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E-Commerce and Legal Aspects of Electronic Contracts

The trade volume of electronic commerce has been increasing incrementally in our day. As per the statistics, almost 70% of the consumers in USA and %35 of the consumers in Europe use internet for shopping. Accordingly, the number of companies operating within the area of e-commerce and their size increased rapidly in the past 10 years. The Alibaba Group IPO which took place in 2014 broke an unbeaten record by reaching to 25 billion USD and it is still the largest IPO globally.

In parallel with the developments above, the consumers altered their habits and thus the volume of the e-commerce and its market share escalated in Turkey as well. The e-commerce increased its market share from 18,9 billion TL to 24,7 billion TL in 2015 as per the statistics provided by TUBISAD[1]. Therefore, the grasping of the legal framework of the electronic contracts which is a constituent of the e-commerce shopping and determining the level of compliance to the regulations in this area during the preparation of the business plan is of utmost importance for the individuals, entrepreneurs and the companies that intend to make an investment to this market.

Electronic Contracts

The electronic contracts in general are distance[2] and adhesion contracts which is executed without the simultaneous physical presence of the parties. There are special provisions applicable to electronic contracts due to their nature as distance and adhesion contracts which will be set out below.

The general rule under the Turkish law is that contracts are formed by mutual and concurrent declarations of intent which is also applied to electronic contracts.

The execution without the simultaneous physical presence of the parties means that the parties are not in direct communication with each other and thereby do not have the means to immediately reply to each other.

Contracts of adhesion are contracts where a part or all the contents of the contract are defined by one of the parties and therefore it is either accepted or declined by the other without a negotiation. Contracts of adhesion are against the general principle of the freedom of contract applied to the law of obligations as the freedom of negotiation is restricted. Thus, special regulations are enforced during the procedure of forming the contract to protect the party which does not have the opportunity of negotiation.

The contracts of adhesion are also similar to general terms, which are terms of a contract prepared by one of the parties in advance in order to use within many contracts which are similar in nature and that are submitted to the other party. The general terms are commonly used by different sectors such as banking, real estate and telecommunications. As so many contracts are concluded with many number of real and legal persons and therefore the loss of time and labour is trying to be prevented by preparing the necessary documents in advance.

Nonetheless as stated above, special provisions are set out in this area under the Turkish Code of Obligations due to one of the parties not being able to negotiate the terms. Accordingly, the general terms which are adverse to the other party of the contract shall become a part of the contract only if the issuing party provided an explicit information about these terms and an opportunity to learn their contents and the other party’s acceptance of these terms. The reflections of this provision to e-commerce and consumer law will be detailed below.

Distance contracts refer to contracts which are formed via remote communication tools including the time passed until the contract is formed and the moment of conclusion of the contract.

The Legal Framework of the Electronic Contracts

The Law on the Regulation of the Electronic Commerce (“LREC”) numbered 6563 became effective on 01.05.2015 within the scope of the works for aligning to the EU regulations and the effect of the e-commerce becoming common increasingly. LREC was prepared to determine the procedures and principles regarding the e-commerce.  Within this scope the commercial communication, the obligations of the service providers and intermediary service providers, the contracts concluded via tools of electronic communication and the duty to provide information regarding the e-commerce are set out.

On the other hand, provisions on e-commerce as part of the distance contracts are also determined within the Law on the Protection of Consumers (“LPOC”) numbered 6502. The LPOC will be applicable to transactions where one of the parties is a consumer as the law regulates the consumer transactions.

LPOC defines the distance contracts as contracts which are formed without the simultaneous physical presence of the seller or provider and the consumer via remote communication tools including the time passed until the contract is formed and the moment of conclusion of the contract within a system created for the distant marketing of goods or services. The electronic contracts concluded within the internet are also distance contracts as the seller and the consumer do not come face to face and in this regard remote communication tools are used. The provisions set out for the protection of consumers are determined by the Regulation on Distance Contracts (“Regulation”) in detail.

I.The Obligations of the Service Providers Under The LREC

LREC shall be applied where the parties are both merchants or one of them is a consumer. The real and legal persons engaged in electronic commerce activities are defined as a service provider under the LREC. Within this context, as per Article 3 of the LREC the service providers have a duty to provide information about the following matters prior to the conclusion of the contract:

  • Introductory information about them which can be accessed easily by the buyers and which are current,
  • Information in relation to technical steps that should be followed for the forming of the contract,
  • Information on whether the text of the contract will be kept by the service provider after the contract is formed and whether the buyer will have access to this contract afterwards and how long this access will be provided,
  • Information about the technical means for clear and comprehensive determination of the mistakes on data input and their correction,
  • The applied confidentiality rules and information in relation to alternative dispute resolution methods if there is.

In addition the service provider has an obligation to enable the buyer to keep the general terms and the provisions of the contract. Nonetheless the parties may agree otherwise when they are not consumers.

Provisions in relation to the orders are also set out together with the obligation to provide information prior to the forming of the contract. Within this scope, the buyer should be allowed to review explicitly the terms of the contract including the total amount that will be paid during the confirmation of the order and prior to entering the data in relation to the payment where the order is placed via tools of electronic commerce.

Monetary fines may be implemented by the Ministry of Customs and Trade if the obligations prescribed by the LREC are breached by the service providers.

II.Distance Contracts Under the LPOC

As stated above the Regulation provides detailed measures in relation to the electronic contracts. The Regulation shall be applied where one of the parties is a consumer unless the contracts is made within one of the areas that are explicitly determined to be out of scope by the Regulation.

Pursuant to the Article 5 of the Regulation the consumer shall be informed fully by the seller or provider about the matters detailed within the aforesaid article prior to the conclusion of a distance contract or an acceptance of any offer in return. Within this scope information should be provided about the matters under the Article 5 which are not limited with the following:

  • Essential features of the goods or services which are the subject matter of the contract,
  • The name or the title of the seller or the provider and if available the MERSIS number,
  • The address, telephone number and similar contact details of the seller or the provider and if available the identity and address of the person that is acting on behalf or the account of the seller or provider,
  • The total price of the goods or services including the taxes, or the calculation method if the price cannot be determined in advance, if available all the additional costs such as transportation, delivery and similar together with the information that additional costs may be paid if these are calculated in advance,
  • Information about the payment, delivery and performance and if available undertakings in relation to these and the complaint resolution methods of the seller or the provider,
  • When there is a right to withdrawal, the conditions to use the right, the period, procedure and the seller’s information in relation to the transporter for returning the goods,
  • Information in relation to deposits and other financial undertakings and their conditions if the consumer if required to make a payment for these upon the request of the seller or the provider.

In addition the preliminary informing should be set out explicitly prior to the consumer undertaking an obligation to make a payment and information should be clearly and comprehensively provided about whether any restriction on delivery is applied and which modes of payment are accepted at the latest before the consumer’s placement of the order. After the preliminary informing the consumer should be enabled to confirm that the preliminary informing was received in compliance with the remote communication tool that is being used. Otherwise the contract will be deemed not validly concluded.

Monetary fines may be implemented by the Ministry of Customs and Trade if the obligations prescribed by the LPOC and the Regulation are breached.

As seen from the explanations above it is crucially important during the pre and post investment periods to determine the level of compliance to the law and regulations for the area of e-commerce and to review the electronic contracts and the website in this respect. Bağ & Gunen Law Office provides legal consultancy services to its clients about compliance to the applicable e-commerce regulations and related matters within the scope of our expertise.

[1] Informatics Industry Association.

[2] Distance contracts are defined as contracts that may be concluded by any means (by telephone, e-mail, catalogue, etc.) which do not require the simultaneous physical presence of the parties to the contract as per Directive 97/7/EC.

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