Paid a commercial deposit or advance payment to a Turkish company but the contract failed? Learn how foreign companies can recover advance payments, deposits and prepaid funds through Turkish litigation, enforcement, provisional attachment and arbitration.

Foreign companies doing business in Turkey frequently make substantial payments before goods are delivered, services are performed or commercial transactions are completed. These payments may be described as an advance payment, deposit, prepayment, down payment, reservation payment, security deposit or earnest money.

Problems arise when the Turkish counterparty receives the money but fails to perform.

A supplier may never manufacture the goods. A distributor may abandon the transaction. A Turkish company may fail to obtain required approvals. A commercial acquisition may collapse before closing. A contractor may receive a substantial advance and stop work. In more serious cases, the recipient may refuse both performance and repayment.

For a foreign company, the immediate question becomes:

Can the advance or deposit be recovered in Turkey?

The answer depends heavily on the contract, the legal characterization of the payment, why the transaction failed and which party was responsible.

Deposit and Advance Payment Are Not Always the Same Thing

One of the most important mistakes in commercial disputes is assuming that every payment made before completion is legally a “deposit.”

The terminology used by the parties is relevant but not always decisive.

A payment may constitute part of the purchase price, an advance against future performance, security for contractual obligations, earnest money demonstrating conclusion of the contract, withdrawal money allowing a party to exit the transaction, or another specifically negotiated payment.

The legal consequences can be very different.

For this reason, the first step in any recovery case should be to determine what the payment legally represented.

Advance Payment Toward the Purchase Price

An advance payment is commonly part of the contractual price paid before full performance.

For example, a foreign purchaser may order machinery worth EUR 1 million from a Turkish manufacturer and pay 30% in advance.

If the Turkish supplier properly manufactures and delivers the equipment, the EUR 300,000 is normally credited toward the final purchase price.

But if the supplier fails to perform and the transaction is lawfully terminated, the foreign purchaser may have grounds to seek repayment together with other available remedies.

Turkish Law Distinguishes Different Types of Upfront Payments

The Turkish Code of Obligations contains specific provisions concerning money given when a contract is concluded.

Article 177 provides, in substance, that money given at the time of contracting is presumed to demonstrate conclusion of the contract rather than constitute withdrawal money. Unless otherwise agreed or established by local custom, that amount is deducted from the principal obligation. (Dünya Fikri Mülkiyet Örgütü)

This distinction can become critical where one party argues:

“The deposit was non-refundable.”

Calling money a “deposit” does not necessarily answer the legal question.

Withdrawal Money Under Turkish Law

Article 178 of the Turkish Code of Obligations addresses withdrawal money (cayma parası).

Where withdrawal money has actually been agreed, either party is considered entitled to withdraw under the provision. If the party that paid the money withdraws, it leaves the payment behind; if the recipient withdraws, it returns twice the amount received. (Dünya Fikri Mülkiyet Örgütü)

This is significantly different from an ordinary advance payment.

Foreign companies should therefore avoid assuming that every advance payment automatically gives either party a right to walk away from the contract.

Is a Commercial Deposit Automatically Non-Refundable?

No.

A contractual payment does not necessarily become non-refundable merely because the other party labels it a “deposit.”

The agreement must be examined carefully.

Relevant questions include:

What was the payment for?

Was it credited against the purchase price?

Did the contract expressly state that it was non-refundable?

Was it intended as security?

Was withdrawal expressly permitted?

Who caused the contract to fail?

Was the contract validly terminated?

Did the recipient perform any corresponding obligation?

These questions can determine whether repayment is available.

Turkish Supplier Receives Advance but Does Not Deliver

This is one of the most common disputes involving foreign purchasers.

Suppose a foreign company agrees to purchase industrial equipment from a Turkish manufacturer for EUR 2 million.

The buyer pays EUR 600,000 in advance.

The supplier promises delivery within six months.

Ten months later, nothing has been delivered.

The manufacturer stops responding and refuses to refund the EUR 600,000.

The foreign buyer should immediately examine the contract’s delivery provisions, termination rights, refund obligations, governing law and dispute-resolution clause.

Depending on the circumstances, it may seek repayment of the advance and potentially additional damages.

Supplier Says the Advance Was Spent

A Turkish supplier may respond:

“We already spent the money manufacturing the goods.”

That statement does not automatically defeat the foreign buyer’s claim.

The supplier’s actual contractual performance must be examined.

Did manufacturing genuinely begin?

Were raw materials purchased specifically for the buyer?

Was the supplier ready to deliver?

Why did performance fail?

Who breached the contract?

Accounting and production evidence may become relevant where substantial amounts are disputed.

Foreign Buyer Cancels the Transaction

The analysis changes where the foreign purchaser itself abandons the transaction.

Suppose a buyer pays EUR 250,000 toward customized machinery but later decides that it no longer needs the equipment.

Whether the advance must be returned depends on the contract and applicable law.

The Turkish manufacturer may have already incurred substantial production expenses and may potentially have contractual claims of its own.

The foreign buyer should therefore not assume that unilateral cancellation automatically creates a full refund right.

Turkish Counterparty Cancels the Deal

The foreign company’s position can be significantly stronger where the Turkish recipient itself refuses to perform.

Suppose a Turkish supplier receives a 40% advance and then announces that it will not supply the goods unless the buyer agrees to a substantial price increase.

The buyer should determine whether this constitutes contractual breach and whether it can terminate the agreement and recover the advance.

Evidence of the supplier’s refusal should be preserved.

Deposit Paid for a Commercial Acquisition

Advance-payment disputes also arise in company acquisitions.

A foreign investor may pay an exclusivity deposit, signing payment or other preliminary amount during negotiations to acquire a Turkish business.

The acquisition may later fail because due diligence reveals hidden liabilities or because the seller cannot satisfy closing conditions.

The refund position depends on the transaction documents.

The letter of intent, memorandum of understanding, Share Purchase Agreement and escrow agreement should all be reviewed.

Real Estate and Commercial Property Deposits

Foreign companies may also pay deposits toward warehouses, offices, factories, hotels or development projects.

The transaction can fail because of title problems, zoning restrictions, financing issues, missing permits or seller default.

Commercial property transactions may involve additional formal requirements and property-law considerations.

The deposit should therefore not be analyzed solely under general contract principles.

Advance Payment for Services

Suppose a foreign company pays a Turkish contractor EUR 400,000 before work begins.

The contractor performs only a small portion of the project and abandons the site.

The foreign company may potentially seek recovery of the unearned portion of the advance together with damages depending on the contractual structure and circumstances.

Evidence showing the value of work actually performed becomes important.

Advance Payment for Goods and the CISG

Where the underlying contract is an international sale of goods, the United Nations Convention on Contracts for the International Sale of Goods (CISG) may also become relevant.

For qualifying international sales involving Turkey, the CISG can govern contractual performance and remedies.

Where a contract is avoided, Article 81 contains restitution principles relevant to performance already supplied by the parties.

This can be particularly important where the foreign buyer paid the purchase price or an advance but never received the contracted goods.

Restitution After Avoidance Under the CISG

If a qualifying international sales contract is properly avoided, a party that performed all or part of the contract may generally claim restitution of what it supplied under the Convention’s framework.

For a foreign purchaser, this can mean seeking repayment of money already transferred to the Turkish seller.

However, the buyer must first determine whether avoidance was legally available and properly declared.

A party should not assume that simply sending an email saying “we cancel the contract” automatically satisfies all applicable requirements.

Interest on Money That Must Be Refunded

Where a seller must refund a price following avoidance of a CISG-governed transaction, Article 84 can become important.

The Convention provides rules concerning interest on a price that must be repaid.

The applicable calculation should be analyzed together with the governing legal framework.

For substantial advance payments held for several years, interest can become commercially significant.

Breach of Contract and Recovery of the Advance

Where Turkish law governs, a repayment claim may arise from the consequences of contractual breach and termination.

The precise remedy depends on the nature of the agreement and how it ended.

The foreign company should establish that it had a legal basis for terminating or withdrawing from the contract before demanding restitution.

An unjustified termination by the foreign company may produce a very different outcome.

Unjust Enrichment

In appropriate circumstances, Turkish unjust-enrichment principles may also become relevant where one party retains money without a valid legal basis.

However, unjust enrichment should not automatically replace contractual claims where a valid contract governs the relationship.

The correct legal characterization matters because limitation periods, damages and evidentiary requirements can differ.

Fraudulent Advance Payment Schemes

Some cases go beyond ordinary breach of contract.

A supposed Turkish supplier may request a substantial advance even though it never intended or had the capacity to supply the goods.

Warning signs can include false factory information, fabricated documents, nonexistent inventory, fake certifications or immediate disappearance after receiving funds.

Where there is evidence of intentional deception from the beginning, criminal-law issues may arise alongside civil recovery claims.

Not every failed commercial contract constitutes fraud.

The distinction depends heavily on evidence concerning intent.

Preserve Bank Transfer Evidence

The foreign company should preserve the complete banking record.

This includes SWIFT confirmations, transfer instructions, beneficiary information, payment descriptions and account statements.

The payment description can become important.

A transfer stating:

“30% advance payment – Contract No. 2026/45”

provides considerably clearer evidence than an unexplained EUR 500,000 transfer.

Preserve the Contractual File

The entire transaction file should be secured immediately.

Important evidence can include the signed agreement, quotations, pro forma invoices, purchase orders, emails, WhatsApp correspondence, delivery schedules, termination notices, invoices, technical specifications and meeting records.

Where negotiations occurred through several channels, evidence should be organized chronologically.

Demand Repayment Formally

Before commencing proceedings, a formal repayment demand can be important.

The notice should identify the contract, payment, legal basis for repayment, amount claimed and deadline.

Where the contract contains a specific notice procedure, it should be followed carefully.

The foreign company should avoid endless informal negotiations where the counterparty repeatedly promises:

“We will refund you next week.”

Written Acknowledgment of the Refund Debt

A Turkish counterparty may admit that the money must be returned but ask for additional time.

For example:

“We acknowledge the EUR 350,000 refund obligation and will repay it in three installments.”

Such correspondence can become important evidence.

If a payment plan is accepted, it should be documented clearly.

Additional security may also be appropriate.

Can Turkish Enforcement Proceedings Be Used?

Potentially.

Where the foreign company’s refund claim has become a due monetary receivable, Turkish enforcement proceedings may provide a recovery route depending on the circumstances.

An ordinary enforcement proceeding can place pressure on the Turkish debtor to pay or formally object.

If the debtor does not successfully object within the applicable period, the creditor may proceed toward compulsory enforcement.

What If the Turkish Company Objects?

A Turkish debtor may dispute the enforcement proceeding.

A timely objection can stop ordinary enforcement.

The foreign company may then need to pursue the appropriate procedure to overcome the objection and establish the receivable.

This makes documentary evidence particularly important.

A clearly drafted refund clause and written acknowledgment of the repayment obligation can materially improve the creditor’s position.

Commercial Litigation

Where Turkish courts have jurisdiction, the foreign company may bring the appropriate commercial action seeking repayment and, where legally available, interest and damages.

The precise cause of action depends on the contract.

The claim may involve breach of contract, restitution following termination, unjust enrichment or another contractual remedy.

The case should be pleaded according to the actual legal structure rather than simply alleging:

“We paid money and want it back.”

Mandatory Mediation

Where the dispute qualifies as a Turkish commercial action seeking payment of a monetary receivable or compensation, mandatory mediation generally must be considered before filing suit.

Official Turkish justice statistics confirm that mediation before litigation is a procedural prerequisite for commercial actions involving claims for payment of a certain amount of money or compensation. (Adli Sicil)

Foreign companies should therefore incorporate mediation into the litigation timetable.

Arbitration Clause

International commercial agreements frequently contain arbitration clauses.

If the contract requires arbitration, the foreign company may need to pursue the refund claim before the agreed tribunal rather than through ordinary Turkish commercial litigation.

Turkey has also continued institutional work concerning international and commercial arbitration in 2026; the Ministry of Justice announced the establishment of an Arbitration Department within its General Directorate for Legal Affairs in May 2026. (Türkiye Cumhuriyeti Adalet Bakanlığı)

The arbitration clause should therefore be checked before proceedings begin.

Can the Recipient’s Assets Be Protected?

A foreign company may face a serious problem where the Turkish counterparty has received a substantial advance and begins moving assets after receiving a refund demand.

Depending on the claim and satisfaction of statutory requirements, provisional attachment or other interim protection may need to be considered.

The purpose is practical.

A final judgment for EUR 2 million has limited value if the defendant has disposed of every recoverable asset during the proceedings.

Bank Accounts

Once the creditor reaches the appropriate enforcement stage, bank accounts may potentially become collection targets.

But foreign companies should not focus solely on bank balances.

A Turkish debtor experiencing financial difficulties may rapidly move or spend cash.

The recovery strategy should therefore identify the debtor’s broader asset structure.

Receivables From Customers

The Turkish counterparty may itself have valuable receivables against customers.

These can potentially become important during enforcement.

For operating businesses, customer receivables may sometimes be more valuable than machinery or vehicles.

Understanding the debtor’s business model can therefore improve collection strategy.

Real Estate and Movable Assets

Real estate, vehicles, machinery and other attachable assets may potentially form part of the recovery strategy.

Existing mortgages, attachments and security rights should be investigated.

Nominal ownership does not necessarily mean the asset contains recoverable equity.

Suspicious Transfers to Related Parties

Suppose a Turkish company receives EUR 1 million from a foreign purchaser.

After the contract collapses and repayment is demanded, the company transfers valuable assets to another company owned by the same shareholders.

This should be investigated immediately.

Depending on the circumstances, interim measures and creditor remedies concerning prejudicial transactions may become relevant.

Delay can substantially reduce recovery prospects.

Can the Company’s Shareholders Be Sued Personally?

Not automatically.

The Turkish company and its shareholders are generally separate legal persons.

The fact that a company refuses to refund an advance does not automatically make its shareholders personally liable.

A separate basis for personal liability must exist.

However, personal guarantees, fraudulent conduct or other specific circumstances may change the analysis.

Personal Guarantee

Foreign companies making large advance payments should check whether a shareholder, director or parent company guaranteed repayment.

A valid guarantee can create an additional recovery source.

Its wording, form, scope and applicable law must be examined carefully.

Bank Guarantee for Advance Payments

For high-value transactions, foreign buyers can reduce future risk by requiring an advance payment guarantee.

The guarantee can provide recourse against a bank if the supplier fails to satisfy specified obligations.

The precise wording is crucial.

Expiry dates, demand requirements and documentary conditions should be monitored carefully.

Escrow Instead of Direct Payment

Escrow arrangements can reduce the risk of paying large amounts directly to a counterparty before performance.

Funds may be released only when specified contractual conditions are satisfied.

For M&A transactions, high-value equipment purchases and other substantial investments, escrow can provide significantly better protection than an unsecured advance.

Payment in Milestones

Another risk-management strategy is milestone-based payment.

Instead of paying 50% immediately, the parties may structure payments around manufacturing, inspection, shipment, installation or acceptance milestones.

This reduces the amount exposed if performance stops.

The contract should define objectively what must occur before each installment becomes payable.

Penalty Clauses

Commercial contracts may contain penalty provisions addressing failure to perform or delayed performance.

The Turkish Code of Obligations regulates contractual penalty clauses separately from earnest and withdrawal money. Article 179 addresses circumstances in which a creditor may demand performance or the agreed penalty, depending on how the clause is structured. (TC Mevzuat)

The foreign company should therefore distinguish between recovery of its advance and any additional contractual penalty claim.

Foreign Currency Advance Payments

International advances are frequently paid in EUR, USD or GBP.

The refund claim should be analyzed in light of the contractual currency, governing law and applicable rules concerning foreign-currency obligations.

The foreign company should preserve the original SWIFT transfer and contractual currency documentation.

Currency fluctuations can make this issue economically significant.

Partial Performance

Suppose a foreign purchaser pays EUR 600,000 in advance.

The Turkish supplier performs work worth EUR 150,000 before valid termination.

The buyer should not automatically assume that the entire EUR 600,000 must necessarily be returned.

The value of validly performed obligations may need to be determined.

Technical experts or accountants may be required where the parties disagree over completion percentages.

Counterclaim for Seller’s Losses

The Turkish company may argue that the foreign purchaser wrongfully terminated the contract and caused losses.

It may attempt to retain the advance or assert a counterclaim.

The foreign company should therefore establish the legal basis for termination carefully.

A strong refund case requires more than proving that money was paid.

It must also address why the recipient no longer has a legal basis to retain it.

Limitation Periods

Foreign companies should not leave commercial deposit disputes unresolved indefinitely.

Applicable limitation periods depend on the nature and legal basis of the claim.

Contractual notice deadlines may also apply.

The claim should therefore be classified legally before the relevant deadline is calculated.

Repeated promises of future repayment should not substitute for limitation analysis.

Practical Example: EUR 800,000 Advance Paid to Turkish Manufacturer

Assume a foreign company orders specialized industrial equipment from a Turkish manufacturer for EUR 2 million.

The foreign buyer pays a 40% advance of EUR 800,000.

The contract requires delivery within eight months.

After twelve months, manufacturing remains substantially incomplete.

The Turkish supplier admits that it cannot complete the project but refuses to refund the money because it says the advance was “non-refundable.”

The foreign company should first examine whether the contract actually characterizes the EUR 800,000 as non-refundable and what legal effect that clause has.

It should establish whether termination is contractually and legally justified.

If the transaction falls within the CISG, avoidance and restitution rules should also be analyzed.

The supplier’s assets and financial condition should be investigated immediately.

If the refund claim is pursued in Turkey, enforcement, commercial litigation, mandatory mediation and possible interim protection should be evaluated.

The foreign company should not wait another year merely because the supplier promises that financing will eventually become available.

Immediate Action Plan for Foreign Companies

A foreign company seeking repayment should first secure the contract and proof of payment. It should then determine the legal characterization of the payment: advance, part-payment, earnest money, withdrawal money, security or another contractual payment.

Next, identify why the transaction failed and which party was responsible.

The governing-law and dispute-resolution clauses should be reviewed, including whether the CISG applies to an international sale of goods.

A formal refund demand should then be prepared.

At the same time, the Turkish counterparty’s financial position and available assets should be investigated.

Where substantial funds are at risk, recovery strategy and asset protection should proceed together.

Frequently Asked Questions

Can a foreign company recover an advance payment from a Turkish company?

Potentially, yes. Recovery depends on the contract, nature of the payment, reason the transaction failed and applicable law.

Is every commercial deposit non-refundable?

No. The contractual and legal characterization of the payment must be determined.

What is earnest or binding money under Turkish law?

Article 177 of the Turkish Code of Obligations provides that money given when concluding a contract is generally considered evidence of the contract rather than withdrawal money and, unless otherwise agreed or customary, is deducted from the principal obligation. (Dünya Fikri Mülkiyet Örgütü)

What is withdrawal money?

Where withdrawal money has been agreed under Article 178, the party paying it may lose the amount upon withdrawal, while withdrawal by the recipient can require repayment of twice the amount received. (Dünya Fikri Mülkiyet Örgütü)

Can an advance be recovered if the Turkish supplier never delivered?

Potentially. The contract, termination rights and applicable law must be examined. CISG restitution rules may also become relevant for qualifying international sales.

Can Turkish enforcement proceedings be used to recover the money?

Potentially, where the refund obligation has become a due monetary receivable and the relevant procedural requirements are satisfied.

What happens if the Turkish company objects?

The ordinary enforcement proceeding may stop, requiring the foreign creditor to pursue the appropriate legal procedure to overcome the objection.

Is mediation required before filing a commercial lawsuit?

For qualifying Turkish commercial actions involving monetary receivables or compensation, mandatory pre-litigation mediation generally applies. (Adli Sicil)

Can assets be frozen before the case ends?

Potentially, where statutory requirements for provisional attachment or another interim measure are satisfied.

Can shareholders be personally responsible for the refund?

Not automatically. A separate basis such as a valid personal guarantee or specific personal wrongdoing would generally be required.

Client-Focused Legal Support for Advance Payment Recovery in Turkey

A commercial deposit dispute should never be analyzed solely by asking whether the contract uses the word “deposit.”

Under Turkish law, different upfront payments can produce very different consequences. The Turkish Code of Obligations distinguishes between money demonstrating conclusion of a contract and specifically agreed withdrawal money. (Dünya Fikri Mülkiyet Örgütü)

For foreign companies, the practical objective is to establish why the Turkish counterparty no longer has a legal right to retain the funds.

Depending on the transaction, recovery may involve contract termination, CISG restitution, repayment claims, unjust enrichment, Turkish enforcement proceedings, commercial litigation, arbitration, provisional attachment and enforcement against assets.

Large advance-payment disputes should also be treated as asset-recovery matters from the beginning. Where a Turkish company has received substantial funds but is already experiencing financial difficulties, delaying legal action can materially reduce the chances of actual collection.

Fırat Fesih Kaya Law Office assists foreign companies, international investors, purchasers, exporters and multinational businesses with commercial deposit disputes, advance payment recovery, failed international transactions, CISG restitution claims, Turkish enforcement proceedings, provisional attachment, commercial litigation and international arbitration in Turkey.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yıldırım Tower, Balgat, Çankaya, Ankara, Turkey