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Think of the last time you entered into a contract to buy a product or service. In the majority of cases, the contract will have been an electronic contract. Entering into negotiations, preparing quotes or creating tenders for work are all things that can be carried out electronically.
As more and more aspects of our lives on both a business and personal level become digitised, contracts are just another of the many things that have been affected by these changes and advances in technology. There are countless transactions and deals that are carried out electronically on a daily basis.
With all of this information being sent backwards and forwards and contracts being created on a regular basis, it is inevitable that legal concerns will be raised, particularly in relation to the creation of electronic contracts.
Some of the most important issues include whether the contract is valid, whether it has complied with the guidance and criteria set out in contract law, whether electronic signatures are acceptable to be used for example when questions are raised over intent and agreements and what laws are applicable to the contract, particularly if the contract is used in an international context.
Electronic Contracts In Depth
There are no set rules on what a contract looks like and they can take many forms. It can be in writing, a deed, implied through the conduct of the parties involved or even something that was said verbally. That being said, certain contracts do need to use a certain format and cannot be legally enforced if they do not adhere to the formalities.
As an example, during the conveyancing process for the acquisition of land Section 52 of the Law of Property Act 1925 must be applied by deed. Many other contracts don’t need to be as formal and can simply be valid provided that they are in writing.
With all that considered, should an electronic contract conform to a certain format and if so, how should it be implemented? The answer to this will very much depend on the specifics of the contract. If it is required that the contract is in writing, would a document stored on the hard drive of a computer be sufficient?
As words are usually stored in a digital form on a computer and they can be printed onto paper, computer storage is covered. However, it would be at the discretion of the court to determine whether the contract would be acceptable.
Whenever you sign something using a pen and paper, this is confirmation that you agree with the contents of what you are signing. But when it comes to electronic signatures, does the same apply? The court will determine that if the name of an individual is included at the end of a contract, this not only identifies the person agreeing to the contract, but also indicated that the individual agreed to the contents of the document.
However, this cannot be applied to all instances of typed names. Signatures must clearly show that the person who signed the document specifically approved of the documents contents and they were happy to be bound by them. It is irrelevant whether the signatory has actually read the contents.
The Electronic Communications Act 2000, and in particular Section 7 states that an electronic signature is anything which:
- Has been incorporated into electronic communications or data
- Has been certified as being approved and incorporated into a document by the signatory
Signatures are an effective way to establish the authenticity or integrity of a document and they are perfectly admissible as evidence. Signature certification places an obligation on the signatory to make a statement that the production, verification or communication of a signature is a valid method of establishing integrity and/or authenticity of the electronic communications.
Laws and Electronic Contracts
A high proportion of contracts will include a clause to indicate what country’s law the contract complies with. Under the Rome Convention of 1980, there are rules on certain laws that are applicable to all EU member states. The involved parties are able to choose which laws can be used for their relations so long as it is applied with certainty and in the right way.
When a specific law hasn’t been selected, it will naturally follow that the contract will be associated to the country in which the contract is most closely associated to, but there are additional rules which should be applied to determine how this is undertaken and which country is used.
Under Article 9 contained within Directive 2000/31/EC in relation to electronic communications, members of the EU must ensure that contracts can be finalised electronically, and the law does not present any obstacles in terms of the use, enforcement or validity of these contracts.
Electronic Communications Act 2000
The Electronic Communications Act 2000 in the UK does support the fact that electronic signatures can be used as evidence. However, there are some contracts such as those which involve the transfer of rights in property are exempt from the general guidance.
Whenever you enter into an electronic contract you should always carry out your own due diligence before agreeing to anything. Even though the contract is electronic, you are still bound as much as you would be if you were to physically sign a document on paper.
If in doubt about your rights under contract law or you have questions about electronic contracts, it is always recommended that you seek legal advice from a qualified solicitor.