The COVID-19 pandemic has disrupted our way of life. Previously unthinkable social distancing measures and restrictive travel regulations are now the norm.
In the commercial sphere, it is likely that the shift towards digital contracts will accelerate.
In Singapore, the pivot towards “digital” started as early as 1998, with the enactment of the legal framework for businesses to use digital signatures, namely, the Electronic Transactions Act (Cap 88) (the “ETA”) and by extension, facilitate digital transactions. This article provides some background to the ETA and highlights the usefulness of the ETA when conducting your business.
History of the ETA
Whilst e-commerce was still at an early stage of development in 1998, the Singapore Government recognized that it would “become an important engine of growth for the global economy in the next millennium”. The ETA was enacted to support e-commerce transactions by dealing with how a contract could be formed electronically, and addressed the issues in relation to the status and use of electronic signatures and records.
This objective was summarized by the then Minister of Trade and Industry in the second reading of the Electronic Transactions Bill:
“First, on electronic contracts in general. While rules on the formation of contracts are clear in the physical world, there are significant ambiguities in the electronic world. There is therefore a need to enact legislative provisions to clarify the rules of formation of electronic contracts. Part IV of the Bill clarifies that contracts can be made electronically. It also deals with the issues of time and place of sending and receipt of electronic messages.
Secondly, on electronic records and signatures. Part II of the Bill clarifies that electronic signatures have the same legal binding effect as that of written signatures. Transactions and submissions that are currently done and signed in written form can also be done in electronic form. Nevertheless, in the generating and processing of electronic records, Parts II and IV of the Bill can be varied by agreement between the parties to a transaction.”
Now, 22 years later, e-commerce has grown from strength to strength, accelerated by the pandemic.
We elaborate on how the ETA gives effect to the above-mentioned aims:
Highlights of the ETA
The ETA promotes e-commerce chiefly by recognizing that the use of digital tools, such as digital signatures, electronic records, electronic communications and automated message systems as legitimate means by which to conclude contracts.
First, the ETA recognizes that where the law requires information to be written or presented in writing, an electronic record will satisfy the rule of law if the information in the record is accessible for later reference.
Second, the ETA declares that in the formation of contracts, an offer and acceptance of an offer may be expressed by means of electronic communications. This has the effect of allowing parties to negotiate and conclude contracts via electronic mediums such as emails. This means that, for example, a valid offer may even be made (and subsequently accepted), over electronic medium that is generally considered informal, for example, via WhatsApp or Zoom.
Third, the ETA allows for contracts to be formed by the interaction of an automated message system and a natural person. This presents your business with the unique opportunity to increase the scalability of your business. In principle, a well-designed automated messaging system may now carry a transaction from the initial expression of interest to the conclusion of a contract. The additional benefit of relying on such systems is that once they are up and running, the costs and ease of scaling up and down are relatively low.
Fourth, the ETA also allows for contracts to be formed by the interaction of automated systems alone. This allows businesses to eliminate the requirement of a physical and direct human interaction to conclude contracts, thereby saving time and costs.
Finally, save for certain exceptions, the ETA elevated electronic signatures to the same effect as wet ink signatures, if
a) a method is used to identify the person and to indicate that person’s intention in respect of the information contained in the electronic record; and
b) the method used is either —
(i) as reliable as appropriate for the purpose for which the electronic record was generated or communicated, in the light of all the circumstances, including any relevant agreement; or
(ii) proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence.
The ETA also contains provisions that safeguards the users of electronic communications. Where a person makes an input error in electronic communication exchanged with the automated message system of another party and does not have an opportunity to correct the error, the person has the right to withdraw the portion of the electronic communication in which the input error is made. To do so, the person must notify the other party of the error as soon as possible after having learned of the error and indicate that he made an error in the electronic communication; and has not received any benefit from the goods or services from the other party.
Finally, the ETA sets the default rules and standards in relation to electronic transactions. Nonetheless, parties to a contract or transaction may choose to exclude some of the provisions of the ETA, under circumstances, where the use of electronic records, communications or electronic signatures is undesirable. Parties may also impose additional requirements as to the manner in which the contract or transaction is authenticated.
Finally, before you embark on the use of electronic signatures and contracts, make sure to check the First Schedule of the ETA where the ETA does not apply. Some examples include wills, contracts relating to immovable property, power of attorney, consignment notes, instruments that entitle the bearer to claim the delivery of goods, and trust documents.
Zechariah J H CHAN, Partner – Intellectual Property
Jasper Lim, Senior Associate – Intellectual Property
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