Hardship Clauses in Turkey: Can Economic Changes Justify Contract Adaptation or Termination? (2026 Updated Guide)

Can inflation, exchange-rate changes, cost increases or economic disruption justify contract adaptation or termination in Turkey? A 2026 guide for foreign companies on hardship clauses and changed circumstances.

Long-term commercial contracts can become economically difficult when exchange rates, inflation, raw-material prices, energy costs, financing expenses, transportation costs, taxes or regulatory requirements change substantially after signing. For foreign investors and international companies doing business in Turkey, the critical question is whether these developments merely make a contract less profitable or whether they are sufficiently exceptional to justify contract adaptation, renegotiation or termination. The answer depends on the contractual hardship clause, governing law, allocation of commercial risk, foreseeability of the event and the degree to which contractual performance has become excessively burdensome. A company should therefore avoid simply stopping performance because economic conditions have deteriorated. The contract and applicable Turkish-law remedies should first be analyzed carefully.

What Is a Hardship Clause?

A hardship clause is a contractual mechanism addressing circumstances that fundamentally alter the economic balance of an agreement after it has been signed. Depending on its wording, the clause may require renegotiation, permit price adjustment, suspend certain obligations or ultimately allow termination if the parties cannot restore the contractual balance.

Hardship should be distinguished from an ordinary deterioration in profitability.

Hardship and Force Majeure Are Different

Force majeure generally concerns an event preventing performance, while hardship usually concerns circumstances in which performance remains possible but has become extraordinarily burdensome.

A supplier may still technically be able to deliver goods, for example, while an exceptional cost increase has radically changed the economics of the transaction.

The legal consequences of the two concepts can therefore differ substantially.

Can Economic Changes Justify Contract Adaptation in Turkey?

Potentially. Turkish contract law recognizes circumstances in which an extraordinary and unforeseeable development can make continued performance excessively burdensome for one party and potentially support judicial adaptation of the contract.

However, every increase in cost, inflation or exchange-rate movement does not automatically satisfy the required conditions.

Article 138 of the Turkish Code of Obligations

The principal statutory mechanism concerning excessive difficulty of performance is Article 138 of the Turkish Code of Obligations. In general terms, it addresses extraordinary circumstances that were not foreseen and could not reasonably have been expected when the contract was concluded, where the circumstances arise for reasons not attributable to the debtor and fundamentally alter the facts existing at formation against the debtor to such an extent that demanding performance in its original form would conflict with good faith.

The precise application remains highly fact-specific.

Foreseeability Is Critical

A company seeking adaptation should be prepared to explain why the economic event was not reasonably foreseeable when the contract was signed.

This becomes particularly important in long-term contracts concluded in markets already experiencing substantial inflation or currency volatility.

Ordinary Inflation May Not Be Enough

A party generally cannot assume that inflation alone automatically creates hardship. Courts may examine whether the relevant level of inflation was foreseeable, whether the contract already addressed inflation and whether the affected party accepted the economic risk.

The analysis becomes stronger where the change is exceptional compared with circumstances reasonably contemplated at contract formation.

Exchange-Rate Changes Require Careful Analysis

A dramatic currency movement can substantially affect a contract involving imported goods, foreign financing or foreign-currency inputs. Nevertheless, currency volatility can be considered an ordinary commercial risk in some transactions.

The contract date, currencies selected, pricing structure, duration and parties’ commercial sophistication can all become important.

Foreign-Currency Contracts Need Special Attention

Where sophisticated commercial parties deliberately choose a foreign currency, courts may scrutinize arguments that currency movements alone justify adaptation.

The question is not simply whether the exchange rate changed, but whether an extraordinary change destroyed the contractual balance in circumstances beyond the risk reasonably assumed by the affected party.

Raw-Material Price Increases Can Create Hardship Issues

Manufacturers may experience extraordinary increases in steel, chemicals, agricultural inputs, semiconductor components or other raw materials.

The legal significance depends on the scale and duration of the increase, contractual price mechanism and whether sourcing risk was allocated to the supplier.

Energy Costs May Be Relevant

For energy-intensive manufacturing, a dramatic increase in electricity or natural-gas expenses may materially alter production costs.

The company should document the relationship between the energy increase and the actual cost of performing the specific contract.

Transportation and Freight Costs Can Matter

Exceptional increases in ocean freight, container costs, fuel prices or transportation restrictions can also affect contractual economics.

Again, the question is whether these costs represent an ordinary commercial fluctuation or an extraordinary alteration of the contractual equilibrium.

New Customs Duties Can Change Contract Economics

An additional customs duty, anti-dumping measure, safeguard measure or another import restriction introduced after the contract was signed can substantially increase landed costs.

The contract should first be reviewed to determine which party expressly assumed customs and regulatory risks.

Regulatory Changes Can Trigger Hardship Clauses

Some commercial agreements expressly include changes in law within their hardship provisions.

New licensing requirements, technical standards, environmental rules, sanctions restrictions or regulatory costs can therefore trigger contractual renegotiation mechanisms depending on the wording.

The Contract Comes First

Before relying on statutory adaptation, review the agreement carefully.

The parties may already have negotiated specific rules concerning inflation, exchange rates, raw-material costs, taxation, regulatory change, price adjustment or hardship.

Those provisions can materially affect the legal analysis.

Review the Definition of a Hardship Event

Some clauses contain a broad definition covering any extraordinary economic change. Others specify particular triggers such as a percentage increase in production costs, currency movement beyond a threshold or changes in taxation.

The exact wording matters.

Check Whether the Clause Contains a Financial Threshold

A well-drafted hardship clause may require costs to increase by a specified percentage before renegotiation rights arise.

The company should calculate the threshold precisely and preserve evidence supporting the calculation.

Notice Requirements Must Be Followed

Hardship clauses frequently require the affected party to notify the counterparty within a specified period.

A late or incomplete notice can weaken the contractual position.

What Should a Hardship Notice Contain?

The notice should identify the event, explain its effect on performance, refer to the relevant contractual provisions and provide supporting financial information where appropriate.

It should also clearly state the relief requested.

Renegotiation May Be Mandatory

Some hardship clauses require the parties to negotiate in good faith after a qualifying event occurs.

Neither party should assume that the obligation to renegotiate automatically means an obligation to accept the other side’s proposed price.

Good-Faith Negotiation Does Not Guarantee Agreement

The parties may be required to discuss adaptation genuinely while still remaining unable to agree on revised terms.

The contract should specify what happens if negotiations fail.

Price Adjustment Is One Possible Remedy

Adaptation can potentially involve increasing or decreasing the price, changing payment terms, modifying quantities or revising another contractual obligation.

The objective is generally to address the altered contractual balance rather than automatically releasing one party from all obligations.

Delivery Obligations May Also Be Adjusted

In some cases, changed circumstances may affect delivery schedules, minimum purchase commitments or production volumes.

The appropriate solution depends on the contractual structure.

Can a Court Adapt the Contract?

Where the statutory conditions are satisfied, judicial adaptation may potentially be sought under Turkish law.

The court will examine the entire contractual relationship rather than simply accepting the affected party’s preferred new price.

Can the Contract Be Terminated?

Potentially. Under the statutory framework concerning excessive difficulty of performance, withdrawal from the contract may become relevant where adaptation is not possible. For contracts involving continuing performance, termination rather than retroactive withdrawal may apply depending on the circumstances.

Termination should therefore not be treated as the automatic first remedy.

Do Not Unilaterally Stop Performance Without Analysis

A company that simply refuses to deliver or pay may itself commit a contractual breach if the hardship requirements are not satisfied.

This can expose the company to damages, penalties, termination claims or enforcement proceedings.

Performance Under Reservation Can Matter

The statutory framework contains important consequences concerning whether the affected obligation has already been performed. Where a party continues performance, the legal strategy should therefore be considered before payments or deliveries are made without reservation.

The circumstances should be evaluated promptly rather than months later.

Evidence Is Essential

A successful hardship argument requires more than a general statement that “costs increased.”

The affected company should document the actual financial effect on the contract.

Prepare a Before-and-After Cost Analysis

Compare the cost structure at contract formation with the current cost structure.

Identify raw materials, labor, energy, freight, financing, taxes and other components relevant to performance.

Preserve Historical Market Data

Market prices, exchange rates, supplier quotations and industry data can help establish whether the change was genuinely exceptional.

The relevant comparison should correspond with the contract period.

Preserve Internal Financial Records

Accounting records, purchase invoices, supplier contracts and cost calculations can demonstrate how the changed circumstances affect actual performance.

Internal projections alone may not be sufficient.

Mitigation Efforts Should Be Documented

The affected party should consider whether alternative suppliers, transportation routes or commercially reasonable measures could reduce the impact.

Failure to take reasonable mitigation measures can weaken the hardship argument.

Commercial Risk Allocation Is Crucial

A fixed-price contract often deliberately allocates certain cost risks to the supplier.

The supplier cannot necessarily escape that allocation simply because the transaction later becomes less profitable.

Price Escalation Clauses Can Change the Analysis

If the contract already contains an indexation or escalation mechanism, the parties may be considered to have anticipated certain economic fluctuations.

A party seeking additional adaptation must therefore explain why the existing mechanism does not address the extraordinary event.

Contract Duration Matters

A five-year infrastructure or supply agreement can present a different risk allocation from a three-month purchase order.

Longer contractual periods may increase the importance of hardship and adjustment mechanisms.

Sophisticated Parties May Face Greater Scrutiny

Courts may consider the commercial experience of the parties and nature of the transaction.

A multinational corporation entering a negotiated long-term agreement may have difficulty characterizing ordinary market volatility as unforeseeable.

Foreign Investors Should Review Governing Law

An international contract connected with Turkey may not necessarily be governed by Turkish law.

The governing-law clause should therefore be checked before relying on Article 138 or another Turkish-law remedy.

Arbitration Clauses Must Also Be Reviewed

Many international supply, construction, energy and investment-related contracts contain arbitration clauses.

A dispute concerning adaptation or termination may therefore belong before an arbitral tribunal rather than an ordinary court.

Jurisdiction Clauses Matter

Where no arbitration agreement exists, determine which courts have jurisdiction and whether the agreement contains a valid jurisdiction clause.

This should be analyzed before sending a termination notice or initiating proceedings.

International Sale Contracts May Require Additional Analysis

Cross-border sales can involve international instruments and contractual terms affecting performance, exemption and damages.

The governing-law and dispute-resolution structure should therefore be reviewed as a whole rather than assuming that domestic hardship principles automatically control every international sale.

Hardship Clauses Should Be Distinguished From Price Review Clauses

A price-review clause may operate automatically according to an index or formula, whereas a hardship clause usually responds to exceptional circumstances.

Companies should determine which contractual mechanism actually applies.

Change-in-Law Clauses May Provide a Better Remedy

If the problem results from new legislation, taxation or regulatory measures, a specific change-in-law provision may be more directly relevant than a general hardship clause.

The provisions should be interpreted together.

Sanctions Can Create Complex Hardship Questions

New sanctions or banking restrictions may make payments or performance significantly more difficult without making them legally impossible.

The contract’s sanctions, force-majeure, hardship and compliance clauses should therefore be reviewed together.

Financing Costs Can Become Relevant

A dramatic increase in financing costs may affect highly leveraged long-term projects.

However, a party’s own financing arrangements may sometimes be treated as its commercial risk. The factual circumstances and contract structure are decisive.

Public Procurement and Regulated Contracts Require Separate Analysis

Contracts involving public entities, concessions or heavily regulated projects may be subject to specific statutory or contractual adjustment mechanisms.

General private-law hardship principles should not be applied without examining those rules.

Construction Contracts Are Particularly Sensitive

Construction projects can be affected by material-price inflation, labor costs, exchange rates and regulatory changes over several years.

Review unit-price mechanisms, escalation provisions, variation clauses and delay allocation before invoking hardship.

Energy Contracts Can Face Long-Term Price Disruption

Power purchase, engineering, procurement, construction and operation agreements may contain detailed economic-adjustment mechanisms.

Foreign investors should analyze these provisions before seeking general contractual adaptation.

Supply Contracts Should Address Future Economic Shocks

Businesses negotiating new contracts in 2026 should define hardship triggers clearly rather than relying solely on general legal principles.

The clause can identify threshold percentages, relevant indices, notification procedures, negotiation periods and consequences of failed renegotiation.

Avoid Vague Hardship Language

A clause stating only that the parties will “discuss unexpected circumstances” may create uncertainty.

More precise drafting can substantially reduce later disputes.

Define the Baseline

The contract should identify the economic baseline against which hardship is measured.

Without a baseline, parties may disagree over whether a cost increase is truly extraordinary.

Define the Remedy Hierarchy

A sophisticated clause can provide a sequence: notice, information exchange, negotiation, temporary adjustment, expert determination, arbitration and ultimately termination.

This can prevent immediate escalation.

Independent Expert Determination Can Help

For disputes primarily concerning cost calculations, the parties may agree to use an independent accountant, economist or industry expert before litigation or arbitration.

This can sometimes preserve the commercial relationship.

Do Not Use Hardship as a Negotiating Threat Without Evidence

An unsupported threat to terminate may damage negotiations and create evidence against the party if litigation follows.

The legal and financial analysis should be completed before formal notices are sent.

Immediate Strategy for Foreign Companies

When economic changes make a Turkish contract commercially difficult, the company should immediately review the hardship, force-majeure, change-in-law and price-adjustment clauses; identify governing law and dispute resolution; determine whether the event was foreseeable; calculate the actual economic impact; examine contractual risk allocation; preserve supporting evidence; comply with notice requirements; propose a commercially defensible adaptation; continue or reserve performance appropriately; and evaluate judicial or arbitral remedies before terminating the agreement.

Frequently Asked Questions

Can inflation justify contract adaptation in Turkey?

Potentially, but inflation alone does not automatically establish hardship. Foreseeability, contractual risk allocation, the scale of the change and its effect on performance must be examined.

Can exchange-rate increases justify adaptation?

Potentially. However, currency volatility may constitute an assumed commercial risk depending on the contract and circumstances.

What is Article 138 of the Turkish Code of Obligations?

It is the principal statutory provision addressing excessive difficulty of performance caused by extraordinary changed circumstances under Turkish contract law.

Is hardship the same as force majeure?

No. Force majeure generally concerns prevention of performance, while hardship typically concerns performance that remains possible but has become extraordinarily burdensome.

Can a company stop performing after invoking hardship?

Not automatically. Unjustified suspension of performance can itself constitute breach of contract.

Can the court increase the contract price?

Where the statutory requirements for adaptation are established, judicial adaptation may potentially affect the contractual obligations. The appropriate form of adaptation depends on the circumstances.

Can the contract be terminated if adaptation is impossible?

Potentially, subject to the applicable legal requirements and nature of the contractual relationship.

Does a hardship clause override Article 138?

The contractual allocation of risk and agreed hardship mechanism can materially affect the analysis. The contract and statutory framework should therefore be examined together.

Can a foreign company rely on Turkish hardship rules?

Potentially, where Turkish law governs the relevant contractual relationship. International contracts require a governing-law analysis first.

What should a company do before sending a hardship notice?

Review the contract, calculate the actual economic impact, determine whether the event was foreseeable, identify the risk allocation and prepare documentary evidence showing why continued performance under the original terms has become exceptionally burdensome.

Client-Focused Legal Support for Contract Adaptation and Hardship Disputes

Economic disruption can create significant disputes involving hardship clauses, price adjustment, exchange-rate losses, inflation, regulatory changes, customs duties, supply-chain costs, renegotiation, contract adaptation and termination. Fırat Fesih Kaya Law Office assists foreign investors, international companies, suppliers, purchasers and shareholders in commercial contract disputes involving changed economic circumstances in Turkey. Lawyer Fırat Fesih Kaya provides legal assistance in reviewing hardship and force-majeure clauses, preparing renegotiation and adaptation strategies, drafting contractual notices, evaluating termination rights and representing clients in commercial litigation and dispute-resolution proceedings.

Phone:
+90 312 434 22 22

Mobile:
+90 532 769 22 22

Email:
info@firatfesihkaya.av.tr

Address:
Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey