The COVID-19 pandemic has had a profound effect on all our lives. The requirement to practice social distancing and the restriction on public gatherings mean we are no longer able to hold face to face meetings in the usual way.
Many people are working from home and may don’t have access to printed documents. Others may prefer to avoid exchanging hard copy documentation in person as part of a responsible social distancing regime.
Electronic contracts and signatures are the most appropriate way to keep business going without unnecessary delays whilst adhering to Ministry of Health public health guidelines on social distancing.
The good news is, the Electronic Transactions Act, 2011 and the Electronic Signatures Act, 2011 are already in place to facilitate this new normal. Here are some legal requirements under the said laws that everyone transacting electronically must know.
Is the Electronic Transactions Act applicable to all transactions?
Even if parties agree to conduct business transactions electronically, some documents are excluded from application of the Electronic Transactions Act.
The Act states that it does not apply to certain documents, including wills, trusts, power of attorney, documents that create or transfer an interest in property and require registration to be effective against third parties.
The Act was amended in 2018 and some of the restrictions were relaxed, such as, exclusion of negotiable instruments, for example, cheques from their applicability under the Act. This paved way for use of cheque truncation.
Cheque truncation reduces or eliminates the physical movement of paper cheques and reduces the time and cost of cheque clearance.
Do contracts that are signed by the parties in hard copy, scanned and sent electronically to the other party have the force of law?
Yes, unless the parties have expressly excluded this possibility in advance, or the nature of the contract is one which falls within the category of excluded contracts highlighted above.
The Electronic Transactions Act promotes the enforceability of electronic contracts by giving them the same force of law as ordinary contracts concluded by the parties in each other’s presence. In that vein, the Act provides for “legal equivalence” between ordinary (physical) contracts and electronic contracts.
This brings us to the related matter of the signing of contracts. Does a scanned signature affixed to an electronic document or a scanned copy of a contract signed in wet ink and sent over by e-mail to the counter-party suffice?
Yes, the Electronic Signatures Act, 2011 comes into play.
The Electronic Signatures Act gives recognition to all forms of electronic signatures, including scanned signatures. As a core principle, it stipulates that an electronic signature, irrespective of its type, should not be denied legal effect (i.e. as a manifestation of the signatory’s consent) and admissibility as evidence in legal proceedings solely on the grounds that it is in electronic form.
On the strength of that legal basis, such forms of signatures would thus suffice to give the contract being signed the legal validity of consent. The responsibility to determine the type of electronic signature to use given the complexity or value of the matter lies with the parties. The law allows for this flexibility.
What is an electronic signature?
An electronic signature is defined under the Electronic Signatures Act, 2011 as “data in electronic form affixed to or logically associated with a data message, which may be used to identify a signatory or indicate his/her approval of the information contained in the data message”.
In simple terms, it is a legal way to get consent or approval on electronic documents or forms.
What are some of the examples of electronic signatures?
A number of electronic signature techniques have been developed over the years. These include those based on the:
- knowledge of the user [e.g. passwords, Personal Identification Numbers (PINs)];
- physical features of the user (e.g. biometrics) – used to identify an individual through his or her intrinsic physical or behavioural traits, such as, fingerprints, iris, hand or facial geometry, handwriting or typing patterns;
- possession of an object by the user (e.g. codes or other information stored on a magnetic card); and those not based on any of the above: –
- scanned signatures or a name typed at the bottom of an electronic communication, such as, an e-mail; and
- signatures relying on public key cryptography.
But how could you be sure that the person who signed a contract electronically is the person whose name is on the signature block?
The Electronic Signatures Act, 2011 stipulates that electronic signatures can be verified or authenticated through application of a method previously agreed upon by the person signing and the recipient of the signed document.
The verification method is usually provided by the respective electronic signature providers in the market.
It is advisable that a fully signed electronic contract is maintained as a record just as it would for a paper contract with wet signatures. Further, it is advisable that any person seeking to conclude a contract electronically, should have a contract execution policy that expressly provides for electronic contracts and electronic signatures.
Baker Birikujja is an advocate at the National Information Technology Authority, Uganda (NITA-U)