Contracting in a World of COVID-19

Contracting in a World of COVID-19

Published On: March 30, 20206.2 min read

The spreading coronavirus is exacting a toll on many businesses around the world. In an unprecedented move, Singapore has closed its borders to all short-term visitors and some work pass holders. Singapore’s closest neighbour, Malaysia, recently announced a two-week national lockdown, closing its borders and shutting down schools and businesses. Many other countries (including, most recently, the UK and India) have done the same, culminating in some of the world’s largest and most restrictive mass quarantines and restrictions on international travel. In a vastly interconnected economy where cross-border contracts are commonplace, this has raised the question of how parties can continue to contract with one another in a world where it may be impossible for signatories to even step out of their homes or quarantine zones, let alone sit around the same table and ink a contract.
The answer may well lie in the usage of electronic contracts and electronic signatures – but several legal and practical issues must be contemplated.

What is the governing law of the contract?

Under Singapore law, electronic contracts and electronic signatures are recognised under the Electronic Transactions Act (Cap. 88) (“ETA”). An offer and an acceptance (the elements of a formation of a contract) can be expressed by means of electronic communications, and such a contract shall not be denied validity or enforceability solely on the ground that electronic communication was used for that purpose. An electronic record satisfies the requirement for a contract to be in writing if the information contained therein is accessible so as to be usable for subsequent reference. Further, where a contract requires a signature by rule of law (e.g. contracts of guarantee or a contract to be performed more than 1 year from the date of the contract), such a requirement may be satisfied and valid provided that it is not an excluded contract under the ETA and the requirements of section 8 of the ETA are satisfied. That section stipulates that an electronic signature is capable in law of being used to execute a contract if it reliably and appropriately authenticates the signer and indicates the signer’s intention to be bound by the terms of the agreement. As there is no fixed definition of an electronic signature, it is possible that it could take a variety of forms. For example, there has been case law to the effect that the inscription of the sender’s name next to his e-mail address at the top of the e-mail constitutes a valid legal signature.

What type of contract is it?

The type of document which is to be signed matters. This is because the ETA excludes (as at present – this may change) the following classes of documents or transactions from being capable of execution using electronic signatures:

(i) the creation or execution of a will;

(ii) 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 or the payment of a sum of money;

(iii) the creation, performance or enforcement of an indenture, declaration of trust or power of attorney, with the exception of implied, constructive and resulting trusts;

(iv) any contract for the sale or other disposition of immovable property, or any interest in such property; and

(v) the conveyance of immovable property or the transfer of any interest in immovable property.

Is it an appropriate method?

Even if as a matter of Singapore law electronic signatures are valid, there are practical considerations that individuals or businesses should weigh in order to assess whether an electronic signature is appropriate. For example, it is important to ensure that the signatory has the authority to apply the electronic signature to the document in question – the company’s constitutional documents or resolutions may provide or require otherwise (e.g. “dual-key” signature mandates etc.). There could be particular restrictions in legislation or case law, or certain documents which need to be filed with governmental bodies or registries (e.g. ACRA, SLA, MPA etc.) may require the use of wet ink signatures either as a matter of law or practice. Further, as using electronic signatures injects considerable flexibility as to the place where one could execute a document, tax or stamp duty consequences might arise. Finally, if there is a possibility of the legal validity of the contract being disputed in court, the signer should be mindful that the particular method of electronic signature used will probably have an impact on its evidential merits and its reliability.

What is the particular mode of execution required?

Certain types of instruments must be executed in a particular manner. Deeds are still required to be executed either by affixation of the common seal of the company and countersigning of the instrument in the manner as provided for in its Constitution, or by way of section 41B of the Companies Act (Cap. 50), which provides for specific capacities and number of signatories of the company to sign off on the instrument before it can comprise a deed executed without use of the common seal. Where the use of the common seal involves a physical seal embossed on a hardcopy instrument, electronic signatures are logically impossible. As to execution under section 41B of the Companies Act (Cap. 50), it is likely that electronic signatures under the ETA would suffice where the 2 signatories are directors and/or secretary depending on whether the electronic signature platform permits consecutive or collaborative signatures. However, in the case of section 41B(1)(c) in respect of an attesting witness, it is an open question as to how an attesting witness would actually see the signature of the director.

What kinds of electronic signatures are presently available?

There has been an emergence of businesses that provide “eSignature” services. Examples include DocuSign, Adobe Sign and PandaDoc. These services enable users to “sign” an electronic document by applying a computer generated signature and creating a fully signed pdf version, all without having to print and manually sign the document. Notwithstanding the convenience they provide, there are several issues that users should consider. First, depending on how the service is structured, it is unclear whether it sufficiently authenticates and demonstrates the signer’s intent. Second, it is unclear if such services have the appropriate functionality to deal with attestation requirements which require a witness to actually see the signatory sign the document. Third, e-signing platforms which are cloud-based might not be sufficiently secure so as to ensure compliance with the Personal Data Protection Act 2012 (No. 26 of 2012).
Notwithstanding the challenges, what is abundantly clear is that electronic contracts and e-signatures are increasingly becoming the new norm in a world where the established ways of doing business may no longer be physically possible. As we stand once again at the precipice of another technological frontier, it is necessary to recognise that the speed at which entrepreneurship, technology and innovation integrate and break new ground is often faster than developments in the law. Present limitations in both legislation and customary practice on the use of electronic contracts and signatures must be tested and reconsidered in a global context in which parties are no longer presented with any other viable alternative but to explore electronic contracts and e-signatures as a means of carrying on business – a digital contract and sign-off is now no longer a matter of being trendy, but a practical necessity across all fields and industries.

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