic Important?
A significant proportion of international commercial disputes arise not from bad faith on the part of the parties, but from the failure to adequately assess legal risks during the contract drafting process. Many issues that appear to be commercial in nature at first glance are, in fact, the result of incomplete or improperly drafted contractual provisions.
While foreign companies often focus on the commercial aspects of a transaction, issues such as the applicable legal system, the competent court in the event of a dispute, the jurisdiction where a judgment will be enforced, and the adequacy of payment security may receive less attention. However, these factors become fundamental elements that directly affect the future of the business relationship once a dispute arises.
For example, even if the parties have reached full agreement on the commercial terms, failing to clearly specify the governing law in the contract may lead each party to assert its rights under different legal systems. Likewise, contracts signed by unauthorized representatives may give rise to disputes regarding their validity, while a payment structure lacking adequate security may result in the inability to recover the debt for many years.
For foreign companies planning to operate in Turkey, the first contract often represents far more than a single commercial transaction. It establishes the legal foundation of the future business relationship and serves as a precedent for subsequent transactions. Therefore, the legal review conducted before signing the contract affects not only the current transaction but also the long-term security of the commercial relationship.
While foreign companies often focus on the commercial aspects of a transaction, issues such as the applicable legal system, the competent court in the event of a dispute, the jurisdiction where a judgment will be enforced, and the adequacy of payment security may receive less attention. However, these factors become fundamental elements that directly affect the future of the business relationship once a dispute arises.
For example, even if the parties have reached full agreement on the commercial terms, failing to clearly specify the governing law in the contract may lead each party to assert its rights under different legal systems. Likewise, contracts signed by unauthorized representatives may give rise to disputes regarding their validity, while a payment structure lacking adequate security may result in the inability to recover the debt for many years.
For foreign companies planning to operate in Turkey, the first contract often represents far more than a single commercial transaction. It establishes the legal foundation of the future business relationship and serves as a precedent for subsequent transactions. Therefore, the legal review conducted before signing the contract affects not only the current transaction but also the long-term security of the commercial relationship.
3. Legal Framework
Commercial contracts in Turkey are not merely documents created through the free will of the parties. Although the parties are generally free to determine the content of their agreement, this freedom is limited by mandatory legal provisions and public policy rules. Therefore, foreign companies should assess not only the contract itself but also the legal framework governing the agreement.
The principal regulations governing commercial contracts are primarily set out in the Turkish Code of Obligations and the Turkish Commercial Code, together with other applicable legislation. In cases involving an international element, the Turkish Act on Private International Law and International Civil Procedure plays a crucial role in determining the applicable law, the international jurisdiction of Turkish courts, and the recognition and enforcement of foreign court judgments.
The subject matter of the contract may also directly affect the applicable legal framework. For example, companies operating in manufacturing, distribution, software, healthcare, construction, energy, or finance may be subject not only to general contract law but also to sector-specific regulations and licensing requirements. Certain business activities require administrative permits or compliance with the rules of specific regulatory authorities.
Tax obligations are also an integral part of the legal assessment of a contract. The payment method, the nature of the services, the parties’ place of establishment, and the applicability of double taxation treaties may lead to different outcomes regarding withholding tax, VAT, and corporate income tax. A contract that appears commercially advantageous may create unexpected costs if tax planning is not properly addressed.
In addition, a significant portion of commercial relationships is now conducted electronically. Electronic signatures, digital contracts, electronic evidence, and obligations relating to the protection of personal data are among the important factors affecting the legal security of the contracting process.
For this reason, foreign companies should regard their first commercial contract not merely as a document setting out commercial terms, but as a multi-layered legal transaction requiring a comprehensive assessment of corporate law, contract law, private international law, tax law, and the relevant sector-specific regulations. This approach is one of the most effective mechanisms for preventing future disputes.
The principal regulations governing commercial contracts are primarily set out in the Turkish Code of Obligations and the Turkish Commercial Code, together with other applicable legislation. In cases involving an international element, the Turkish Act on Private International Law and International Civil Procedure plays a crucial role in determining the applicable law, the international jurisdiction of Turkish courts, and the recognition and enforcement of foreign court judgments.
The subject matter of the contract may also directly affect the applicable legal framework. For example, companies operating in manufacturing, distribution, software, healthcare, construction, energy, or finance may be subject not only to general contract law but also to sector-specific regulations and licensing requirements. Certain business activities require administrative permits or compliance with the rules of specific regulatory authorities.
Tax obligations are also an integral part of the legal assessment of a contract. The payment method, the nature of the services, the parties’ place of establishment, and the applicability of double taxation treaties may lead to different outcomes regarding withholding tax, VAT, and corporate income tax. A contract that appears commercially advantageous may create unexpected costs if tax planning is not properly addressed.
In addition, a significant portion of commercial relationships is now conducted electronically. Electronic signatures, digital contracts, electronic evidence, and obligations relating to the protection of personal data are among the important factors affecting the legal security of the contracting process.
For this reason, foreign companies should regard their first commercial contract not merely as a document setting out commercial terms, but as a multi-layered legal transaction requiring a comprehensive assessment of corporate law, contract law, private international law, tax law, and the relevant sector-specific regulations. This approach is one of the most effective mechanisms for preventing future disputes.
4. Five Key Legal Risks to Assess Before Signing the First Commercial Contract
Every commercial contract involves different risks. However, most of the legal issues encountered by foreign companies when establishing a commercial relationship in Turkey for the first time fall into several common categories. Assessing these risks before signing the contract can significantly help prevent future disputes.
4.1. Legal Status of the Counterparty and Authority of Representation
One of the most common issues in international trade is signing a contract with the wrong person or with someone who is not authorized to represent the company.
A company’s registration in the trade registry alone does not necessarily mean that it is reliable. It should also be verified whether the company is actively operating, whether it has entered liquidation, whether it faces bankruptcy or restructuring risks, and whether the person signing the contract is duly authorized to represent the company.
Before signing the contract, it is recommended to review at least the following documents:
4.2. Governing Law and Dispute Resolution Mechanism
In many international contracts, the parties spend considerable time negotiating price, delivery schedules, and the scope of services, while the governing law and jurisdiction clauses receive only minimal attention.
However, these are often the most important provisions once a dispute arises.
For example:
Particularly in international trade, identifying only the competent court is not sufficient. It should also be assessed, during the drafting stage, whether the resulting judgment can be recognized and enforced in the relevant jurisdiction.
4.3. Payment Security and Collection Risks
Many commercial relationships that initially appear successful ultimately end not because of legal disputes, but because of collection problems.
Merely specifying the payment date in the contract is usually insufficient. The contract should also clearly regulate the payment method, the consequences of delayed payment, and the security mechanisms protecting the receivable.
Depending on the payment structure, the following mechanisms may be considered:
4.4. Contractual Liability and Risk Allocation
When establishing a commercial relationship, the parties usually focus on how the business will operate. From a legal perspective, however, the more important question is who will bear the risk if the transaction does not proceed as planned.
For this reason, particular attention should be given to the following contractual provisions:
4.5. Tax and Regulatory Obligations
International contracts create not only private law obligations but also various tax and regulatory responsibilities.
In particular, the following matters should be assessed according to the nature of the commercial activity:
4.1. Legal Status of the Counterparty and Authority of Representation
One of the most common issues in international trade is signing a contract with the wrong person or with someone who is not authorized to represent the company.
A company’s registration in the trade registry alone does not necessarily mean that it is reliable. It should also be verified whether the company is actively operating, whether it has entered liquidation, whether it faces bankruptcy or restructuring risks, and whether the person signing the contract is duly authorized to represent the company.
Before signing the contract, it is recommended to review at least the following documents:
- Current trade registry records
- Signature circulars or representation documents
- Corporate authorization resolutions
- Power of attorney (if applicable)
- The company’s current operational status
4.2. Governing Law and Dispute Resolution Mechanism
In many international contracts, the parties spend considerable time negotiating price, delivery schedules, and the scope of services, while the governing law and jurisdiction clauses receive only minimal attention.
However, these are often the most important provisions once a dispute arises.
For example:
- Will Turkish law apply?
- Will the law of another country apply?
- Will Turkish courts have jurisdiction?
- Will arbitration be preferred?
- Can the resulting judgment be enforced in another country?
Particularly in international trade, identifying only the competent court is not sufficient. It should also be assessed, during the drafting stage, whether the resulting judgment can be recognized and enforced in the relevant jurisdiction.
4.3. Payment Security and Collection Risks
Many commercial relationships that initially appear successful ultimately end not because of legal disputes, but because of collection problems.
Merely specifying the payment date in the contract is usually insufficient. The contract should also clearly regulate the payment method, the consequences of delayed payment, and the security mechanisms protecting the receivable.
Depending on the payment structure, the following mechanisms may be considered:
- Advance payment
- Bank guarantee letter
- Letter of credit
- Escrow arrangement
- Surety
- Guarantee
- Liquidated damages clause
- Interest provisions
4.4. Contractual Liability and Risk Allocation
When establishing a commercial relationship, the parties usually focus on how the business will operate. From a legal perspective, however, the more important question is who will bear the risk if the transaction does not proceed as planned.
For this reason, particular attention should be given to the following contractual provisions:
- Parties’ obligations
- Warranty provisions
- Liability for defects
- Indemnification provisions
- Liquidated damages
- Limitation of liability
- Force majeure
- Termination conditions
4.5. Tax and Regulatory Obligations
International contracts create not only private law obligations but also various tax and regulatory responsibilities.
In particular, the following matters should be assessed according to the nature of the commercial activity:
- VAT application
- Withholding tax obligations
- Double taxation treaties
- Import and export regulations
- Sector-specific licensing requirements
- Personal data protection obligations
- Compliance rules relating to sanctions and anti-money laundering
5. Legal Due Diligence Before Signing the Contract
In practice, many foreign companies consider legal review only after a dispute has already arisen. However, in international trade, the most cost-effective legal service is not managing litigation, but preventing disputes before they occur.
A comprehensive legal due diligence process conducted before signing the first commercial contract involves much more than simply reviewing the contract text. It also includes assessing the legal status of the counterparty, its commercial reliability, and the regulatory framework governing the transaction.
A comprehensive legal review generally covers the following:
Company Review
A comprehensive legal due diligence process conducted before signing the first commercial contract involves much more than simply reviewing the contract text. It also includes assessing the legal status of the counterparty, its commercial reliability, and the regulatory framework governing the transaction.
A comprehensive legal review generally covers the following:
Company Review
- Trade registry records
- Shareholding and management structure
- Authority of representation and binding authority
- Operational status
- Balance of rights and obligations
- Payment and security provisions
- Liquidated damages clauses
- Termination mechanisms
- Dispute resolution provisions
- Tax obligations
- Required permits and licenses
- Sector-specific legislation
- Compliance obligations
6. The Most Common Scenarios Encountered in Practice
Although every commercial transaction has its own unique characteristics, similar disputes frequently arise in practice.
Contract Signed by an Unauthorized Person
If the individual acting on behalf of the company lacks the authority to represent it, serious disputes may arise regarding the validity of the contract.
Failure to Collect Payment
Insufficient payment security is one of the most common commercial risks faced by foreign companies operating in Turkey.
Inadequate Governing Law and Jurisdiction Clauses
When a dispute arises, the parties may disagree on which court has jurisdiction or which country’s law should apply. This may result in lengthy procedural disputes before the substantive issues are even addressed.
Use of Standard Contract Templates
Using contract templates prepared in another country without considering the Turkish legal framework may render certain provisions unenforceable or lead to unexpected legal consequences.
Overlooking Tax Obligations
Even if a contract appears commercially profitable, withholding tax, VAT, or other financial obligations arising after the transaction may significantly increase the overall cost.
These examples demonstrate that, in international commercial relationships, legal risks are often managed during the preparation stage before the contract is signed rather than after execution. A well-planned legal review can therefore prevent a significant number of potential disputes from arising in the first place.
Although every commercial transaction has its own unique characteristics, similar disputes frequently arise in practice.
Contract Signed by an Unauthorized Person
If the individual acting on behalf of the company lacks the authority to represent it, serious disputes may arise regarding the validity of the contract.
Failure to Collect Payment
Insufficient payment security is one of the most common commercial risks faced by foreign companies operating in Turkey.
Inadequate Governing Law and Jurisdiction Clauses
When a dispute arises, the parties may disagree on which court has jurisdiction or which country’s law should apply. This may result in lengthy procedural disputes before the substantive issues are even addressed.
Use of Standard Contract Templates
Using contract templates prepared in another country without considering the Turkish legal framework may render certain provisions unenforceable or lead to unexpected legal consequences.
Overlooking Tax Obligations
Even if a contract appears commercially profitable, withholding tax, VAT, or other financial obligations arising after the transaction may significantly increase the overall cost.
These examples demonstrate that, in international commercial relationships, legal risks are often managed during the preparation stage before the contract is signed rather than after execution. A well-planned legal review can therefore prevent a significant number of potential disputes from arising in the first place.
7. The Most Common Mistakes
A significant portion of the legal disputes encountered by foreign companies starting commercial operations in Turkey arise not from complex legal issues, but from fundamental mistakes made during the contract preparation process. Most of these mistakes can be prevented through a brief legal review before the contract is signed.
The most common mistakes include:
The most common mistakes include:
- Using Standard Contract TemplatesA standard contract that works without issues in one country may not produce the same legal effect in Turkey. In particular, limitation of liability clauses, liquidated damages provisions, termination mechanisms, and dispute resolution clauses may be interpreted differently under each legal system.
- Failure to Verify Authority of RepresentationProceeding without confirming whether the person signing the contract is actually authorized to act on behalf of the company is one of the most common risks encountered in practice.
- Treating Governing Law and Jurisdiction Clauses as SecondaryWhile the parties often focus on price, delivery schedules, and commercial terms, insufficient attention is given to determining which legal rules will apply and where disputes will be resolved.
- Neglecting Payment SecuritySpecifying the payment date alone is not sufficient. The contract should also clearly regulate the mechanisms securing the receivable and the consequences of default.
- Considering Tax Obligations Only AfterwardIn international commercial transactions, tax planning should be addressed while the contract is being prepared, not after it has been signed. Otherwise, unexpected financial obligations may arise.
- Viewing the Contract Solely as a Commercial DocumentA contract is not merely a document that sets out the price and delivery date. It is also the fundamental document that determines the allocation of risks, the limits of liability, and the legal framework to be followed in the event of a dispute.
8. Frequently Asked Questions (FAQ)
In many contracts containing an international element, the parties are free, to a certain extent, to choose the governing law. However, mandatory provisions of Turkish law and rules relating to public policy may continue to apply to certain matters.
No. Arbitration can offer significant advantages, particularly in international commercial disputes. However, including an arbitration clause without considering the nature of the dispute, the value of the contract, the countries where the parties are located, and the place where the award will be enforced may not be appropriate.
Yes, particularly in long-term business relationships, high-value commercial transactions, distributorship agreements, manufacturing projects, technology transfer arrangements, and investment projects. Conducting legal due diligence before signing can significantly reduce the likelihood of future disputes.
Yes. The parties may execute contracts in a foreign language. However, if the contract is to be used before Turkish courts in the event of a dispute, a certified translation may be required. In addition, where a contract is prepared in two languages, it should clearly specify which version will prevail.
Yes. Under Turkish law, electronic signatures are legally valid provided that the statutory requirements are met. However, whether an electronic signature is sufficient depends on the nature of the transaction and should be assessed on a case-by-case basis.
Depending on the nature of the transaction and the applicable legislation, the parties may conclude a contract denominated in a foreign currency. However, as certain types of contracts remain subject to foreign currency restrictions, the applicable regulations should be reviewed before the transaction is completed.
9. Aetra Legal Perspective
In international commercial relationships, the greatest cost is often not the initiation of legal proceedings. The real cost lies in disputes that may last for years, uncollectible receivables, unsuccessful business partnerships, and lost business opportunities resulting from the failure to identify legal risks during the contract drafting process.
Aetra Legal does not evaluate international commercial contracts solely from the perspective of contract law. Every transaction is analyzed by considering corporate law, private international law, tax law, regulatory obligations, and commercial risk management together. The objective is not only to prepare a legally valid contract, but also to establish a sustainable legal framework that supports the parties’ commercial objectives and provides protection against potential disputes.
For foreign investors and international companies in particular, the first commercial contract represents the first legal step into the Turkish market. Ensuring that this step is taken on a solid legal foundation is of critical importance for the security of future commercial relationships.
In international commercial relationships, the greatest cost is often not the initiation of legal proceedings. The real cost lies in disputes that may last for years, uncollectible receivables, unsuccessful business partnerships, and lost business opportunities resulting from the failure to identify legal risks during the contract drafting process.
Aetra Legal does not evaluate international commercial contracts solely from the perspective of contract law. Every transaction is analyzed by considering corporate law, private international law, tax law, regulatory obligations, and commercial risk management together. The objective is not only to prepare a legally valid contract, but also to establish a sustainable legal framework that supports the parties’ commercial objectives and provides protection against potential disputes.
For foreign investors and international companies in particular, the first commercial contract represents the first legal step into the Turkish market. Ensuring that this step is taken on a solid legal foundation is of critical importance for the security of future commercial relationships.
10. Conclusion
Turkey offers significant commercial opportunities for international investors and foreign companies. However, as in every new market, the success of a commercial relationship in Turkey depends not only on the parties’ commercial expectations but also on how that relationship is structured from a legal perspective.
The first commercial contract is the fundamental legal document governing numerous critical issues simultaneously, including the determination of the applicable law, payment security, authority of representation, tax obligations, dispute resolution mechanisms, and the allocation of liability. Therefore, the contracting process should be viewed not merely as a commercial negotiation, but as a comprehensive legal risk management process.
Although legal due diligence conducted before signing cannot guarantee that all future disputes will be avoided, it can significantly reduce foreseeable risks and contribute to establishing the commercial relationship on a more secure legal foundation. Successful and sustainable international business relationships are built not only on well-negotiated commercial terms but also on a strong legal framework.
The first commercial contract is the fundamental legal document governing numerous critical issues simultaneously, including the determination of the applicable law, payment security, authority of representation, tax obligations, dispute resolution mechanisms, and the allocation of liability. Therefore, the contracting process should be viewed not merely as a commercial negotiation, but as a comprehensive legal risk management process.
Although legal due diligence conducted before signing cannot guarantee that all future disputes will be avoided, it can significantly reduce foreseeable risks and contribute to establishing the commercial relationship on a more secure legal foundation. Successful and sustainable international business relationships are built not only on well-negotiated commercial terms but also on a strong legal framework.
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