Can I electronically sign a contract?

By Bryan Boo

The recent COVID-19 pandemic has tested the viability of businesses in this age of rapid technological advancement. Companies are forced to adopt creative strategies to migrate their businesses and operations digitally as much as possible. It is no doubt that this pandemic will be a catalyst that brings about a change in the way business is done as we know it. The words of Nobel laureate Milton Friedman rings truer than ever – “You never have real changes unless you have a time of crisis.”

Digitising the way businesses are conducted would also bring about legal questions and challenges that one would have to contend with. One such question is whether or not a contract that is signed electronically is binding and enforceable?

Electronic Signatures

It must be noted that electronic signatures are not new in Malaysia. Section 5 of the Electronic Commerce Act 2006 (“ECA 2006“) reads:

Interpretation

5. In this Act, unless the context otherwise requires –

  “electronic signature” means any letter, character, number, sound or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature;


It is therefore clear that this legislation enacted and gazetted back in 2006 recognises electronic signatures, and in effect, the legitimacy of electronic signatures in Malaysia.

Are electronic signatures legally binding?

The question then is whether or not these electronic signatures, when used in a contract, is legally binding. Section 9 of the ECA 2006 reads as follows:

Signature

9. (1) Where any law requires a signature of a person on a document, the requirement of the law is fulfilled, if the document is in the form of an electronic message, by an electronic signature which—
      (a) is attached to or is logically associated with the electronic message;
     (b) adequately identifies the person and adequately indicates the person’s approval of the information to which the signature relates; and
     (c) is as reliable as is appropriate given the purpose for which, and the circumstances in which, the signature is required.


The construction of Section 9(1) ECA 2006 provides 3 requirements for such electronic signatures to be deemed valid and binding in law:

  1. the electronic signature must be attached to or logically associated with the electronic message;
  2. the electronic signature must identify the person signing and his/her approval of the information to which his/her signature relates; and
  3. the electronic signature is as reliable as is appropriate for the purpose and circumstances which the signature is required.

The question then is what is an “electronic message” and does a contract qualify as an electronic message within the meaning of the ECA 2006?

Section 5 of the ECA 2006 defines “electronic message” as such:

Interpretation

5. In this Act, unless the context otherwise requires –

  “electronic message” means an information generated, sent, received or stored by electronic means;


Typically, an electronic signature can only be employed if the document (in this case, the contract) itself is in electronic form (e.g. in PDF) and as such, it would be an electronic message under the ECA 2006.

“… as reliable as is appropriate given the purpose for which, and the circumstances in which, the signature is required.”

A plain reading of Section 9(1)(c) ECA 2006 on its own would leave a person confused due to its ambiguity. What qualifies as reliable as is appropriate given the purpose and circumstances in which the signature is required? Section 9(2) ECA 2006 provides 3 requirements for an electronic signature to be as reliable as is appropriate:

(2) For the purposes of paragraph (1)(c), an electronic signature is as reliable as is appropriate if—
      (a) the means of creating the electronic signature is linked to and under the control of that person only;
    (b) any alteration made to the electronic signature after the time of signing is detectable; and
    (c) any alteration made to that document after the time of signing is detectable.


Conclusion

The world today is a borderless world. The Internet has enabled businesses to easily transcend countries and its geographical limitations. Consumers can easily purchase products from another country and business deals can be concluded regardless of location, time and nationality.

While there are some other aspects to pay attention to and certain specific clauses that might be necessary when it comes to electronic contracts and agreements, it is clear that as far as Malaysia is concerned, electronic signatures on an electronic contract or electronic agreement may still bind the signatory.