Things to Consider When Preparing Commercial Contracts

KOÇAK Hukuk | Commercial Law Guide

Quick Summary

In commercial contracts, the biggest risks are rarely “bad actors”—they are ambiguous clauses, missing definitions, and unworkable remedies. This guide covers the must-have sections: scope, price/payment, delivery & acceptance, warranties, liability, security/guarantees, penalties, termination, confidentiality, data protection, IP, and dispute resolution.

KOÇAK Hukuk Approach

We treat contracts as a business roadmap + risk allocation tool:

• Is the scope measurable and complete?

• Is cashflow protected (invoicing and payment triggers)?

• Are remedies enforceable if the other party defaults?

• Will dispute resolution be fast and predictable?

1) Parties & Signing Authority

• Correct legal entity details (registration/tax IDs, addresses)

• Signing authority (board resolution, power of attorney)

• Clear notice addresses and valid communication methods

2) Definitions & Scope (What exactly is being delivered?)

• Precise description of goods/services (specs, versions, SLA)

• Out-of-scope items

• Change request mechanism (approval, pricing, timelines)

3) Price, Invoicing & Payment

• Net/gross, VAT, currency, FX rules

• Payment schedule (advance/milestones/post-acceptance)

• Invoicing triggers (acceptance certificate, delivery note)

• Late payment interest/default and collection costs

4) Delivery, Performance, Acceptance & Delay

• Delivery method/place, partial deliveries

• Acceptance tests and criteria

• Delay remedies: extensions, notices, penalties, termination

5) Quality, Defects & Warranty

• Warranty scope and exclusions

• Defect notification windows

• Repair/replace/refund mechanisms

• Maintenance/support terms (for services/software)

6) Liability Cap & Exceptions

• Overall liability cap (e.g., fees paid in last 12 months)

• Exclusion of indirect damages (loss of profit, goodwill, etc.)

• Exceptions (intent/gross negligence, confidentiality breach, IP infringement, data breach—depending on the deal)

7) Security/Guarantees

• Advance payment protections

• Bank guarantee letters (amount, term, calling conditions)

• Performance bonds and warranty retention

8) Penalties / Liquidated Damages

• Clearly defined triggers (delay, confidentiality, non-performance)

• Calculation method and caps

• Relationship with actual damages (clarify)

9) Term, Renewal, Termination & Exit Plan

• Fixed/indefinite term, auto-renewal

• Termination for cause (breach, insolvency, chronic delay)

• Notice periods and notice method

• Post-termination: return of materials, data handover, settlement

10) Confidentiality

• Define “Confidential Information”

• Purpose limitation and permitted disclosures

• Duration (during and after the contract)

• Remedies (injunction + penalties if appropriate)

11) Data Protection (if personal data is involved)

• Roles (controller/processor), purpose, retention

• Security measures, sub-processors

• Incident/breach notification workflow

• Deletion/return upon termination

12) Intellectual Property (IP)

• Ownership vs license of deliverables

• Background IP and pre-existing tools

• License scope (term, territory, users)

• Open-source compliance (if applicable)

13) Dispute Resolution & Governing Law

• Governing law (especially cross-border)

• Courts vs arbitration (seat, language, institution, number of arbitrators)

• Notice procedure and evidence preservation

Red Flags (Stop Before Signing)

• Unlimited one-sided penalties

• Open-ended “any and all damages”

• Unclear acceptance criteria

• One-sided price change rights

• No exit plan for data/tools/deliverables