What Should Companies Watch, Legally, in Supply-Chain Management?

The supply chain is no longer merely a matter of "logistics and operations". The process running from production to storage, and from distribution to sale, has become an area of legal management that creates contractual liability, compliance, reputational, and even enforcement risk for companies. In this shift, the importance of supply-chain management is emphasised as growing by the day, driven by technology, competitive conditions, and changing customer expectations.

In this article we set out, in a practical framework and from the perspective of Turkish law, the key points companies should watch in order to make their supply-chain relationships legally more secure.

1. What Does a Supply Chain Mean "Legally"?

A supply chain is not a single contract; it is a continuing network of commercial relationships involving several actors (manufacturer, supplier, subcontractor, logistics company, distributor, and so on). A disruption in this network does not remain merely a "delay" or an "extra cost"; it can give rise to contractual liability, compensation, termination, and dispute processes.

Some commercial relationships in particular (for example, franchise systems) by their nature give rise to a contract of continuing performance; the fact that the parties' needs are met over time brings out the continuing character of these relationships.

2. The Most Common Legal Risks in the Supply Chain

A) Risks from Delivery, Deadlines, and Delay

In the supply chain, delay is often not merely "late delivery". A delay can give rise to knock-on consequences such as:

• a halt in production;

• lost sales;

• breach of the company's own customer contracts; and

• penalty-clause and compensation claims.

One of the most critical undertakings in a supply chain is the obligation of timely delivery (the deadline). Late delivery is often not just "late delivery"; it can cause knock-on losses such as disruption of the production plan, loss of customers, and increased operational costs. For this reason, depending on the specific case, delay can give rise to breach of contract and liability for compensation.

In practice, in claims of a deadline breach, the courts examine the clarity of the delivery undertaking, the fault behind the delay, and the causal link to the loss that arose. For example, in its decision dated 11 September 2025 (Case No. 2025/639, Decision No. 2025/1332), the 13th Civil Chamber of the Istanbul Regional Court of Appeal discussed the connection between delay and fault by reference to facts such as failure to meet the promised delivery date and the project being left "far behind" the stage at which it should have been delivered.

The second heading companies should always clarify in their supply contracts is the penalty clause (delay penalty). In sectors where the risk of delay is high, granting a cure period and then applying a penalty on a weekly/monthly basis after that period both provides deterrence and creates predictability in the event of a dispute. Indeed, in its decision dated 4 July 2023 (Case No. 2023/188, Decision No. 2023/1061), the 12th Civil Chamber of the Istanbul Regional Court of Appeal discussed a penalty-clause structure in the form of "cure period + weekly delay penalty + cap" in the event of delay.

Delay, moreover, is not limited to a contractual penalty; where the conditions are met, items such as loss of profit can also come onto the agenda. For example, in its decision dated 10 October 2022 (Case No. 2020/276, Decision No. 2022/1280), the 22nd Civil Chamber of the Ankara Regional Court of Appeal set out a calculation approach in which sales-based loss of profit was assessed as compensation in the event of non-delivery.

The deadline clause should not be left as a "one-line delivery date". When the contract sets out the deadline, acceptance criteria, cure period, the operation of the penalty clause, the cap, the right of termination, and the compensation/loss-of-profit framework together, the supply-chain relationship can become considerably more secure.

B) Quality, Defects, and Returns

A defective product or service has a direct effect on stock, production, and brand trust. For companies, the following should be planned from the outset:

• the periods for notifying defects;

• the replacement/repair procedure;

• warranty provisions; and

• compensation and recourse mechanisms.

In practice, the courts may assess a supplied product's failure to meet the technical criteria or special standards agreed in the contract as, depending on the specific case, grounds for justified termination and/or compensation. Indeed, in its decision dated 30 October 2025 (Case No. 2022/631, Decision No. 2025/1535), the 43rd Civil Chamber of the Istanbul Regional Court of Appeal discussed the consequences of breach of contract on the basis of findings that "the specified special standards were not met".

Similarly, a defect may be established not only by technical reports but, in some cases, in a "visually noticeable" way. In its decision dated 17 January 2024 (Case No. 2020/982, Decision No. 2024/162), the 17th Civil Chamber of the Izmir Regional Court of Appeal assessed the seller's liability on the basis of a finding of a "colour-tone difference visible to the naked eye" in the delivered products.

To reduce quality risk in supply contracts, the product specification, the acceptance/rejection procedure, the periods for notifying defects, the replacement–return mechanism, the warranty provisions, and, where necessary, the compensation–recourse headings should all be clarified.

C) Sub-Suppliers and "Chain Risk"

One of the most critical problems in supply-chain relationships is that risks originating with actors other than the party the company contracts with directly (a sub-supplier, subcontractor, logistics company, and so on) grow along the chain. In practice, the main supplier's carrying out the process through a subcontractor frequently raises the question of "who bears responsibility" for delay, quality, and compliance problems. Even where the supplier obtains a service from another firm in performing the work, in most cases the outcome does not change for the company: the counterparty to the contract is still the main supplier, and performance liability is assessed through the main supplier. For this reason, provisions such as an approval requirement for the use of sub-suppliers, an audit right, a reporting obligation, and sanction and termination mechanisms in the event of non-conformity are critical elements that strengthen the company's control along the supply chain.

D) Ethics/Compliance Risks and Reputational Impact

In international trade, approaches such as "ethics" and "fair trade" are gaining ever greater importance; commercial systems are assessed not only on economic grounds but also along the axis of universal values and business ethics.

Here, the risk for companies is not only legal but also important in terms of:

• brand reputation;

• customer trust; and

• the sustainability of contracts.

3. Why Is the EU CSDDD (Corporate Sustainability Due Diligence Directive) on the Agenda?

In the European Union, the Corporate Sustainability Due Diligence Directive (CSDDD), No. 2024/1760, has been published and has entered into force. This measure aims to provide a legal framework for the social and environmental impacts of company activities in global supply chains. It is also stated that, under the Directive, the "chain of activities" approach may in practice be used in a sense similar to the concepts of "value chain / supply chain".

An important note for Türkiye: there is no general piece of legislation that is a direct equivalent of this Directive in Türkiye; however, it is noted that regulations have been made in certain special areas (for example, the supply chain for nuclear facilities). Companies operating in Türkiye, and especially those working with the EU, need to manage their contracts and internal processes on "supply-chain compliance" more proactively.

4. How Can Companies Secure the Supply Chain Legally? (OKAB Suggestions)

To reduce supply-chain risks, we suggest that companies take the following steps in the way they design their contracts.

1. Contractual Control Mechanisms

• an audit right;

• a reporting and information obligation; and

• an approval requirement for the use of sub-suppliers.

2. Termination and Sanction Models

In a continuing relationship, setting up the termination, compensation, and penalty-clause mechanisms clearly is critically important. In franchise contracts too, headings such as termination and post-contract effects are seen to be addressed systematically.

3. Dispute-Resolution Design

• choice of competent court / arbitration; and

• an evidence and proof strategy.

The Supply Chain Is Now a Matter of "Contract + Compliance + Risk Management"

Supply-chain relationships have become not only an operational area for a company, but a legal and strategic management area as well. Where a sound contractual structure and compliance mechanism is not established, a small disruption can give rise to much larger consequences such as compensation, termination, and reputational loss. In this area, it matters for companies to obtain support on supplier contracts, distribution/franchise networks, and compliance and risk analysis.

This article provides general information on Turkish law and does not constitute legal advice. For advice on a specific matter, please contact OKAB — Oğuz Kara Avukatlık Bürosu.