1. Introduction
International commercial contracts provide a framework for business between parties with different legal systems and commercial cultures. Since such contracts have a broader scope than those governed by domestic law, they should set out the parties’ rights and obligations clearly and in detail and safeguard the interests of both parties. Therefore, the parties should pay attention to the points below while establishing their contract provisions.
2. Contract Provisions
a) Contracting Parties
International commercial contracts should provide the parties’ trade names and addresses in full, as in all other types of contracts. If the contracting parties are legal entities, they should specify their full and unabbreviated titles and addresses registered in the trade registry. Additionally, the signatories to the contract must be fully authorized and have the capacity to contract under the governing law.
b) Subject of Contract
If the contract concerns the sale of goods, it should specify the goods’ characteristics and nature. To this end, the contract may indicate the goods’ quality, quantity, and other specific characteristics (AKINCI, 2024, pp. 62-63). If the contract covers the provision of a service, it should define the service and its quality standard.
c) Language of Contract
International commercial contracts are often concluded between parties of different nationalities. Therefore, the contracting parties should choose a common language for uniformity of meaning and interpretation. In practice, this common language is mostly English. However, if the parties choose several languages to govern the contract, they should agree on the language they will prioritize interpreting the contract and overcome differences in translation (AKINCI, 2024, p. 11).
Still, if one and/or both of the contracting parties are subject to Turkish laws, they should comply with Law No. 805 on the Compulsory Use of Turkish in Business Enterprises (“Law No. 805”) and other relevant legislation and case law. Indeed, the first article of Law No. 805 mandates that if both parties to the contract are Turkish, then they should conclude the contract in Turkish. On the other hand, the second article of Law No. 805 does not specify whether the contract should be drafted in Turkish if one of the parties to the contract is foreign and the other is Turkish. The relevant judicial decisions also do not provide a common case law (DİNÇ, 2020, p. 137). The Court of Appeals previously ruled that the contract must be drafted in Turkish if one of the parties is Turkish and the other is foreign (Decision No. 2014/3815, File No. 2014/1385; Decision No. 2017/4720, File No. 2016/5836). However, the Court has recently made an exception for arbitration agreements and started to consider “the existence of a foreign element” to decide whether an agreement would be contrary to Law No. 805 (Decision No. 2020/2193, File No. 2019/3156). Indeed, the Court ruled that the conclusion of an arbitration agreement in a foreign language would not constitute a breach of Law No. 805, even though both parties to agreement were Turkish, since it contained a foreign element (Decision No. 2020/2, File No. 2019/23).
d) Contract Price
Contracts should specify the price clearly, leaving no room for interpretation. If the contract price includes other items along with the sales price, they should be indicated clearly as part of the contract price. In addition, the prices should be given in both numerical and written-out forms to avoid numerical errors during contract preparation.
e) Payment Method in International Sale Contracts
The buyer’s payment method for the contractual price, which is their most fundamental obligation, is crucial in international sale contracts. The most common international trade payment methods are as follows: cash payment, letter of credit, cash against documents, cash against goods, and acceptance credit (AĞSAKAL & ERKAN, 2016, p. 582). In practice, the parties often prefer the letter of credit method in their sales contracts to significantly reduce their risks (DÖNMEZ, 2021, p. 18). In this context, the parties should balance their positions, risks and interests in the contract when choosing the payment method.
f) Delivery Method in International Sale Contracts
The method of delivery is as important as the method of payment in international sale contracts. To ensure the transparent and safe delivery of the contracted services or goods to the other party, the contract should specify (i) the place of delivery, (ii) the party that will bear the costs, or (iii) whether the parties will make insurance and carriage agreements. The parties may also add “Incoterms” rules to sale contracts to define the method of delivery. These rules are frequently used and integrated into international sale contracts. In this case, the contract should make a clear and unambiguous reference to the Incoterms rules and the ones that the parties will use (AĞAOĞLU, 2020, p. 1120).
g) Force Majeure Clause
Another key aspect is the scope of the force majeure provision. Force majeure refers to unforeseeable and unpreventable events that happen beyond the control of the parties after the conclusion of the contract. In practice, contracts generally list force majeure events individually, by providing examples, or through definitions and references. If the parties wish to include a force majeure clause in the contract, the clause should respect the governing law. In addition, the parties should carefully define in the contract their notification obligations in case of a force majeure event (AKINCI, 2024, p. 28).
h) Resolution of Contractual Disputes
The contracting parties may agree on various methods for resolving contractual disputes in compliance with the effective regulations. They may refer the dispute to local/national courts or choose from alternative dispute resolution methods such as institutional or ad-hoc arbitration. In practice, the parties may prefer arbitration to traditional litigation due to its various advantages such as speed, independence and impartiality, and sectoral expertise (AKINCI, 2024, p. 46).
If the parties choose arbitration as their dispute resolution method, they should explicitly state it in their contract (KETBOĞA, 2024, p. 89). In Türkiye, case law and the decision of the General Assembly of the Court of Appeals rule that the parties’ intention to arbitrate must be clear and unambiguous for the arbitration clause to be valid (Decision No. 2022/129, File No. 2021/15-855).
Upon their choice of arbitration method, the parties may determine the place, method and language of arbitration, the number of arbitrators and the method of selecting arbitrators to prevent potential misunderstandings.
3. Conclusion
International commercial contracts involve many variables and details in terms of scope and nature, bringing together parties with different legal systems and cultures. However, regardless of its nature and scope, a well-prepared contract will prevent potential disputes and disagreements while sustaining the business relationship between the parties. Therefore, as outlined above, it is crucial that contracts duly set out the rights and obligations of the parties and other key issues.
Att. Ahmet Oğul Aksoy
SOURCES
- AĞAOĞLU, C. (2020). Incoterms® 2020. Public and Private International Law Bulletin, pp. 1113-1149.
- AĞSAKAL, A., & ERKAN, M. K. (2016). Türkiye’de Dış Ticarette Ödeme Şekilleri ve Faiz Oranları. International Journal of Management Economics and Business, pp. 581-588.
- AKINCI, Z. (2024). İngilizce Sözleşmelerin Hazırlanması. İstanbul: On İki Levha Yayıncılık, pp. 10-11, pp. 27-29, pp. 46-47, pp. 62-63.
- DİNÇ, D. İ. (2020). İktisadi Müesseselerde Mecburi Türkçe Kullanılmasına Dair Kanunla İlişkin Güncel Yargı Kararlarının Değerlendirilmesi. Türkiye Adalet Akademisi Dergisi.
- KETBOĞA, M. (2024). Dış Ticaret Firmalarının Uluslararası Ticari Sözleşmelere Taraf Olurken Dikkat Etmesi Gereken Hususlar. MTÜ Sosyal ve Beşeri Bilimler Dergisi, pp. 82-91.
- DÖNMEZ, F. E. (2021). Uluslararası Ticari Sözleşmelerin Hazırlanması ve Uyuşmazlık Çözüm Yolları. Malatya Turgut Özal Üniversitesi İşletme ve Yönetimi Bilimleri Dergisi, 2(1) 1-24.
