Common Legal Problems in Construction Contracts and How to Solve Them

This article is an English translation of the Turkish original published by the office.

Construction is one of the most important sectors of the Turkish economy; when construction moves, many other sectors move with it. Yet the sector that drives the economy is also a field with a great many legal problems. From drafting the contract to problems during the works, from late delivery to payment disruptions, difficulties arise frequently in practice. In this article we look at the legal problems most often encountered with construction contracts and suggest solutions.

Contracts that do not meet the form requirement

The most common construction contracts in practice are flat-for-land construction contracts and promises to sell real estate. Both must be made in official form. Unfortunately, in daily life these contracts are often signed between the buyer and the construction company as private documents. Problems of enforceability caused by failure to comply with the form requirement are therefore the most frequent issue.

Solution: Because flat-for-land construction contracts and promises to sell real estate contain provisions on the transfer of ownership of immovable property, they must be drawn up by a notary in official form. The key point is that the notarial contract must be drawn up by the notary; contracts that are merely certified by a notary will still be invalid.

Vague and incomplete contract terms

In many construction projects, technical specifications and payment plans in the contract are not clear, which leads to differing interpretations and disputes. Incomplete provisions on the scope of the works, delivery dates and penalty clauses in particular create uncertainty in performance.

Solution: The scope of the works, technical features, quality of materials, delivery dates and payment plans should be set out in detail in the contract.

Delays in delivery

Failure to deliver projects on time is a common problem in the sector. When the contractor cannot complete the works within the agreed period, the employer suffers financial loss, which may lead to claims for delay compensation.

Solution: Clearly stating the penalty clauses applicable in case of delay and the method for calculating compensation will reduce both parties’ legal risks.

Requests for extra payment while the contract is ongoing

During construction, contractors sometimes ask the buyer for payments beyond the agreed price, citing rising costs. If the buyer refuses, disputes arise between the parties.

Solution: The parties should include in the contract the circumstances in which additional costs may arise, how they will be documented, how any extra charge will be calculated and which additional expenses will be paid. Even so, where extraordinary events occur and circumstances change radically compared with the time the contract was made, the contractor may request adaptation of the contract price under Article 480/2 of the Turkish Code of Obligations — provided that all the conditions of that provision are met together.

Poor workmanship and materials

Construction carried out with poor workmanship and materials that do not meet standards endangers the safety of the works and paves the way for compensation claims for defective work. Setting clear criteria for materials and workmanship in the contract is therefore very important.

Solution: The scope, technical features, quality of materials, delivery dates and payment plans should be detailed in the contract. Inspections at defined stages of construction also make it possible to detect poor workmanship and materials at an early stage.

Compliance with permits and zoning legislation

Missing or irregular permits and licences adversely affect the legal status of a project and may lead to serious sanctions such as suspension of works or demolition. All permit processes must be carried out carefully under the Zoning Law and related legislation.

Solution: All necessary zoning and building permits should be obtained before the project starts, and the obligations of the landowner or buyer and the contractor should be clarified in the contract.

Courts and alternative methods of dispute resolution

Disputes arising from these contracts are often resolved through long and costly court proceedings. When the parties do not use alternative methods such as mediation or arbitration, cases drag on and trust in the business relationship is lost.

Solution: The contract should provide for methods such as mediation and arbitration so that disputes can be resolved quickly and effectively, avoiding lengthy court proceedings.

Construction contracts are the most basic tool for the successful completion of construction projects. Obtaining legal advice from experienced lawyers when drafting and performing them is an effective way to minimise risk. Acting with professional legal support reduces the legal risks of a project and builds trust between the parties.

Türker Law Office provides legal representation and advice on drafting and reviewing flat-for-land construction contracts, promises to sell real estate and other construction contracts, and on lawsuits, mediation and other proceedings arising from them.