In this article, we explain that the service we provide is not limited to drafting a manufacturing agreement. It also includes taking an active role in direct negotiations with the manufacturer in Turkey, conducting an on-site and physical inspection of the production facility, investigating the company’s legal, commercial, and financial history, and reflecting the concrete findings obtained in the terms of the agreement, as well as securing receivables through additional guarantees alongside the contract. Where deemed necessary, we also arrange supplementary protocols to safeguard the parties’ obligations and put in place the appropriate security mechanisms specifically provided for under the law. In this way, the aim is to identify risks before production begins, to properly structure the commercial relationship between the parties, to prevent potential disputes from the outset, and to secure potential receivable items in advance.
Legal and Commercial Risks to Know Before Signing the Contract
One of the most common mistakes made when starting to work with a manufacturer in Turkey from abroad is conducting the entire process solely through digital channels. Product photographs, correspondence, and even samples sent by courier are not, on their own, a sufficient basis for establishing a reliable and sustainable business relationship.
This is rooted in four fundamental realities:
- The showroom and the production site may be different places. The facility you visit may have been set up solely to host customers, while actual production takes place at a different address and under different conditions.
- An intermediary firm may present itself as the manufacturer. Many intermediaries in Turkey may act as though they are the actual manufacturer in order to bypass the real producer and protect their own margin.
- Capacity may be overstated. The delivery times and production capacity figures provided often do not reflect reality; orders are subcontracted out, and control over quality and timing is lost.
- The sample and the mass-produced goods may not be the same. While the sample may be carefully made by hand, mass production may involve different materials or workmanship.
A Contract Alone Is Not Always Sufficient
A well-drafted contract is, of course, important; however, once a dispute arises, the counterparty’s actual production capacity and assets become far more decisive. A strong contract alone may not be enough where a receivable cannot be collected. Winning a lawsuit and actually collecting payment are two very different outcomes.
Under Turkish law, obtaining a court judgment, initiating enforcement proceedings, carrying out a seizure (attachment), and ultimately collecting the receivable are each a separate process, requiring separate time and separate cost. If the counterparty has no attachable assets, even the most solid contract remains only words on paper.
For this reason, the contract stage should not be limited to putting rights and obligations in writing; it is also necessary to determine in advance the manufacturer’s capacity to actually pay and, where necessary, to put in place appropriate security mechanisms.
Matters to Investigate and Examine Regarding the Manufacturer
Before placing an order with a manufacturer, concrete and verifiable answers to the following questions must be obtained. This research should not be limited to a review of official records; it should also be supported by on-site inspections and physical observations.
Is it really the manufacturer?
Whether the party is an intermediary or the actual manufacturer should be researched through trade registry records, business activity filings, and other official data, and should also be verified in practice through an inspection of the production site.
Where is the production site located?
The address recorded in the trade registry and the actual place of production are not always the same. The address on file with the trade registry may be the company’s head office, accounting office, administrative office, or simply a correspondence address, whereas production may actually take place at a different factory, workshop, warehouse, industrial estate, or subcontractor’s facility.
Knowing the company’s head-office address is therefore not enough on its own. Where production actually takes place, whether that location is suitable for manufacturing, and whether the ordered product can actually be produced at that address must all be examined separately.
Whether the address recorded in the trade registry matches the place where production actually takes place should be checked; if there is a discrepancy, the reason for it and the risks it may create for the commercial relationship should be assessed separately.
Does the manufacturer have export experience?
For products to be shipped abroad, the manufacturer’s export experience is particularly important, because the export process is not limited to manufacturing the product. Packaging, labelling, customs documentation, delivery terms, logistics planning, product standards, and the expectations of international customers all require separate experience.
A manufacturer that has exported before will have a better understanding of the documents required to ship the product, how packaging and labelling processes are handled, what the applicable delivery terms mean, and which quality criteria buyers abroad expect.
A manufacturer without export experience, by contrast, may still be capable of producing a good product but can create problems in terms of shipment, documentation, delivery dates, and international trade practice. For this reason, it should be established which countries the manufacturer has previously exported to, which product categories it has worked in, and whether it has successfully completed similar orders.
Is the company active, and who is authorized to represent it?
The trade registry records of the company to be contracted with should be reviewed to determine whether the company is active, its field of activity, its ownership structure, its governing body, and its authorized representatives.
In practice, the person conducting the negotiations may not be the same person legally authorized to represent the company. For this reason, it must always be verified whether the person signing the contract has the authority to bind the company.
Contracts signed by an unauthorized person can later create serious problems in establishing liability and collecting the receivable. It should also be verified that the bank account to which payment will be made belongs to the company that is a party to the contract.
Are there any enforcement proceedings, attachments, or lawsuits on record?
When assessing the manufacturer’s financial standing and commercial reliability, it should be researched whether there are any existing enforcement (debt-collection) proceedings, attachments, composition/restructuring (concordato) proceedings, bankruptcy filings, or other indicators of heavy indebtedness.
The mere existence of an enforcement file against a company does not, on its own, mean it cannot be worked with. However, numerous enforcement proceedings, unpaid debts, or attachment records may indicate that the manufacturer is in financial difficulty.
Does the manufacturer have identifiable assets?
The manufacturer’s asset position is of critical importance for the collectability of a receivable in the event of a dispute, because even with a strong contract and a favorable court judgment, collection can become very difficult if the counterparty has no attachable assets.
For this reason, before signing the contract, research should be carried out — to the extent possible — into real estate, vehicles, machinery, and equipment registered in the manufacturer’s name, as well as its banking activity, commercial operations, and general ability to pay, and appropriate security should be obtained.
Entering into a high-value manufacturing relationship with a company that has no assets, operates only on paper, or whose production equipment all belongs to third parties creates serious risk. In such cases, it may be necessary to obtain security, split the payment plan into stages, or add supplementary security provisions to the contract.
On-Site Inspection of the Factory or Production Facility
Beyond documents and registry records, the only way to understand a manufacturer’s real capacity is to go to the site. Production capacity cannot be understood on paper.
- The sample and mass-produced goods are often not the same. The sample may have been carefully prepared, while the materials and workmanship used in mass production can be entirely different.
- Whether the production line actually exists should be verified. Capacity can be assessed by examining the machinery and equipment shown during the factory visit.
- Some firms act only as intermediaries. Such firms take the order and subcontract production elsewhere, while you lose control over quality and delivery time.
- A manufacturer marketing itself well does not mean it is a good manufacturer. Investment may go into the website, catalogue, and promotional materials, while the resources allocated to actual production come last.
5. Essential Clauses to Include in a Manufacturing Contract in Turkey
Once the manufacturer has been selected and preliminary due diligence completed, the relationship between the parties must be secured through a written contract. However, it is important that this contract not consist solely of general provisions, but also include clauses specific to the production process.
Technical specification
The size, material, colour, model, weight, packaging, labelling, and other technical characteristics of the product to be manufactured must be clearly specified. The phrase “manufactured in accordance with the sample” may not be sufficient on its own. What constitutes the sample, which dated sample will serve as the reference, and how the technical specifications are determined should all be put in writing.
Quality standard
The quality standard to which the product must be manufactured should be specified. The contract should clearly set out what rights the buyer will have in the event of defective, incomplete, faulty, or non-conforming production.
Delivery time
The delivery date, place of delivery, method of delivery, and the consequences that will apply in the event of delay should be clear. In export-related orders in particular, delays in delivery can also cause the buyer to suffer losses vis-à-vis its own customers.
Penalty clause
Penalty provisions should be established for cases in which the manufacturer breaches the contract, delivers late, or delivers incomplete or defective goods. These provisions are important in ensuring that the manufacturer takes its obligations seriously.
Confidentiality
Product design, brand information, customer portfolio, pricing policy, moulds, and production details may constitute trade secrets. Confidentiality provisions should therefore be included to prevent the manufacturer from sharing this information with third parties or using it for its own benefit.
Ownership of moulds, models, and designs
It should be clearly specified who owns the moulds, drawings, models, logos, designs, or technical documents used in production. Otherwise, the manufacturer may later use the buyer’s design for other customers.
Payment plan and security
The method of payment must be structured around the stages of production. Paying the full price upfront can create serious risk, particularly with a manufacturer being used for the first time. Where necessary, a letter of guarantee, surety, cheque, promissory note, or other security mechanisms should be considered. This should be integrated into the contract signed between the parties in an appropriate manner.
Right of audit and inspection
The contract should provide for the buyer or its representative to be able to monitor the production process, visit the production site, and inspect the goods before shipment. This provision is important not only in the event of a dispute, but also to allow intervention before a problem arises.
Dispute resolution
The contract should specify which court or arbitration centre will have jurisdiction in the event of a dispute between the parties. For cross-border matters, the applicable law, competent court, arbitration clause, and addresses for service of notice should be specifically addressed.
All of the steps described above — verifying the manufacturer’s true identity, reviewing trade registry and enforcement records, assessing its assets and ability to pay, physically inspecting the factory on site, and finally putting in place a solid contract — are precisely the essence of the service our firm provides to companies based abroad.
The service we provide in this context is not limited to drafting the manufacturing agreement; it includes conducting direct negotiations with the manufacturer in Turkey, carrying out an on-site and physical inspection of the production facility, investigating the company’s legal, commercial, and financial history, and reflecting the concrete findings obtained in the terms of the contract. It also includes securing economic matters such as receivables or penalty clauses, in addition to the contract itself. While the contract sets out the matters agreed between the parties, the additional preparation of documents specifically provided for under the law also serves to secure your receivables. In this way, the aim is to identify risks before production begins, to properly structure the commercial relationship between the parties, and to prevent potential disputes from the outset.
Our objective is to make risk visible before an order is placed – so that if a problem does arise, what you hold is not merely a piece of paper, but genuine protection.