Withholding Performance in Turkey: Reciprocal Duties and Security Under TCO 97–98
A party demanding performance of a reciprocal Turkish contract must normally have performed or offered its own obligation. Article 97 of the Turkish Code of Obligations recognises an exception where the contract’s conditions and nature entitle that party to perform later. Article 98 addresses a different problem: the other party falls into inability to perform and thereby endangers the claimant’s right. The endangered party can withhold its own performance until the counterperformance is secured and can withdraw if requested security is not provided within a suitable period. Neither provision gives an unrestricted right to stop paying or delivering whenever trust deteriorates.
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Begin with the actual exchange and its timetable
The two provisions apply to reciprocal contracts. Identify the obligation sought from each party and the relationship between them. An invoice from one arrangement should not automatically be treated as the counterperformance for an unrelated agreement. The signed contract, orders, amendments and payment schedule establish the starting point.
Record the sequence of payment, production, delivery, inspection or other agreed performance. A contract requiring an advance has a different sequence from one providing simultaneous exchange. A later stage must not be treated as already due merely because the other party would prefer to receive it first.
The official basis is Law No. 6098, Articles 97–98. Before relying on either provision, separate a disagreement over the agreed timetable from evidence that the counterparty has become unable to perform. Those are different questions and call for different documents.
Article 97 requires performance or an offer of performance
Under Article 97, the party seeking performance must have performed its own obligation or offered to perform it, unless it is entitled to perform later under the contract’s conditions and characteristics. The provision protects the reciprocal exchange. A demand does not become justified simply because it has been placed on formal letterhead.
For completed performance, retain the records proving what was supplied, when and to whom. Delivery receipts, acceptance records and payment evidence should correspond to the relevant obligation. A document confirming that goods were dispatched does not necessarily establish every contractual requirement concerning delivery or acceptance.
For an offer of performance, identify the act offered and how it matched the agreed obligation. A statement expressing willingness to cooperate can be different from an offer to provide the required performance. The time, place, quantity and conditions attached to the offer matter to the assessment.
The review must also consider any special rules applying to the particular contract. Article 97 should not be used as a substitute for examining the agreed exchange, legal delivery rules or the nature of the obligation. A general assertion that both sides must act together leaves the statutory exception and the actual timetable unresolved.
The right to perform later changes the Article 97 analysis
The exception is express: a party entitled to perform later need not first perform an obligation that is not yet due in the contractual sequence. Identify the provision or characteristic establishing that entitlement. Do not assume simultaneous performance merely because the contract is reciprocal.
A due-date schedule should distinguish unconditional dates from stages dependent on earlier performance. It should also show any valid amendment. An informal request to change the sequence is not automatically an agreed amendment, and the sender’s authority must be considered where another person negotiated on a party’s behalf.
The practical consequence is that a party obliged to act first cannot rely on Article 97 merely by pointing out that the later counterperformance has not yet occurred. That does not end the review: Article 98 provides a separate protection where the statutory inability and endangerment conditions are established.
Article 98 requires inability to perform and danger to the reciprocal right
Article 98 applies where one party falls into inability to perform and, as a result, the other party’s right is endangered. The statute expressly identifies bankruptcy and unsuccessful attachment as particular situations. The legal explanation should connect the inability with the threatened counterperformance, not merely report a general loss of confidence.
Obtain the actual record relied on. A bankruptcy decision, an enforcement record showing an unsuccessful attachment and a statement that a business is experiencing difficulty are not interchangeable evidence. Identify the legal entity concerned, the date and the relevance to the obligation in this contract.
The wording does not limit the protection exclusively to the two listed situations, but their illustrative nature is not permission to dispense with proof. Another asserted inability must still be established, and its effect on the claimant’s right explained. An unsupported rumour about another group company does not establish the required facts for the contracting entity.
Existing security is also relevant to the danger assessment. List what already secures the counterperformance, its scope and any known limitations. A review that ignores an effective existing safeguard can overstate the risk, while a reference to security without examining its actual coverage can understate it.
Withholding is protection pending security, not immediate discharge
Where Article 98’s conditions are met, the endangered party can refrain from its own performance until the counterperformance is secured. This is a temporary protective position linked to the provision of security. It is not the same as announcing that the underlying obligation has ceased to exist.
Identify precisely which performance is withheld and why the statutory condition relates to it. Keep a record of readiness, remaining tasks and communications. The legal basis should be stated clearly enough for the counterparty to understand the endangered right and the security requested.
The position must be reviewed when relevant circumstances change. A party should not describe withholding as unlimited after the statutory basis has been removed. Whether the security offered actually addresses the counterperformance requires a substantive assessment, not an automatic acceptance or rejection based on the document’s title.
Evaluate the proposed security rather than only its label
Article 98 does not prescribe one universal form of security in its text. The question is whether counterperformance is secured. Identify the proposed instrument, provider, beneficiary, amount, duration and conditions under which it can be used. A letter expressing support is not necessarily equivalent to an enforceable security obligation.
For personal security, formation, authority and the legal capacity in which the signatory acts require review. Our personal-guarantee form and consent guide explains relevant individual-surety safeguards. A promise offered during negotiations should not be counted as valid security without checking the rules that govern it.
For any time-limited instrument, compare its expiry and coverage with the obligation to be protected. Identify any condition that materially restricts access to the security. The review should explain why the actual arrangement addresses the endangered counterperformance instead of treating every guarantee, pledge or deposit as identical.
Keep the security assessment distinct from an attempt to renegotiate the commercial bargain. A demand for unrelated concessions should not be presented as though Article 98 automatically authorises it. The statutory purpose is security for the reciprocal right that has been endangered.
A suitable period for security precedes the withdrawal route
Article 98’s second paragraph permits the endangered party to withdraw if the requested security is not provided within a suitable period. Identify the request and the period allowed. A statement that the contract ended immediately upon hearing of financial difficulty omits this separate statutory step.
The provision does not set a fixed number of days suitable for every transaction. The period must be evaluated in context, including the obligation and the security sought. A form letter with a standard deadline should not be treated as legally sufficient without that assessment.
Retain the request, delivery evidence, response and any proposed security. The chronology should show what the other party was asked to provide and what happened by the end of the relevant period. An incomplete response and a valid security supplied in time have different significance.
Withdrawal itself is a distinct legal act from the earlier decision to withhold. The wording, addressee, applicable communication requirements and consequences of ending the relationship require review. A right to withdraw should not be described as an automatic refund arriving without any further action.
Do not confuse withholding with set-off, hardship or impossibility
Set-off addresses extinction of reciprocal claims under its own requirements. Withholding under Article 98 protects the exchange while security is awaited. Our set-off guide explains why an accounting deduction should not be substituted for a statutory set-off declaration.
Hardship under Article 138 concerns qualifying excessive difficulty and adaptation. Impossibility under Articles 136–137 concerns performance becoming impossible under the statutory responsibility conditions. The separate guides to contract hardship and impossible performance explain those different consequences.
A creditor refusing proper performance creates another issue under Articles 106–111. The creditor-default and deposit guide examines it. None of these routes should be selected merely because the parties have stopped communicating; the facts must fit the mechanism invoked.
Wrongful withholding can create a separate non-performance problem
Article 112 provides the general liability rule where an obligation is not performed or not properly performed, subject to the debtor proving absence of attributable fault. A party withholding without a valid basis therefore needs to consider the consequences of its own non-performance. Citing Article 98 in an email does not establish that its requirements were met.
Before stopping performance, review maturity, the agreed sequence, evidence of inability and the requested security. Preserve the record showing why the decision was taken. The review should consider the response available to the other party as well as the protection sought by the person invoking the provision.
If an agreement is reached to resume or change performance, record the operative terms, authority and effective date. Distinguish a consensual adjustment from a unilateral assumption that the contract now contains different payment or delivery conditions.
Assess the counterparty’s response before extending the suspension
A response can address several different issues. The other party can dispute that it is unable to perform, produce evidence that the reciprocal claim is already secured, offer a new instrument, or contest the demanded performance sequence. Record which proposition the response actually makes. A document showing ownership of an asset does not, without a relevant security arrangement, necessarily establish security over that asset for this obligation.
Where the response offers a security document, obtain its complete terms rather than accepting a screenshot of the signature page. Identify whether it protects the same creditor and counterperformance, whether its conditions can be satisfied, and whether the signatory has authority. A proposed instrument that has not been executed should be distinguished from security that already exists.
The assessment should also identify the appropriate next communication. Acceptance of effective security, a reasoned request for a missing document and withdrawal after non-provision are different steps. Preserve the reasons and supporting records for the chosen response. That makes the duration of withholding explainable and avoids treating the initial warning as permanent authorisation to leave the contract unperformed.
Preparing an international supplier or buyer file
Organise the documents into four groups: the exchange and sequence; evidence of inability and endangerment; security already held or requested; and notices with delivery records. The grouping helps separate Article 97 from Article 98 and avoids relying on a general account of commercial dissatisfaction.
Use exact legal names for the parties, guarantors and any insolvent entity. Add the original documents beside translations. A group-level presentation or common brand can conceal which entity promised the performance and which entity is said to be in financial difficulty.
A cross-border contract also requires applicable-law and dispute-forum analysis. A Turkish delivery address does not alone resolve every issue. Where proceedings have already begun, include the complete served document and service date. A security demand is not itself the procedural response to a payment order or lawsuit.
Frequently asked questions
Must the party demanding performance first perform its own obligation?
Article 97 normally requires performance or an offer of performance. It expressly excepts a party entitled to perform later under the contract’s conditions and nature.
Does every reciprocal contract require simultaneous performance?
No. The agreement and the obligation’s nature can establish a different sequence. Identify the actual due dates and stages before relying on Article 97.
What additional protection does Article 98 provide?
When the counterparty falls into inability to perform and endangers the reciprocal right, the endangered party can withhold its own performance until counterperformance is secured.
Is bankruptcy the only situation covered?
No. Article 98 particularly identifies bankruptcy and unsuccessful attachment, but still requires inability to perform and resulting danger to the other party’s right in the case relied on.
Does a rumour of financial difficulty justify withholding?
The statutory conditions need evidence concerning the actual contracting party and endangered counterperformance. A rumour does not by itself establish those facts.
Does withholding mean the obligation has disappeared?
No. Article 98 links withholding to security for counterperformance. Withdrawal is a separate route when requested security is not provided within a suitable period.
Does the Code prescribe a universal deadline for giving security?
Article 98 uses a suitable period, not one fixed number of days for every transaction. The obligation, request and proposed security must be assessed in context.
Is any document called a guarantee sufficient?
The actual instrument must secure the counterperformance. Its validity, provider, coverage, duration and conditions require review rather than reliance on its heading.
Can unjustified withholding expose the withholding party to a claim?
Yes. The general non-performance framework, including Article 112, remains relevant where the asserted right to withhold is not established.
What should a business provide for an urgent review?
Provide the contract and timetable, evidence of inability, existing and proposed security, notices and delivery records. Include served proceedings and their service dates.
Official legal sources
Turkish Code of Obligations No. 6098, Articles 97–98 and 112; official Ministry text, page 19, containing the reciprocal-performance provisions. This English guide explains the statute; the Turkish text governs.
Istanbul and Mersin offices
For a review in English, state which party must perform first, the counterperformance at risk and any approaching delivery or payment date in the contact section. Bakırcı & Keskin Law Office coordinates Turkish matters from Mersin and Istanbul. Agree a confidential channel for financial and contractual documents.
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