What this guide covers

Contractors preparing a security request when the client’s ability to pay is in doubt.

A short questionnaire explains which records may matter and produces a document checklist. It does not assess eligibility or predict a case outcome.

Documents discussed in this guide
  • Complete agreement, payment annexes and next-work programme
  • Lawfully obtained inability and endangered-entitlement records
  • Complete wording of existing and offered security instruments
  • Security request, reasons for the period, receipt and replies
  • Work condition, safety, protection and counter-notice records
  • Receivable account, mediation and any full litigation/service file

Full topic-specific Information Guide ↓

Problems with a client’s ability to pay may emerge before the contractor incurs further material and labour costs. The issue is not confined to an unpaid earlier progress payment: payment for continuing work may also be endangered. Article 98 of the Turkish Code of Obligations addresses withholding performance pending security in specified circumstances, and withdrawal if requested security is not provided within an appropriate period. A late invoice payment, rumour or statement about cash-flow difficulties does not automatically establish those rights.

1. Distinguish payment delay from inability to perform

Article 98 requires joint assessment of a reciprocal contract, the other party’s inability to perform and the resulting danger to the first party’s entitlement. Bankruptcy and unsuccessful attachment are expressly identified examples. They should not be read as an exhaustive list allowing the provision only when those two records exist; equally, every debt dispute is not inability to perform. Identify which payment obligation the client cannot fulfil and which reciprocal entitlement of the contractor is endangered.

A progress payment withheld solely over measurement quantities differs from a file involving unsuccessful enforcement against the client’s assets. Even in the latter case, verify whose records they are, their currency and their relationship to the contractual payment debtor. Difficulties of an associated company are not automatically the contracting debtor’s inability to perform. This distinction requires legal assessment of concrete records; a selected guide answer cannot conclusively diagnose it.

2. Identify the work the contractor must perform next

Article 97 concerns reciprocal performance order, while Article 98 addresses danger arising from inability to perform. A contractor’s obligation to complete work first matters under Article 97; it does not remove the need for a separate Article 98 assessment. Payment maturity requires reading Article 479 with agreed advance or interim-payment terms. Issuing an invoice does not automatically make every payment deferred until delivery immediately due.

The preparation file should distinguish completed work, remaining activities, their cost, the relevant payment milestone and existing security. Do not collapse requested security and collection of an already due receivable into one account entry. If existing security already provides sufficient protection, explain why entitlement remains endangered. This exercise supplies no general power to reprice the contract unilaterally or demand advance payment in every case.

3. Assess offered security beyond its label

Article 98 focuses on securing reciprocal performance; it prescribes neither one security instrument nor a fixed percentage for every case. A proposed bank guarantee, pledge or third-party undertaking requires review under that instrument’s own validity and realisation rules. Do not conclude that security is sufficient without reviewing issuer identity and authority, amount, currency, coverage, expiry and demand conditions.

An instrument called a guarantee may still expire before the relevant payment milestone or cover only another project’s price. Likewise, a statement that a shareholder will pay does not replace valid and sufficient third-party security. This article approves no particular security wording. When security is offered, reassess whether the grounds for withholding remain; indefinite suspension despite sufficient security cannot be presumed protected.

4. Specify the security request and appropriate period

Article 98 addresses withdrawal where requested security is not provided within an appropriate period. It specifies no universal statutory period of seven, fifteen or thirty days for security. Assess the instrument’s preparation requirements, seriousness of the danger, approaching work milestone and parties’ actual circumstances when determining an appropriate period. The notice should identify the agreement, concrete grounds for risk, reciprocal performance to be protected and requested security.

Retain dispatch and receipt evidence. The methods in Commercial Code Article 18(3) require separate attention for default, termination and withdrawal notices between merchants; a security request combined with other legal declarations needs that review too. A general reservation of rights does not explain the request’s scope. Reassess the legal position when the period ends: do not proceed as though silence automatically ended the agreement.

5. Distinguish temporary withholding from withdrawal

Temporary withholding is a defence that keeps the agreement in existence, whereas withdrawal raises ending and settlement consequences. The Article 98 route and the Articles 117 and 123–125 route for default on a due payment do not rest on identical grounds. Separately identify the right exercised, its conditions, the account for completed works and treatment of existing construction. Adding an unconsidered termination sentence to a security demand can therefore create serious risk.

Document site condition, work requiring protection and safety measures through dated records. Alleged absence of security does not authorise endangering existing construction or attributing all delay to the client. Allegedly unjustified withholding may lead to penalty and damages claims. Where bankruptcy, concordat, direct public procurement or a mixed construction-for-land-share relationship is involved, do not decide suspension or withdrawal from this general preparation flow without reviewing the special regime.

6. Prepare the notice file separately from collection

A letter requesting security is not an enforcement decision procuring payment of a due price. For a separate price or damages claim, subject-matter jurisdiction depends on party status and claim character: assess Civil Procedure Code Article 2 for ordinary private-law disputes and Commercial Code Articles 4–5 for commercial proceedings. Consumer or other special regimes require a separate distinction. Review territorial jurisdiction under Articles 6 and 10 and any valid jurisdiction agreement; construction disputes do not all automatically go to the same court.

Commercial money or damages proceedings require assessment of pre-action mediation under Commercial Code Article 5/A. Requesting security, filing proceedings and commencing non-judgment enforcement are distinct acts. Include the full agreement, payment programme, lawfully obtained risk records, existing and offered security, notices and replies. Where enforcement, litigation or a special collective process has begun, select the appropriate route separately against the full file and service records.

7. The security period is not the limitation period

The appropriate period under Article 98 concerns provision of security; it is not a new collection timetable extending limitation. For ordinary works-contract receivables, check the five-year period in Article 147(6) and maturity-based commencement in Article 149, with separate assessment of claim type and special circumstances. Sending a demand alone does not automatically interrupt limitation. While security negotiations continue, track the receivable’s limitation and any existing procedural timetable separately.

The final preparation must go beyond saying that the client cannot pay: match the contractual debtor, concrete inability records, endangered reciprocal performance, existing security coverage, requested protection, appropriate period and intended legal step. The full interactive guide below supports those distinctions and document preparation. No answer grants permission to stop work, determines security sufficiency or establishes that ending the agreement was justified.

Sources

General information; individual documents, facts and procedures need separate review.

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Client inability to pay: security-request preparation guide

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