The Basic Considerations When Drafting A Contract

The Basic Considerations When Drafting A Contract
The Basic Considerations When Drafting A Contract
Table of Contents

According to the definition in the Turkish Code of Obligations, a contract is a legal transaction that arises from the mutual and congruent expressions of will of the parties. The main purpose of contracts is to accurately reflect the demands and desires of the parties and to minimize potential disputes that may arise in the future. Therefore, it is important to pay attention to the essential elements that should be included in a contract when preparing it.

First and foremost, the key headings that should be included in a typical contract are as follows:

  • 1) Type of the contract (e.g., work, construction, agency)
  • 2) Identification information and notification addresses of the parties
  • 3) Purpose of the contract
  • 4) Subject matter of the contract
  • 5) Definitions of terms used in the contract
  • 6) Rights of the parties
  • 7) Obligations of the parties
  • 8) Duration of the contract
  • 9) Termination of the contract
  • 10) Force majeure events
  • 11) Termination of the contract
  • 12) Penalty clause
  • 13) Security deposit
  • 14) Attachments (technical documents, circulars, trade registry, etc.)

One important aspect to be mindful of in contracts is the formal requirement. If a contract is explicitly subject to a specific form in the laws, and if it is not prepared in accordance with that form, the contract may be considered invalid. The rights and obligations of the parties should be clearly specified in the contract. The contract’s date, duration, and termination date should be clearly indicated, and what would happen if the contract is extended should be covered.

A contract should have a title, and it should be ensured that the parties are legally competent when signing the contract. If they have identification documents and signature circulars, these should be attached to the contract. Company representatives should also use their seals along with their signatures. Additionally, each page should be initialed, and it should be ensured that the last page is signed. It should be stated at the end of the contract how many pages and copies it consists of. The contract can initially be prepared as a draft and presented for the other party’s review, and any disputed points can be resolved through mutual negotiations.

One of the most important principles of a contract is that the parties’ intentions and what they want from the contract should be clearly and unambiguously documented. Provisions on what to do in case of disputes, such as arbitration or mediation, can be added to the contract if the parties desire.

When preparing a contract, the content of the contract should be determined, and which provisions will apply to that contract, as well as what mandatory elements it should contain, should be carefully examined.

Another crucial aspect in contracts is the place and time of performance. Additionally, including a jurisdiction clause can help minimize disputes.

One of the most critical aspects in contracts is the penalty clause, which outlines the consequences if one of the parties fails to fulfill their obligations under the contract. A specific amount of money can be designated as a penalty, or any penalty that is not contrary to law or morality can be specified.

Furthermore, in contracts subject to stamp duty, it is important to specify who will pay the stamp duty. Under the Stamp Duty Law, the following principles apply to contracts subject to stamp duty:

Those who sign the contracts are obligated to pay stamp duty. The stamp duty rate on contracts is 0.948%.

Each copy of contracts prepared in more than one copy is subject to stamp duty separately.

If there are multiple transactions in the same contract that are completely separate from each other and arise from different causes, stamp duty is levied on the transaction that requires the highest duty.

In cases where a contract is prepared as a single contract and arises from a single cause but contains multiple transactions that are completely separate from each other, stamp duty is levied on the transaction that requires the highest duty.

The stamp duty on contracts signed within a month must be reported to the tax office with a declaration by the permanent taxpayers by the twenty-third day of the following month. The declared tax must be paid to the tax office by the twenty-sixth day of the same month.

In cases where permanent tax liability is not required, contracts must be reported to the tax office with a declaration within fifteen days following the date on which the contract was prepared and must be paid within the same period.

In summary, when preparing a contract, it is essential to pay attention to elements such as the title, date, subject matter, parties, contract summary, formal requirements, stamp duty, penalty clauses, authority documents and powers of attorney, competent court, contract extension, security deposits, and non-assignment clauses.

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