What Should I Do If a Commercial Contract Is Breached?

In short

In a breach of contract, the door of the notice, of default, and of compensation is chosen. Enforcement is not the first step in every breach.

The door of the notice, of default, and of compensation is chosen. Enforcement is not the first step in every breach.

The check of the writing is in a separate writing.

The date of the performance gives birth to the default.

Related writings: a commercial claim.

If the order was not delivered, the service does not carry the quality that was promised, or the other side is not performing the payment obligation, document the breach and the existing situation before ending the contract with the first reaction. A notice of termination sent at the wrong time can confront the creditor who is in the right with the risk of a counterclaim.

In a breach of a commercial contract, the suitable path changes according to whether the continuation of the contract is wanted, whether the breach can be cured, whether the loss is growing, and the need for interim protection. The options of performance in kind, an additional period, rescission, termination, a penalty clause, and compensation cannot be used at the same time in every file. This content is general information. The contract and the transaction records should be examined together.

Define the breach and your aim separately

First determine which debt the other side breached. The sentence "it did not comply with the contract" is not enough. A particular clause such as the delivery date, the quality standard, the payment due date, confidentiality, competition, a minimum purchase, or a reporting obligation should be shown.

The types of breach can be separated as follows:

• The debt not being performed at all
• Late performance
• Performance in an incomplete quantity
• A quality that is defective or contrary to the contract
• The payment not being made
• A breach of confidentiality or of an intellectual right
• The breaking of an exclusivity or a competition obligation
• The use of an unauthorised subcontractor
• The information and reporting obligation not being performed

Then the aim should be determined. Do you want the goods still to be delivered, the contract to end, a reduction of the price, or the loss to be paid? Putting forward elective rights that conflict with each other unconditionally at the same time can create uncertainty.

Find the current and complete text of the contract

Beside the signed main contract, there can be annexes, a technical specification, order forms, amendment protocols, and email agreements. Which document has priority, and which text will apply in case of a conflict, may be arranged in the contract.

The main clauses to be examined are these:

• The correct trade name and the representatives of the parties
• The scope of the performances and the acceptance criteria
• The delivery and payment dates
• The address and the form of notice
• The provisions on correction or an additional period
• The grounds of termination and of rescission
• The penalty clause, interest, and the limit of liability
• Force majeure and excessive difficulty of performance
• Confidentiality and intellectual rights
• The competent court, arbitration, and the applicable law

The parties may have developed a different practice in fact after the contract. Continuous late delivery being accepted without objection may not extinguish the later rights completely. It can play a role in the interpretation. Whether the changes were made by the authorised persons should be examined.

Fix the evidence at once

The situation at the moment of the breach can change later. Defective goods can be repaired, an internet page can be taken down, or system records can be deleted. The delivery minute, the photograph, the video, the sample, the service report, the correspondence, and the time-stamped records should therefore be preserved.

These groups can be found in the evidence file:

• The contract and all its annexes
• The order, offer, and acceptance correspondence
• The invoice, the dispatch note, and the delivery documents
• The quality control and the defect notifications
• The payment and bank records
• The notices and the other side's answers
• The correction offers
• The documents of the loss and of the substitute purchase

In a technical dispute, an independent expert report, or a determination of evidence through the court, may be required. Recording the existing situation in a reliable way before returning the goods to the other side, or before changing the system, is important.

The path of unauthorised access to the company system, or of taking the other side's confidential data, should not be applied to. The aim of obtaining evidence does not legitimise a method contrary to the law.

Do not miss the examination and notification obligations

In sales of goods between merchants, examining the goods that were delivered, and notifying the defects within a suitable period, carries special importance. An open defect, a hidden defect, and a deficiency that can be understood by an ordinary examination can come out at different times. The provisions of the Turkish Commercial Code and of the Turkish Code of Obligations are assessed together with the contract.

Using the goods without making any check after they were taken in delivery can make a later claim of a defect harder. An examination minute, a sample, and a photograph should be prepared. The defect notification should show openly what the problem is, and which lot or delivery it relates to.

In service contracts too there can be an acceptance test, a delivery stage, and an objection period. If an acceptance document that the system was put into operation was signed, the reservation and the defects that came out later are assessed separately. Instead of an uncertain sentence that the rights are reserved, the concrete deficiency should be written.

Assessment of default and of an additional period

If the debt is not performed at its due date, the debtor's default can come onto the agenda. In some situations, even if the due date was determined openly, a notice may be required. The contract can arrange separately which notice will give birth to the default.

Giving the other side a reasonable additional period can matter for the use of the elective rights, especially in delays that can be cured. A different result can arise in the situations where giving an additional period is useless, where performance at a certain time is essential, or where the debtor has stated openly that he or she will not perform.

These points should take a place in the notice of the additional period:

• The debt that was breached, and the contract clause
• The existing deficiency or delay
• The last date given
• The correction or the delivery expected
• The right that will be assessed at the end of the period
• The explanation that the rights are reserved

The period should be realistic. A period of a couple of days that is technically impossible to perform can make the later termination open to debate. By contrast, in events where the critical commercial date was known beforehand, a short period can be reasonable.

The form of the notice and the right addressee

The form of notices of default, termination, and rescission of the contract between merchants is subject to a special arrangement. Methods such as a notary, a registered letter, a telegram, or registered electronic mail with a secure electronic signature can come onto the agenda. An address and a method of notice may also be determined in the contract.

An ordinary email can show that the other side knew the breach. It may not always meet the statutory or contractual form. The safest method is to determine the valid form according to the type of the claim, and to convey the same content by the operational email as well.

The addressee's trade name, MERSIS, and address particulars should be checked. Sending the notice to the wrong one of the group companies creates a debate of default and of the period. If the employee who signed the contract is no longer in the post, sending a message only to him or her may not be enough.

The options of performance in kind, rescission, and termination

Performance in kind is asking that the debt be performed in the way agreed in the contract. If the goods or the service are still necessary and possible, it can protect the commercial relation. The loss that formed because of the delay can also be claimed separately if its conditions exist.

Rescission of the contract rests on the logic of a liquidation with effect on the past. Termination rests on the logic of an ending with effect for the future, especially in continuing debt relations. The parties returning what they received, the situation of the continuing services, and the licence accesses change according to this.

When the choice is made, these measures can be used:

• Is performance still possible and useful?
• Is the breach essential, can it be cured?
• Is the contract continuing, or a one-off?
• Did the other side make a correction in the additional period?
• Are there obligations connected with third persons?
• What is the effect of the ending on the data, the stock, and the customer?

Using the wrong legal term does not always make the notice invalid. The result of the claim should be clear. A conflicting explanation such as "I cancelled the contract, and I also want the service" should be prevented.

Compensation and the calculation of the loss

In a claim for compensation, the breach, the loss, the fault, and the proper causal link are assessed. The loss may not consist only of the contract price. The substitute goods being bought more expensively, a correction expense, an expense made in vain, or a provable loss of profit can come onto the agenda.

In the loss table, a document and the connection with the breach should be shown for each item:

• The extra supply invoice
• The repair or reproduction expense
• The contractual penalty paid to the customer
• The transport and storage expense
• The value of the goods that could not be used
• The provable loss of an order or of profit

The party who suffered the loss should prevent the loss from growing with reasonable measures. Waiting for months when an alternative supply is possible can make it harder for a part of the increased loss to be claimed. By contrast, there is no obligation to take a measure that is excessively costly or unrealistic.

If the same loss was met by the penalty clause, by insurance, or by a third person's payment, it cannot be collected twice. The relations of set-off and of recourse are calculated separately.

The penalty clause and the limitations of liability

In the contract there can be a delay penalty, a minimum-purchase penalty, or an early-termination price. In which event the provision arises, its upper limit, and whether it can be asked for together with the other claims, are determined according to the text.

The merchants' obligation to act prudently, and the special approach relating to reduction of the penalty clause, matter. Limits such as the penalty creating economic ruin, being contrary to morality, or mandatory provisions can be examined separately. The existence of the penalty clause does not remove the creditor's burden of proving the breach and that he or she performed his or her own performance.

Clauses that limit liability can also give birth to a different result as regards intent, gross fault, personal injury, confidentiality, or a breach of an intellectual right. If the provision is in the nature of a standard term, being treated as not written, and a control of the content, can come onto the agenda.

Force majeure, impossibility, and excessive difficulty of performance

The other side can put forward a fire, an epidemic, an import ban, a cyber attack, or a break in the supply chain. As much as the existence of the event, its real effect on the debt, and whether the party took a measure, matter. The definition of force majeure in the contract, the notification period, and the results should be examined.

A mere increase of cost, or a cash difficulty, is not force majeure in every situation. If performance has become impossible physically or legally, impossibility can be debated. If performance is possible but has become heavier to an extraordinary extent, excessive difficulty of performance can be debated.

The debtor should notify the event on time and should investigate the alternatives that reduce the loss. If supply from another supplier, a partial delivery, or an extension of the period is possible, these are assessed. The creditor should not assume in advance that the event ends the contract completely.

Mediation and collection

For commercial claims and compensation claims whose subject is the payment of a sum of money, mediation before the case is opened is obligatory as a rule. In the application, the principal claim, the penalty clause, the interest, and the items of loss should be separated.

Joining the meeting with the contract, the notice, the delivery records, and the loss table is useful. If a settlement is made, beside the payment, the remaining delivery, the liability for defects, the return of data, and the intellectual-right and confidentiality obligations can also be arranged. In a partial settlement, the claims that remain open should be stated.

If there is no settlement, a case, or, if its conditions exist, enforcement proceedings, is assessed. When proceedings are started for a specific money claim, the debtor can object. The path after an objection to the enforcement proceedings changes according to the nature of the document in hand. The wider collection plan is in the guide a commercial claim.

Interim measure and interim attachment

If there is a concrete risk that the other side will transfer its assets, will disclose confidential information, or will create a loss that is hard to reverse by continuing the breach, interim protection can come onto the agenda. The request should be chosen in a way that fits the nature of the main case.

An interim measure can be used to stop a certain conduct, to protect the goods, or to continue the existing situation. As regards a money claim, the conditions of an interim attachment are different. The due date of the claim, its document, and the risk of diversion are examined.

The court can ask for approximate proof and a security. The request being excessively wide can stop the other side's activity unnecessarily, and can give birth to liability for loss because of unjust protection. An urgent application should be planned together with the arbitration or jurisdiction provision in the contract.

Jurisdiction, arbitration, and a foreign element

Particular city courts may have been made competent in the contract. An agreement on jurisdiction between merchants is effective if it carries the statutory conditions. Whether the record is exclusive, and whether it covers the dispute, should be examined.

If there is an arbitration clause, the dispute on the merits can be taken before an arbitrator. Opening a case in the state court can meet the first objection of arbitration. Despite this, for urgent interim protection, the court or arbitrator mechanisms can be used according to the contract.

If there is a foreign party, a foreign currency, a delivery abroad, or a choice of foreign law, the service, the language, the applicable law, and the enforcement of the decision are handled separately. The existence of an Ankara jurisdiction record does not remove every foreign-law problem.

Mistakes often made

In a breach of a commercial contract, these mistakes should be avoided:

• Sending a termination without defining the breach and the aim
• Neglecting the form of notice in the contract
• Changing the goods before determining the defect or the delivery situation
• Giving no period at all in an event where an additional period is required
• Using elective rights that conflict with one another
• Calculating the loss without a document and in an exaggerated way
• Not taking the reasonable steps that will prevent the loss from growing
• Sending the notice or the proceedings to the wrong group company
• Noticing the arbitration and jurisdiction record after the case is opened
• Leaving the items of the claim missing in the mediation application

If the commercial relation will continue, writing every small mistake of the other side like a heavy breach hardens the negotiation unnecessarily. By contrast, staying silent in the face of a continuous breach also makes the application of the contract uncertain. A measured notice, dated and based on the clause, should be preferred.

Where the breach record is read

A breach of contract is read from the notice, the default, and the record of performance. A penalty-clause percentage and an article number that are not written in the file are not added. The Ankara lawyer separates from the contract the fact that the office being in Çankaya does not choose the competent authority. Not every breach is counted as a ground of termination by itself.

• Gather the complete text of the contract, the annex, and the amendments.
• Determine the debt that was breached, and the date.
• Fix the evidence of delivery, of the defect, of payment, and of the correspondence.
• Check the examination and notification periods.
• Assess whether an additional period is needed.
• Send the notice by the valid method.
• Compare the options of performance in kind, rescission, termination, and compensation.
• Calculate the loss on the basis of the document, and take a measure that reduces it.
• Complete the mediation process for the money claims.
• Choose the path of a measure, an attachment, a case, or arbitration according to the contract.

The general frame of contract management is on the page commercial law. In a commercial breach, the right reaction is not the harshest reaction. It is the measured reaction that takes into account the aim of the contract, the evidence, and the growth of the loss.

This text is in the nature of general information. A legal assessment should be made by examining the concrete contract, the date of the transaction, the capacity of the party, and the current legislation.

Conclusion

This writing is for general information. The document, the period, and the procedure of the concrete event should be read separately. There is no promise of a result by rote.