More and more business and trade are now done electronically, often with the parties never physically meeting each other. This raises a number of legal questions, specifically with regard to electronic contracts.  Some of the most important issues include whether an electronic contract is valid, that is, whether it must comply with certain formalities, whether electronic signatures are admissible as evidence of intent and agreement, and what law applies to an electronic contract (if it is between international parties). Understanding what an electronic contract (eContract) is essential to your business’ success in an increasingly digital world.

Electronic Contract

An electronic contract is an agreement that is drafted, negotiated, and executed completely online. Electronic contracts can eliminate many costs associated with traditional pen-and-paper contracts and see countless other advantages such as the ability to easily modify, manage, and store them. Bicak Law will streamline your company’s electronic contract process throughout all stages of the contract management lifecycle. Our services include creating, drafting, negotiating, reviewing, editing, approving, eSigning, and managing all your personal or company’s legal electronic contracts, such as contracts of sale and purchase, agency, marriage, partnership, and investment.

The rules on electronic contracts are mainly regulated in Turkey under the E-commerce Law, Code of Obligations, Regulation on Distance Contracts and the Regulation on Service Providers and Intermediary Service Providers.

Electronic contracts are frequently confused with smart contracts. However, electronic contracts are different since their main requirements, and legal characteristics are almost identical to traditional contracts. Most importantly, they are equally admissible. In other words, they are contracts signed via electronic communication tools. Smart contracts, on the other hand, have a different nature and their legal effect is still being questioned.

Elements

An electronic contract is an agreement formulated online. The parties interact with one another in a digital format, rather than in-person or over the phone. The interaction between the parties in forming the contract can be by many different electronic means: e-mail, through a computer program, or by two electronic agents programmed to recognize the formation of the contract. Although it is digital, an eContract is still a contract. It is an agreement between two individuals or companies to create a binding mutual obligation that must meet certain legal elements to be enforceable:

• Offer: A specific offer from one party to the other to perform some service or pay for some good.
• Acceptance: An acceptance from the other party agreeing to the terms of the offer.
• Promise: A promise to do the action that has been accepted, such as payment for certain goods.
• Consideration: Something of value given by one party to the other in exchange for goods or services.
• Capacity: Whether or not the signers understand the terms being agreed to. 
• Legality: The contract matter itself is legal.

Electronic contracts are held to many of the same standards as traditional contracts. There must be a “meeting of the minds” for the agreement’s essential terms. The contract should clearly outline each party’s responsibilities and dictate the requirements necessary for full compliance.

As electronic contracts become more popular, your business must understand how to make them enforceable and binding. Turkish law makes digital contracts just as binding as traditional contracts, but it requires proper tracking and record-keeping. With effective contract management, Bicak Law can create and manage electronic agreements that fit your company’s needs.

Contract Formation

It is possible to form and conclude contracts digitally. Electronically forming and concluding contracts is possible in Turkey and subject to the same requirements of concluding traditional contracts regulated under the Turkish Code of Obligations No. 6098. However, not all contracts are eligible to be concluded electronically, and there are certain form requirements stipulated in different sets of laws.

There are specific obligations for forming and concluding contracts electronically arising from regulations on electronic commerce, such as the Law on the Regulation of Electronic Commerce and the Consumer Protection Law. For example, service providers (ie, legal or natural persons engaged in electronic commercial activities), as well as intermediary service providers (ie, legal or natural persons providing an electronic commerce platform for third-party economic and commercial activities), are obliged to provide certain information to customers before concluding contracts electronically, as per the named regulations. Further, the Consumer Protection Law sets forth that an electronic contract concluded with consumers should entail certain rights in favour of consumers such as the consumer’s right of withdrawal from the contract within 15 days following the delivery of the goods or services. It should be emphasised that other liabilities may arise depending on the product or service presented online that would fall into the scope of other specific regulations such as financial services, timeshare vacation, and long-term holiday products, package holidays, and package tours.

As with traditional paper contracts, eContracts apply the same principles and remediations of typical contract law. While a digital contract may seem more relaxed than one presented in person, they require the same level of consideration. With any contract, you want to ensure that you understand exactly what you are signing. If something does not sound quite right, do not sign until you have discussed your concerns with a lawyer.

The Choice of Governing Law

Parties are free to choose the governing law applicable to digital contracts as per Law No. 5718 on International Private and Procedural Law (IPPL), in principle. However, IPPL stipulates certain limitations to application of foreign law. For example, foreign law rules that are against public policy will not apply and the directly applicable rules of Turkish law may find application instead of the rules of the selected foreign law. Concerning consumer contracts, parties cannot exclude the minimum protection afforded to consumers in Turkey by selecting a foreign law.

Language of the Contract

Regarding the language of the contract, Law No. 805 on the Compulsory Use of the Turkish Language dated 1926 applies to business-to-business contracts (B2B) contracts. This controversial law obliges all Turkish companies and enterprises to execute contracts that they conclude in Turkey with other Turkish parties in Turkish.

The Court of Appeals in some of its decisions applies this rule to contracts concluded between foreign and Turkish companies if the contract is concluded in Turkey. The Court of Appeals has rendered varying decisions on the effects of non-compliance, ranging from invalidity of the contract to not taking specific provisions into account in a dispute. There is no specific requirement that consumer contracts have to be concluded in Turkish. That said, as the seller or provider is required to inform the consumer on many aspects of the contract, it is not certain whether the seller or provider can fulfil such duties in a language other than Turkish.

Electronic Signatures

Article 3(b) of the Electronic Signatures Law No. 5070 defines an electronic signature as ‘electronic data that is joined or linked logically to another electronic data and which is used to authenticate an identity’. If the e-signature (1) is exclusively linked to an individual, (2) is generated with a device at the disposal of the signer only, and (3) allows authentication based on a qualified electronic certificate and detection of data alteration, it qualifies as a secure electronic signature. The Electronic Signatures Law does not contain provisions on the signatures that do not meet the said requirements other than the definition of these as basic digital signatures. As per article 5 of the Electronic Signatures Law and article 15 of the Turkish Code of Obligations, only secure electronic signatures have the same legal effect as (ie, are equal to) handwritten signatures. 

Electronic certificate service providers must notify the Information and Communication Technologies Authority (ICTA) prior to starting their operations. ICTA is authorised to enforce the Electronic Signatures Law, inspect electronic certificate service providers and regulate the application of the Electronic Signatures Law.

Data Retention

There are data retention requirements in relation to the formation of electronic contracts. Service providers and intermediary service providers should store the electronic logs regarding electronic commerce transactions for three years following the transaction date and submit these logs to the Ministry of Trade upon request.

Dispute Resolution or Remedies for the Breach of Digital Contracts

eContracts offer the same legal recourse as paper ones. Signing online does not release either party from their obligations. If the opposing party is not fulfilling their end of the agreement, seek the advice of our lawyers who specializes in contract law.

Parties may refer their disputes to foreign courts if there is a foreign element in the legal relationship and the dispute arises from an obligation. Parties can refer their disputes to arbitration, however Turkish law has strict rules on special authority to conclude arbitration agreements and the arbitration clause must satisfy particular form requirements. That said, Turkish courts have the exclusive authority in the case of disputes arising from consumer contracts, thus any disputes arising thereof cannot be brought before foreign courts or arbitration.

In B2B contracts, the remedies specified in the Turkish Code of Obligations (specific performance, damages, termination) will be available. In B2C contracts, consumers have the right of withdrawal without giving any grounds and paying any fines which can be exercised within 14 days following the conclusion of the contract or delivery of the goods. If the seller fails to fulfil its obligation to provide information to consumers, the right of withdrawal can be extended to one year. In addition to the right of withdrawal, consumers have the right to terminate the contract if the seller fails to deliver the goods within 30 days following receipt of the order by the supplier or provider, except for products that are prepared as requested or specifically needed by the consumer.

Our Law Firm’s business contract lawyers serve clients offline or online with contract drafting and negotiating watertight business contracts.