In contractual relationships established with companies based in Turkey, it is of utmost importance that all parties duly fulfill their obligations. Otherwise, while one or several parties may perform their obligations, others may fail to do so, leading to losses and grievances. Therefore, when entering into contractual relationships, certain matters must be considered, and the correct approach should be taken from the outset.
First and foremost, it is crucial to clearly define the purpose of the contract. In other words, the contractual relationship should focus on the legal benefit you expect to achieve through it. Generally, companies seeking to do business and find solution partners assume that their counterpart will act honestly and properly. However, if the party you are contracting with is not a natural person but a legal entity, your examination should be more thorough.
In the Turkish legal system, companies are classified into those with limited liability and those with unlimited liability. This means that in some company types, shareholders bear limited responsibility, while in others, they may be personally liable for the company’s debts. Particularly when dealing with limited liability companies, multiple factors must be taken into account, since the contractual relationship is established solely with the legal entity, and the shareholders may not be held personally liable for company debts. For this reason, it is vital to determine whether the company operates under a limited or unlimited liability regime. Once this determination is made, the possibility of non-performance of contractual obligations by the company should be carefully evaluated.
It must be remembered that such risks can always arise. For instance, the company you are dealing with may no longer be actively operating, yet present itself as though it is. In that case, it will not be able to fulfill its contractual commitments. Similarly, the company’s financial situation may be critically poor or it may already be insolvent. Entering into a contract with such a company almost certainly results in losses.
Therefore, merely meeting with company representatives is not sufficient. It may be useful to request their previous year’s activity reports and financial statements. Additionally, information about the company can be obtained from the publicly available Turkish Trade Registry Gazette. The content of the contract itself is also crucial. It is strongly recommended that such agreements be drafted and reviewed by experts with knowledge and experience in international contracts.
Finally, in the event of a dispute, it is essential to promptly initiate legal proceedings. Otherwise, the company may cease its activities, go into liquidation, or be declared bankrupt. In such a case, even with a favorable court decision, you may face the risk of not being able to recover your receivables.
