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Presentation

Formation of Contracts in the Metaverse

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What Is the Metaverse?

The metaverse, or "sanal evren" (virtual universe) in Turkish, is a hypothetical iteration of the Internet that supports persistent online three-dimensional virtual environments through conventional personal computers as well as virtual and augmented reality devices.

Also referred to as the trans-universe or the beyond-universe, the metaverse is likewise defined as the potential to move beyond the physical universe one inhabits, detaching from the dimensions of time and space, by means of computers, Android devices, VR lenses and various 3D user interfaces.

Principles Governing the Law of Obligations

a) Freedom of Will

  • Freedom to Enter into a Contract
  • Freedom to Determine and Regulate the Subject Matter of the Contract

b) The Relative Effect of the Obligation Relationship

The Nature of a Contract Concluded in the Metaverse

Above all, such a contract is an electronic contract. Electronic contracts are contracts concluded in the electronic environment using Internet tools.

Electronic contracts are regarded as

  • distance contracts,
  • contracts between absent parties, and
  • contracts of adhesion.

They are recognized as such.

  1. Indirect Commerce: Formation of the contract takes place in the Internet environment, while performance takes place in the physical environment.
  2. Direct Commerce: Both the formation and the performance of the contract take place in the Internet environment.

Contracts concluded in the metaverse may be of either type.

Types of Contracts Concluded in the Metaverse According to the Parties

  • Merchant & Merchant
  • Merchant & Consumer
  • Consumer & Consumer
  • Public Administration & Consumer

This distinction is important in terms of the legal rules to be applied to contracts concluded in the metaverse.

Contracts That May Be Concluded in the Metaverse

  • Contract of Sale
  • Contract of Deposit (Safekeeping)
  • Contract for Services (Work-Performance Contract)
  • Loan Contract
  • Lease Contract
  • Deposit (Bank Deposit) Contract
  • Contract for Work

In the metaverse, any type of contract may be concluded, except for contracts subject to a specific form or to a ceremony.

Pre-Contractual Liability (Culpa in Contrahendo)

For example, even if no contract is concluded following a negotiation conducted in the metaverse, the parties to the contract must not share the information they have obtained from one another with unauthorized persons, within the scope of the "duty of confidentiality."

Formation of Contracts

  • A contract is formed by the parties expressing their intentions reciprocally and in a manner consistent with one another. (Offer + Acceptance)
  • The expression of intent may be express or implied.

Assessment of Metahumans & Avatars "in terms of the declaration of intent"

  • Messenger
  • Representative
  • Means of Communication

Because the avatar or metahuman entities that constitute a person's virtual counterpart in the metaverse are not persons in the legal sense, they cannot be characterized as a messenger or a representative. Such entities can only be characterized as a "means of communication" that merely conveys the declaration of intent.

In the metaverse, a declaration of intent may be made verbally as well as entirely through digitized data. For example:

  • Just as intent may be expressed in writing via chat,
  • through the transmission of audio and/or video, or
  • by performing a predetermined action in the electronic environment, and
  • it may likewise be expressed in similar ways.

Offer and Acceptance

Offer with a time limit: A person who offers to conclude a contract by setting a period for acceptance is bound by the offer until the expiry of that period. If acceptance does not reach the offeror within this period, the offeror is released from being bound by the offer.

Offer without a time limit – between parties who are present: If an offer made without a period being set for acceptance, to a person who is present, is not accepted immediately, the offeror is released from being bound by the offer. An offer made during direct communication by means of devices that enable communication, such as a telephone or a computer, is deemed to have been made between parties who are present (with the other party learning the content at the moment the message is sent).

Offer without a time limit – between parties who are absent: An offer made without a period being set for acceptance, to a person who is absent, binds the offeror until the moment at which the arrival of a reply sent in due time and in proper form may be expected. The offeror may treat its offer as having been received in due time. If an acceptance sent in due time reaches the offeror late and the offeror does not wish to be bound by it, the offeror must immediately notify the accepting party of the situation.

Depending on the structure of the metaverse and on whether the parties to the contract are in instantaneous communication, the contract may be concluded between parties who are present or between parties who are absent. This distinction must be assessed on a case-by-case basis according to each concrete situation.

  • If the offeror expressly states that it reserves the right not to be bound by its offer, or if it is understood from the nature of the matter or the requirements of the circumstances that it does not intend to be bound, the offer does not bind the offeror.
  • The display of goods with their prices indicated, or the sending of a tariff, price list or the like, is deemed to be an offer, unless the contrary is clearly and readily apparent.

The virtual display of a product in the metaverse does not fall within the scope of a "display of goods"; however, the transmission of a tariff or price list via a metaverse account may be deemed an offer.

The Form of Contracts

  • The validity of contracts is not subject to any particular form unless otherwise provided by law.
  • The form prescribed by law for contracts is, as a rule, a form required for validity. Contracts concluded without complying with the prescribed form do not produce legal effect.

Written Form

  • In contracts required to be made in written form, the signatures of those assuming the obligation are mandatory.
  • The signature must be affixed by the person assuming the obligation in their own handwriting. A secure electronic signature also produces all the legal consequences of a signature affixed by hand.
  • Unless otherwise provided by law, a signed letter, a telegram whose originals have been signed by those assuming the obligation, a fax provided it has been confirmed, or similar means of communication, as well as texts that can be sent and stored by means of a secure electronic signature, also substitute for the written form.

The Validity of Contracts

Conditions of validity required in all contracts:

  1. The parties must have legal capacity.
  2. The contract must not be contrary to mandatory rules of law, public order, general morality or personal rights.
  3. The subject matter of the contract must not be impossible.
  4. The declarations of intent must be sound.
  5. There must be no simulation (collusion).

Conditions of validity required in certain contracts:

  1. There must be no unconscionable exploitation (lesion).
  2. Compliance with the prescribed form.
  3. The contract must not be contrary to the General Terms and Conditions rules.

Preliminary Contract

  1. Contracts concerning the conclusion of a contract in the future are valid.
  2. Except for the exceptions provided by law, the validity of a preliminary contract depends on the form of the contract to be concluded in the future.

Just as the principal contract may be concluded in the metaverse, a preliminary contract may also be concluded there.

Defects in Intent – Error (Mistake)

A party who falls into a material error while concluding the contract is not bound by the contract. In particular, the following cases of error are material:

  1. Where the party in error has expressed its intent for a contract other than the one it intended to conclude.
  2. Where the party in error has expressed its intent with respect to a subject matter other than the one it intended.
  3. Where the party in error has expressed its intent to conclude the contract to a person other than the one with whom it actually intended to contract.
  4. Where the party in error, although having taken into account a person with particular characteristics when concluding the contract, has expressed its intent with respect to another person.
  5. Where the party in error has expressed its intent for a performance significantly greater than the one it actually intended to undertake, or for a counter-performance significantly less than the one it actually intended.

Error as to motive: An error as to motive is not deemed a material error. Where the party in error regards the motive as to which it was mistaken as the basis of the contract, and this is also consistent with the rules of good faith applicable in business dealings, the error is deemed material. However, this situation must also be recognizable by the other party.

Error in transmission: The provisions on error also apply where the intent to conclude the contract has been incorrectly transmitted by an intermediary, such as a messenger or an interpreter, or by a means of transmission. In the metaverse, if a person's declaration of intent is incorrectly transmitted for a reason arising from the system, this provision may be relied upon.

Defects in Intent – Fraud (Deception)

  1. If one of the parties has concluded a contract as a result of the other party's fraud, it is not bound by the contract even if its error is not material.
  2. A party who has concluded a contract as a result of fraud by a third person is not bound by the contract where, at the time the contract was concluded, the other party knew or should have known of the fraud.

The Relationship Between the Metaverse & the Intermediary Service Provider (Within the Scope of Law No. 6563)

According to Law No. 6563 on the Regulation of Electronic Commerce:

  • Electronic commerce: any online economic and commercial activity carried out in the electronic environment without the parties physically coming face to face;
  • Intermediary service provider: refers to the natural and legal persons who provide the electronic commerce environment for the carrying out of economic and commercial activities belonging to others;
  • Service provider: refers to the natural or legal persons engaged in electronic commerce activity.

If there is someone operating the metaverse and commerce is carried out in this virtual space, it is possible for that person to be regarded as an "intermediary service provider" or a "service provider" within the scope of Law No. 6563.

Obligations under Law No. 6563:

  • Information obligations,
  • Obligations relating to the protection of personal data,
  • Obligations relating to the receipt of orders,
  • Obligations relating to commercial communication.

From the Perspective of Consumer Law

If a contract to be concluded in the metaverse falls within consumer legislation, then the provisions of the Law on the Protection of the Consumer (TKHK) No. 6502 concerning distance contracts will apply.

A distance contract is a contract concluded, without the simultaneous physical presence of the seller or supplier and the consumer, through the use of means of distance communication up to and including the moment the contract is concluded between the parties, within the framework of a system established for the remote marketing of goods or services. The consumer has the right to withdraw from the contract within fourteen days without giving any reason and without paying any penalty.

If the person operating the metaverse is regarded as an "intermediary service provider," it will also be subject to the special provisions added to the Consumer Law that entered into force on 01.10.2022. Intermediary service providers who, through the system they have established, mediate the conclusion of distance contracts on behalf of the seller or supplier, are obliged to establish and keep continuously open a system suitable for enabling consumers to submit and follow up on their requests throughout the period of exercise of the rights and obligations arising from distance contracts concluded through the system.