Using Digital Methods to Execute Contracts

In Singapore, the Electronic Transactions Act (Cap. 88) (“ETA”) legally recognises the use of electronic and digital signatures in the execution of contractual documents. We will discuss in this article how parties to a contract may take advantage of the provisions of the ETA to do so.

Types of signatures recognised under the ETA

The ETA defines a “signature” as method used to identify a person and to indicate the intention of that person in respect of the information contained in the record. The following types of electronic signatures are recognised by the ETA:

Electronic Signature

Any representation of a person’s name and intention by electronic means, which may include:

  • signing off in an email;
  • digitally inserting a signature into a soft copy document; and
  • typing one’s name into an online form.

Secure Electronic Signature

The ETA regards an electronic signature as a secure electronic signature where, after applying a specified security procedure or a commercially reasonable security procedure agreed to by the parties involved, it can be verified that the electronic signature was, at the time it was made:

  • unique to the person using it;
  • capable of identifying such person;
  • created in a manner or using a means under the sole control of the person using it; and
  • linked to the electronic record to which it relates in a manner such that if the record was changed the electronic signature would be invalidated.

Whether a security procedure is commercially reasonable will depend on the purposes of the procedure and the commercial circumstances at the time the procedure was used, including (i) the nature of the transaction; (ii) the sophistication of the parties; (iii) the volume of similar transactions engaged in by either or all parties; (iv) the availability of alternatives offered to but rejected by any party; (v) the cost of alternative procedures; and (vi) the procedures in general use for similar types of transactions.

Digital Signature

An electronic signature is recognised by the ETA as a digital signature if it consists of a transformation of an electronic record using an asymmetric cryptosystem and a hash function such that a person having the initial untransformed electronic record and the signer’s public key can accurately determine:

  • whether the transformation was created using the private key that corresponds to the signer’s public key; and
  • whether the initial electronic record has been altered since the transformation was made.

A digital signature may be recognised as a secure electronic signature if:

  • it was created during the operational period of a valid certificate and is verified by reference to the public key listed in such certificate; and
  • the certificate is considered trustworthy, in that it is an accurate binding of a public key to a person’s identity because:
  • the certificate was issued by an accredited certification authority operating in compliance with the ETA;
  • the certificate was issued by a recognised certification authority;
  • the certificate was issued by a public agency approved by the Minister of Communications and Information to act as a certification authority on such conditions as he may by regulations impose or specify; or
  • the parties have expressly agreed between themselves (sender and recipient) to use digital signatures as a security procedure, and the digital signature was properly verified by reference to the sender’s public key.

Use of electronic signatures under the ETA

Generally, the ETA recognises the use of electronic signatures to execute contracts. This is subject to any additional formalities required to execute the contract, which may be set out in legislation, the company’s constitution, required by the relevant government authorities, or as agreed between the parties to the contract.

Additionally, there are benefits to using a secure electronic signature to execute contracts, because in any proceedings involving a secure electronic signature, there is a presumption that:

  • the secure electronic signature is the signature of the person to whom it correlates; and
  • the secure electronic signature was affixed by that person with the intention of signing or approving the electronic record.

As such, the use of secure electronic signatures may provide the parties additional certainty and protection as to the validity of the electronic document executed.

However, it should be noted that the validity of electronic signatures under the ETA does not apply to the following documents and accordingly these should not be executed by way of electronic signatures:

  • the creation or execution of wills;
  • negotiable instruments;
  • documents of title;
  • bills of exchange;
  • promissory notes;
  • consignment notes;
  • bills of lading;
  • warehouse receipts or any transferable document or instrument that entitles the bearer or beneficiary to claim the delivery of goods/payment of money;
  • creation, performance or enforcement of an indenture; declaration of trust; and powers of attorney – with the exception of implied, constructive and resulting trusts;
  • any contract for the sale, transfer or disposition of immovable property, or any interest in such property;
  • the conveyance of immovable property or the transfer of any interest in immovable property; and
  • any contract or transaction by agreement that the parties agree to exclude the use of electronic signatures.

Use of electronic signatures for contracts

Generally, the use of electronic signatures for contracts is permitted by the ETA, unless there are specific regulatory or contractual requirements which prohibit the parties from doing so. For contracts with foreign parties, parties should also ensure that electronic signatures are recognised and enforceable in the relevant jurisdiction, particularly if the contracts will not be governed by Singapore law. For certainty, parties may choose to provide in the contract that the execution of the contract via electronic signature will have the same legal effect as original wet ink signatures. For completeness, apart from the signature requirement, parties should also consider if there are additional execution formality requirements under the relevant foreign jurisdiction applicable to the foreign parties, including, any requirement for witness(es), translation, affixation of seals, notarisation or legalisation.

Amendments to the ETA

It should be noted that the Info-communications Media Development Authority (“IMDA”) had concluded a public consultation in 27 September 2019, where it sought the public’s comments on potential changes to the ETA. Briefly, the IMDA has proposed the following amendments:

  • removing most matters from the list of contracts excluded from the ETA, with the exception of trusts relating to immovable property or dispositions of equitable interest and POAs other than POAs for the enforcement of security interests and Lasting Powers of Attorney; and
  • requiring the use of secure electronic signatures for contracts for the sale or disposition of immovable property.

Given that the IMDA has not made any public announcements pertaining to the outcome of the public consultation, it remains to be seen how the IMDA proposes to amend the ETA.

Benjamin Gaw

Director, Commercial Services Group

Director, Telecommunications, Media and Technology

T: +65 6531 2393

E: benjamin.gaw@drewnapier.com

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