The rapid rise of digitalisation has also changed the concepts we encounter in our daily lives. As we hear concepts such as blockchain, cryptocurrency, smart contract, we realise that the existing processes around us have started to change and we aim to recognise and incorporate these concepts into our lives as soon as possible. We also wonder what the equivalents of these concepts or the institutions created by these concepts will be in our legal system.
The use of cryptocurrencies as a price in shopping was banned by the recently introduced legal regulation. However, this regulation did not prohibit the purchase and sale of cryptocurrencies, and more importantly, the concept of cryptocurrency was recognised for the first time in our legislation. Therefore, we have all witnessed that the concept of cryptocurrency cannot be ignored, even if it is subject to a limited prohibition.
All legal systems valid in various parts of the world, including the Turkish legal system, are organised from a traditional point of view, and in parallel with the developments, changes are introduced to the legal texts or institutions valid in these systems. However, the changes introduced are also realised with the same tradition. Therefore, when analysing these concepts and their possible consequences, we should not think independently of the traditionality of the legal system.
In the face of traditionally executed legal systems, we are talking about a technological system through which we can carry out many business and transactions that we encounter in daily life. In this system, which is called blockchain technology, there is a database in a chain structure consisting of blocks. This database has a structure that can record the information and documents needed. It is stated that supply and demand factors can also be kept up-to-date in this database.
In the light of the information and documents kept up-to-date in the database where the blockchain technology is carried out, it is envisaged that the business and transactions to be carried out by matching the supply and demand elements can also be followed. The computer protocols subject to the business and transactions to be carried out in this direction are called smart contracts. What will be the validity or operability of smart contracts against traditional legal systems and the contractual models envisaged in these systems?
With reference to the legal system of our country, it should be noted that the principle of freedom of contract is valid, except for contracts where special formal conditions are stipulated. Therefore, it can be stated that smart contracts, which (i) implicitly and practically eliminate the offer and acceptance processes carried out in traditional contracts, since they work with a technology that automatically matches the offers and demands introduced in the system; (ii) do not require any information-document sharing, since all the information-documents that may be needed are kept up-to-date in a common pool; and (iii) the follow-up of whether the obligations undertaken in the system are fulfilled or not, can be valid in our legal system and will not face any obstacles in general. However, it should not be ignored that as the application of smart contracts increases, the legal system may introduce more detailed regulations for smart contracts by taking into account the needs arising. Just like the legal regulation introduced after the increase in interest in cryptocurrencies…However, it is also certain that the regulations that may be introduced can be foreseen by considering the philosophy and purpose of the legal system.
For example; in the early days of the development of e-commerce, our legal system did not include a special regulation for participation agreements, which are mostly used in e-commerce, where one party prepares and submits to the acceptance or rejection of the other party. However, with the widespread use of these agreements, it is believed that the right of the parties to negotiate, which is mandatory in our legal system, has been violated, especially to the detriment of consumers. This is because consumers are imposed to accept the existing contract by ticking a box or not to purchase the services and goods in question; in global terms, “take it or leave it!”. At this point, by taking into account whether the provisions of the participation agreements, which are widely used in e-commerce, are imposed on consumers and whether they are negotiated with consumers, “general transaction terms” under the Code of Obligations and “unfair terms” in consumer legislation are included. Thus, contract terms that deprive one of the parties of the right to negotiate are considered null and void.
Based on the explanation and examples given above, it is foreseeable that smart contracts will face the same sanctions if they ignore the negotiation process. So what should be done? Of course, it is not possible to resist the developing technology and rising digitalisation, and it is not right as a necessity of the age. However, it is necessary and vital to reconcile the requirements stipulated by traditional law with the concepts and institutions shaped through the database established by technology. For example, a company that plans to invest in smart contract technology should not ignore the invalidity fate and should take a measure to meet the requirements of traditional law in this context. For example, in these so-called smart contract protocols, it may be considered as a solution to enable the other party or the consumer to negotiate on each clause in the negotiation rooms to be implemented by the company within a certain period of time after the formation of the contracts.
Of course, the scope and nature of the smart contracts to be established may require different measures to be taken. The purpose of this article is to remind that the legal obstacles that these technological systems, which require a serious infrastructure investment, may encounter should be foreseen.
