Covid-19’s Effects on Signing Processes

  1. Except for contracts that are required to be in a certain form by Turkish law, agreements are established when parties declare their mutual intent constituting a consensus, and the parties will be bound by the intent they have declared. Declaration of intent can be made orally, in written form or in other methods. In other words, apart from exceptions, freedom of form is adopted as a principle in Turkish law[1]. Written form is regulated by laws as a condition for validity of certain contracts, while in some others it appears as a condition for proof. For example, according to Article 200 of the Code of Civil Procedure (“CCP”), for legal transactions exceeding 4.480 TRY in value (for 2020), it is required to prove the legal transaction by deed. In other words, whether or not written form is a condition for validity, it will be needed for proof in contracts exceeding the abovementioned value.

[1] Oğuzman/Öz, Borçlar Hukuku Genel Hükümler, Vol. I, p. 141.

2.In commercial life, parties prefer to execute a written and signed contract to designate special provisions and their rights and obligations applicable for each case, as well as to ensure the application of these provisions and to be able to use such contract in resolution of disputes. However, nowadays a lot of enterprises have adapted remote working conditions to the extent allowed by the nature of the business, due to the Covid-19 pandemic. While it is possible for business to be conducted via technological devices like computers or mobile phones, commercial relations which require processes in which parties must come face to face are disrupted.  Especially in this point in time, difficulties are experienced in how contractual terms can be proven, even in case of a consensus of intent. Turkish legislation allows for alternative methods in which parties can draw contracts in written form without the need of physical meetings.

3.This memorandum will broadly evaluate the methods which commercial enterprises unable to execute contracts with wet-ink signature during the Covid-19 outbreak can use to enter into a valid and binding contract.

  1. USING CONTRACTS THAT ARE SIGNED WITH SECURED ELECTRONIC SIGNATURES AS A PROOF

4.According to Article 1 of the Turkish Code of Obligations no. 6098 (“TCO”), for a contract to be established, the mutual declarations of intent of two or more parties towards a legal outcome must comply with each other[1]. The declaration of intent may be express or implied. According to Article 12 of the TCO, the validity of contracts does not depend on any form, unless stated as a condition by law. While this is the rule, parties generally prefer to have contracts in written form to be able to utilize them as a means of proof in the event of a conflict regarding the terms of a validly established contract.


5.Pursuant to Article 15 of the TCO, signature should be handwritten by the debtor. A contract bearing such signature of the debtors is regarded as direct evidence unless proven otherwise. Therefore, in the presence of a contract bearing the handwritten signature (“wet-ink signature” as referred frequently in practice) of the persons authorized to put the contracting parties under debt, the signed contract will be strong evidence for resolution in the case a dispute arises within scope of the commercial relationship between the parties.

6.As a result of social distancing measures against the Covid-19 pandemic; even if companies agree to enter into a legal relationship, company officials are not able to come together, and thus contract signing procedures cannot be physically conducted. In case parties cannot come together in order to sign the contract or the wet-ink signature cannot be procured due to physical conditions, then the parties can agree to sign the contract with secured electronic signature.

7.With technological advances, legal procedures are also affected and methods such as electronical notifications and electronical signature find their place in legal practice. Electronical signature and electronical communications are regulated in Turkish legislation. Secured Electronical Signature, with its definition in the Electronical Signature Law(“ESL”)is a signature that; a) is exclusively bound to the signature owner, b) is generated by the electronical secured signature generating tool that is only in the disposition of the owner of the signature, c) provides the identification of the owner via qualified electronical certificate, d) provides the ability to detect whether a change in the signed electronical data is made afterwards. Actions which cannot be performed with electronical signature is also regulated in the ESL. According to the article 5/2, legal actions that require official form or requiring any special procedures by Law, and collateral agreements other than letter of guarantees issued by banks shall not be made with the electronical signature.

8.Certain regulations regarding the application areas are:

-According to Article 15 of the TCO, secure electronical signature bears all the legal consequences of the wet-ink signature.

-According to Article 14/2 of the TCO, text documents that can be sent and saved with secure electronical signature are regarded to be in written form.

-As per Article 199 of the CCP, data in the electronical environment are regarded as “documents”.

-Again, according to Article 205/2 of the CCP, electronical data generated using secured electronical signature are regarded as deeds. 

-According to ESL art. 5, secured electronical signature bears the same legal consequences as wet-ink signature.

As it can be seen, Turkish legislation regards electronical secure signature on par with wet-ink signature regarding validity, and considers documents generated with electronical signatures as deeds.

9.The usage area of electronical signature and the conditions regarding documents generated in electronic environments are also regulated in 6102 Turkish Commercial Code (“TCC”)[3].

-As regulated in Article 18/3 of the TCC, notifications and warnings regarding putting the other party into default, termination of the contract and renege on contract between merchants can be sent via registered electronical mail system.

-According to Article 1525 of the TCC, in the event the parties agree explicitly, declarations such as notifications, warnings,  objections; invoices, letters of acknowledgement, letters of application, calls for meetings, electronical sending and electronical saving contracts can be made, sent, be objected through and accepted in the electronical environment, save for the provisions of Article 18/3 of the TCC.

10.As seen in the provisions of the TCC, it is allowed for contracts between merchants to be executed, and warnings and notifications regarding contracts to be sent electronically. In this method, the contract signed with electronic signature can be sent to the other party directly, or it can be sent through registered electronic mail account; thus, the benefit of the proof provided by written form can be fully utilized. As with wet-ink signature, electronic signature of persons authorized to represent and bind the company is required in signing agreements electronically.

2.USING TRANSACTIONS MADE VIA REGISTERED ELECTRONIC MAIL SYSTEM AS A PROOF

11.Registered electronic mail system (“REM”) is legally valid and technically secured electronic mail. To send or receive e-mail messages through the registered electronic mail system a REM account must be obtained. REM service providers are published in the website of the Information Technologies and Communications Authority. In order to receive a REM account, an application must be made to one of these REMSPs. Both real and legal persons can apply to receive a REM account.

12.Within the REM system, the sender of the electronic mail, sending date, the message sent and whether the message was altered by another person or not can be determined with certainty. This certainty is ensured by secured e-signature and time stamp[1].


13.E-mail messages sent via REM are recorded within the system and regarded as direct evidence until proven otherwise, according to Article 15/1 of the Regulation on the Procedures and Principles Regarding the Registered Electronic Mail System (“Regulation”).

14.When using a REM account, the party sending the e-mail message must have an e-signature. It is only possible to send e-mail messages via REM account to real or legal persons who own a REM account as well. Real or legal persons who own a REM account can send all kinds of official, private and commercial documents to institutions and persons. The actions possible to send and receive with a REM account include, but are not limited to the below[5];

-All kinds of information and documents,

-Warning letters and notifications,

-Reconciliation and extracts,

-Agreements,

-Invoices,

-Confirmatory letters,

-Declarations,

-Proclamations,

-Offers, orders and order approvals,

-Calls for meetings and letters of application.

3.USING CONFIRMATORY LETTERS AS EVIDENCE

15.As explained above, the TCO finds it sufficient enough for parties to express their intentions mutually and compatibly with each other for establishment of the contract. However in terms of contracts that are not executed in a written form due to there being no formal requirement, it is very difficult to determine the content of the contract proposal made by a party and the acceptance of the other party as well as whether such declarations of intent were mutual. As such, according to Article 21/3 of the TCC, one party can send a confirmatory letter to another in order to verify the content of the statements made in contracts established orally or via telephone, telegraph, any communication or information systems device or any other technical device. The same article also regulates that in case such confirmatory letter is not objected to within eight days, then the confirmation letter will be deemed to be in conformity with the agreed contract. Thus, confirmatory letters that are not objected to within eight days constitute evidence of contracts that was established between parties

16.

According to the provision regarding the confirmatory letter of the TCC, under the chapter title of “The terms of being a merchant”, the legal consequences that will occur for the recipient of the confirmation letter are determined. It is clear that to be a merchant is necessary in order to become the recipient of the confirmatory letter. According to an opinion in doctrine[1], due to the nature and its placement in the TCC, confirmatory letters will only find application between merchants and only a merchant can rely on a confirmation letter, which was sent to another merchant as evidence. However, as there is no legal conclusion regarding the sender of the confirmation letter within the provision, there are also those who suggest that the sender is not required to be a merchant.


17.Besides these, the confirmatory letter should be sent by the authorized representative of the relevant party. In order for a letter confirming the terms agreed by the authorized representatives of the parties wishing to enter into a legal relationship to be valid, the letter should also be sent by the authorized representative. If a confirmatory letter sent by an unauthorized representative is not objected to, the contract will remain pending until approved by the authorized representative. With such approval, the contract will be deemed as effective from the start. However, if the authorized representative has declared their will to the other party by giving approval at the time of the establishment of the contract, the contract will be valid from then. In this case, although the contract has been established in a valid manner, if the confirmatory letter sent to act as evidence to bind the parties with the contract is sent by the unauthorized representative, the evidence power of the confirmation letter, as the “letter confirming the content of the contract”, will be weakened.

18.The confirmatory letter, as stated in the definition in the law; is sent to verify the content of an unwritten contract between the parties. Therefore, the content of the confirmatory letter must be in accordance with the content of the agreed contract. There might be no agreement regarding the secondary elements of a contract, the essential elements of which are agreed between the parties. In this context, if the confirmatory letter determines the contract’s secondary elements and is not objected to, it is possible to say that the contract is drawn in accordance with the confirmation letter.

19.According to Article 21/3 of the TCC, confirmatory letters are defined as “a letter confirming the statements made by parties in unwritten contracts” and this letter is required to be signed by the sender. Therefore, while a confirmatory letter is not solely sufficient enough to prove the relevant legal actions according to the CCP, it can be regarded as a document/beginning of evidence given or sent by the person against whom a claim is set forth, showing that the claim regarding the contract is likely.

20.The procedure for sending confirmatory letters is not regulated under TCC. However, the arrangement and sending of the confirmation letter electronically is subject to the terms of the explicit agreement of the parties pursuant to the Article 1525 of the TCC. In order to strengthen the letter as an evidence instrument, it will be more beneficiary to send the confirmation letter through notary or if possible, via REM.

4.CONCLUSION

21.As described in detail above, we can summarize the methods that may be followed to benefit from the possibilities of evidence, in cases where the parties cannot physically come together to sign contracts, as follows:

Using contracts that are signed with secured electronic signatures as proof | The validity of contracts is not bound to any form unless regulated otherwise in the law. While this is the rule, parties generally prefer to have contracts in written form to be able to utilize them as a means of proof in the event of a conflict regarding the terms of a validly established contract. In the event merchants fail to sign a contract by coming together, secure electronic signatures may be used with the mutual understanding of the parties, save for contracts listed as exceptions in the relevant legislation.

Using transactions made via REM system as proof | If both parties of a contract between merchants have REM accounts and the parties have agreed upon notifications between each other to be sent through the electronical environment, then notifications can be made through the REM system. With the help of the REM system, it can be determined whether notifications reached the other party and whether the content of the notified message has been changed.

Using Confirmatory Letters as proof | The confirmatory letter, which is a verification letter regarding the content of a contract, can be sent to the counterparty in order to create written proof for contracts established by any communication or information systems device or verbally. The content of the confirmation letter must be prepared in accordance with the content of the agreed contract. If the addressee of the confirmation letter does not object to the letter within 8 days after the confirmation letter is sent, it shall be accepted that the content of the confirmation letter is in accordance with the contract. It is possible to send the confirmation letter via notary, return receipt requested mail or REM account.

22.In this study, the options provided by Turkish law are evaluated in general terms in order to allow flexibility in the management of business transactions during Covid-19 pandemic. However, there is no doubt that it would be beneficial to evaluate each case in light of the type of agreement and its content.

Respectfully,

Bozoğlu-İzgi Attorney Partnership


[1] Oğuzman/Öz, Borçlar Hukuku Genel Hükümler, Vol. I, p. 141.

[2] Oğuzman/Öz, Borçlar Hukuku Genel Hükümler Vol. I, p. 49

[3]For other regulations regarding electronical signature in TCC also see art. 94, art 855/4, art. 1526/2.

[4] Güneli, N., Kayıtlı Elektronik Posta: Bir Uygulama Örneği Olarak Elektronik Apostil, p.3.

[5] Öztürk,G., Türkiye’de E-Devlet Sürecinde Elektronik Tebligat Ve Kayıtlı Elektronik Posta (Kep) Uygulaması, p.50.

[6] Oğuzman/Öz, Borçlar Hukuku Genel Hükümler, Vol. I, p. 78.