Key Considerations When Drafting Contracts for Companies

In the daily operations of companies, contracts are the most important legal instruments governing commercial relations. An improperly or incompletely drafted contract can expose even a successful business model to serious risks. For this reason, the process of drafting contracts for companies involves not only legal aspects but also commercial and strategic considerations of critical importance.

In this article, we will address the essential clauses, potential risks, and practical solutions that companies should not overlook when drafting contracts.

1. Purpose and Scope of the Contract

The opening section of every contract must clearly set out its purpose and scope:

• What service or product is being provided?

• Between which parties?

• For what duration?

Ambiguous definitions may give rise to disputes. For example, in a software contract, does “delivery” mean “go-live” or merely “completion of the testing phase”? Such terms must be defined with precision.

2. Definitions and Rules of Interpretation

The definitions section constitutes the backbone of the contract. Terms such as “service,” “product,” “acceptance date,” “subcontractor,” and “confidential information” should be drafted in a glossary-style manner. This not only facilitates the parties’ understanding but also guides the courts in interpreting the contract.

3. Delivery, Acceptance, and Performance Standards

One of the most frequent disputes in contracts arises from whether the work has been completed on time and in compliance with the agreed standards. For this reason, contracts should explicitly state:

• Delivery dates,

• Acceptance criteria,

• Penalty clauses for delay.

For example, in a manufacturing contract, a measurable criterion could be: “95% of the products must comply with the agreed quality standards.”

4. Pricing and Payment Terms

This is one of the most critical sections for companies. Issues to be clearly defined include:

• Payment deadlines,

• Interest rates,

• Currency fluctuation and exchange differences in foreign currency payments,

• Tax obligations (VAT, withholding).

Recommendation: To avoid ambiguity, use clear language such as: “Payments shall be made within 30 days of the invoice date.”

5. Confidentiality and Data Protection (KVKK/GDPR)

Today, data security is an inseparable element of contracts.

• In compliance with the Law on the Protection of Personal Data (KVKK), the parties’ obligations regarding data processing, transfer, and storage must be set out.

• Notification periods in the event of a data breach should be specified, along with which party will take which measures.

Failure to include such provisions may expose a company to substantial administrative fines.

6. Intellectual and Industrial Property Rights

Particularly in contracts for software development, design, or branding, companies must clarify intellectual property rights:

• Who will own the work or product?

• Will there be an assignment of rights, or merely a license to use?

• What are the duration and limits of use?

Otherwise, the intellectual property of a product paid for by the company may remain with another party.

7. Limitation of Liability and Force Majeure

Contracts between companies may include provisions limiting liability. For instance:

• “Each party’s liability shall be limited to 20% of the total contract price.”

Additionally, force majeure events such as earthquakes, floods, and fires should be regulated, with a clause stating that parties’ obligations shall be suspended during such events.8. Sözleşmenin Süresi, Feshi ve Yenilenmesi

8. Term, Termination, and Renewal of the Contract

Every contract should provide clear answers to the following:

• Is the contract for a fixed term or indefinite term?

• How much prior notice must be given for termination?

• If one party fails to fulfil its obligations, does the other party have the right to terminate for just cause?

In long-term commercial relationships, unclear termination provisions may cause significant losses.

9. Notices and Electronic Service

Companies are now required to use electronic service (e-tebligat) and Registered Electronic Mail (KEP) addresses. Therefore, contracts must specify notice addresses and confirm the validity of notices served electronically.

This prevents excuses such as “the notice was not received.”

10. Dispute Resolution and Jurisdiction

Commercial contracts must clearly define how disputes will be resolved:

• Will Turkish law or foreign law apply?

• Which court will have jurisdiction?

• Will arbitration or mediation be required?

For large-scale contracts, arbitration is often preferred, while for SMEs, commercial courts are usually chosen.

The process of drafting contracts for companies is not merely filling out standard templates but rather creating a legal framework that addresses the company’s commercial risks and needs. Every company should include provisions tailored to its sector, avoid ambiguities, and draft critical clauses with precision.

🔑 Recommendation: Contracts are the most important shield of a company. Professional advice from a specialized lawyer should always be sought during the drafting stage, and every contract should be customized to fit the company’s area of activity.