By Mockshy Silva Attorney at law BA(Economics)Hons.
The corporate world cannot simply come to a standstill, even if threatened by a global pandemic, and, will and has continued to function through online means which is accessible to almost anyone today. Sri Lanka, as a tiny island nation cannot afford to wait while the rest of the world resumes business transactions online and in this aspect we are lucky to have a powerful legislation at hand, the Electronic Transactions Act.
The Electronic Transaction Act No. 19 of 2006 (as amended by Act No. 25 of 2017), is based on the standards established by United Nations Commission on International Trade Law (UNCITRAL), the Model Law on Electronic Commerce (1996), the United Nations Convention on the Use of Electronic Communications in International Contracts (2005) and the Model Law on Electronic Signatures (2001). This Act was enacted to give effect to the following objectives as expressly stated in its Section 2;
(a) to facilitate domestic and international electronic commerce by eliminating legal barriers and establishing legal certainty,
(b) to encourage the use of reliable forms of electronic commerce,
(c) to facilitate electronic filing of any application, petition, plaint, answer, written submission or any other document with any court,
(ca)to facilitate electronic filing of any form, application, or any other document with any ministry, department, provincial council, provincial ministry and department or local authority or, office, body or agency owned or controlled by the Government or a statutory body in a particular manner and to promote efficient delivery of public service by means of reliable forms of electronic communications;
(d) to promote public confidence in the authenticity, integrity and reliability of data messages, electronic documents, electronic records or other communications, and
(e) to implement the provisions of the Convention subject to such restrictions specified in Section 23 of the Act declared at the time of ratification of the Convention.
The provisions of the Act have in particular focused on removing difficulties that could arise from the traditional legal requirements of “writing” and “signature” in the context of electronic transactions.
The Electronic Transactions Act also contains provisions for the conduct of on-line business with government Ministries, Departments and other agencies as well as for keeping of electronic records. The provisions of this Act, when supplemented by appropriate regulations, can help us make vast strides in e-governance.
Section 3 of the Act gives legal recognition to electronic documents in the form of data messages, electronic records, electronic documents and other communications, and expressly states that legal recognition shall not be denied to such, merely on the grounds of being electronic. The terms used in this section are defined widely to recognize all forms of electronic transactions and communications by Section 26, which expands the scope of this Act.
Its Section 4 provides for the legality of electronic equivalents to instruments which are required to be in writing, provided that the information contained in a data message, electronic record, electronic documents or communication, is accessible for subsequent reference.
Section 5 and 6 of the Act have a similarity to Article 8 and 10 of the UNCITRAL Model Law on e-commerce. Section 5 stipulates the minimum standards that must be fulfilled when information usually required to be presented or retained in its original form is made available in the electronic format via data messages, electronic records and electronic documents.
Section 6 describes the legal standards required to be satisfied when the retention of information under any law are to be satisfied, when such information is retained in the electronic form. Therefore, the document archiving in electronic or digital form is now valid legally under the Act.
The requirement of “Writing” and “Signature”
The main obstacle in regard to the proof and enforcement of an electronic transaction was the requirement that certain contracts must be made in writing or should be in writing and signed by the parties thereto. While under the laws in force in Sri Lanka, no contract relating to immovable property is of any force or avail in law unless it is in writing, signed by the party making the same and attested before a Notary Public, many other types of contracts need to be put into “writing and signed by the party making the same” too. Although the terms “writing” and “sign” are not defined in these legislation, it was unlikely that the courts of law would be willing to stretch these concepts to include electronic writing or electronic signatures.
But the Electronic Transactions Act’s Section 4 overcomes this hurdle relating to the requirement of “writing”. It expressly states that;
“Notwithstanding the fact that the provisions of written laws for the time being in force in Sri Lanka attach legal validity to certain instruments, only if such instruments have been reduced to writing, such requirement shall be deemed to be satisfied by a data message, electronic record or other communication in electronic form, if the information contained therein is accessible so as to be usable for subsequent reference”.
This deeming provision equates any information contained in a data message, electronic document, electronic record or other communication to an instrument reduced to writing, if the information contained therein is:
(a) Rendered or made available in an electronic form; and
The term “electronic” has been defined to mean “information generated, sent, received or stored by electronic, magnetic, optical, or similar capacities regardless of the medium”. Even though the term “electronic form” has not been defined in the Act, the phrase will extend to information generated, sent, received or stored by electronic, magnetic, optical or similar capacities regardless of the medium.
(b) Accessible so as to be usable for a subsequent reference.
Any information will be deemed to be in the writing only if it is accessible so as to be usable for a subsequent reference through a computer or some similar device.
For instance, electronic mail (or e-mail) is clearly a “communication in an electronic form” which is accessible for future reference, and would satisfy the dual test for an “instrument in writing” laid down in Section 4 of the Electronic Transactions Act.
While the signature of a person entering into a transaction is required by most legislations in order to give legal efficacy to the transaction, the term “signature” has been given a rather narrow interpretation in our courts. For instance, in Meyappan vs. Manchanayake [1], Sansoni J. stated that:
“As a matter of language, giving the words their ordinary meaning, when a document is required to be signed, or when a person’s signature is required on a document, the person’s name should be written by hand with a pen or pencil”.
On the trust adopted by Sansoni J, a digital or electronic signature will have no validity.
It is with a view of overcoming this legal obstacle that Section 7 of the Electronic Transaction Act has been provided with.
“Where any written law provides that a communication or any other document shall be signed or bear the signature of any person, then notwithstanding anything to the contrary in such written law, the requirement shall be deemed to be met in relation to a data message, electronic document, electronic record or communication if-
(a) a method is used to identify that person and to indicate that person’s intention in respect of the information contained in the electronic communication; and
(b) the method used is,
(i) as reliable as appropriate for the purpose for which the electronic communication was generated, sent or communicated, in the light of all the circumstance, including any relevant agreement; or
(ii) proven to have fulfilled the functions described in paragraph (a) by itself or together with further evidence.”[2]
The term “electronic signature” has been defined as “data in electronic form, affixed to, logically associated with a data message, electronic document, electronic record or communication which may be used to identify the signatory in relation to the data message, electronic document, electronic record or communication and to indicate the signatory’s intention contained therein”.
This section means that where an enactment requires a person to affix his handwritten signature or any mark on any document, it would suffice if the information is found in an electronic form and is authenticated by means of an electronic signature.
“Electronic signature” is a generic, technology-neutral term that refers to the universe of all the various methods by which one can ‘sign’ an electronic record. This broad definition allows electronic signatures to take many forms and to be created by different technology and the digital signature is one such electronic form of signing that comes under the umbrella of electronic signatures.
Digital Signature
The signing of an electronic contract may take many different forms including a text signature at the end of an email, or the click of a mouse to indicate that one is bound by the legal terms and conditions on a webpage. Although these simple methods theoretically satisfy the formality of a signature, they lack the inherent security attributes of signed paper documents such as the “semi permanence of ink embedded in paper, unique attributes of some printing processes, watermarks, the distinctiveness of individual signatures, and the limited ability to erase, lineate, or otherwise modify words on paper”. Further, in order to reduce the risks associated with the internet, the following purposes must also be served;
(a) to identify the source or the sender,
(b) to indicate the sender’s intent (for example to be bound by the terms of a contract), and
(c) to ensure the integrity of the document signed.
It is clear that text e-mail signs and mouse clicks do not serve these purposes.
Digital signatures can be defined as electronic signatures that use public key cryptography to give electronic signatories a unique digital identification. Used properly, digital signatures identify the sender, ensure message integrity and render the message non repudiative. They are produced through the use of public key cryptography based on asymmetric cryptosystem, which uses two keys, a private one and a public one. Only the originator can generate the digital signature, but anyone can verify it with the public key. This method makes it possible to ascertain whether the data has been encrypted with a certain private key, which in turn is particular to a certain signatory. This way parties engaging in transactions online can authenticate their electronic documents in the open network of the Internet to compensate for the lack of printed documents. The digital signature becomes a part of a message, which indicates the source of the message and shows that the message has not been altered in transit.
A digital signature meets the functional requirements of a hand written signature by;
1. Providing evidence on the identity of the Signatory
Here, the Certification Authority takes traditional evidence of identity, for example, by examining identification cards and in the case of public key encryption digital signatures, checks that the signature effected with the signatory’s secret key are verifiable using the public key. Once the Certification Authority is satisfied as to the signatory’s identity, it issues an ID Certificate, which includes, inter alia, a certification of the signatory’s identity and of his public key. This certificate may be used by the recipient to satisfy himself of the identity of the sender.
2. Evidence of Intention to sign and to adopt contents
Once the identity of the signatory has been proven, the very fact that an electronic signature has been affixed to a document should raise the same presumption as handmade signatures that they have been placed with intention.
One may argue that a third party who had access to the computer or to the storage device would be able to make the signature. For this reason, the electronic signature should be treated similar to the rubber seal signature. The argument that an electronic signature’s forgery cannot be detected easily can be challenged by pointing out that no such requirement is needed for handmade signatures and rubber stamps. In fact, electronic signatures are much harder to forge than manuscript signatures.
3. The role of the ID certificate
When parties are contracting for the first time, the ID certificate helps to confirm the identity and trustworthiness of the signatory.
Entering into contracts online
Even though there are a countless number of definitions of e-commerce, the rapid changes in the Internet and continuously evolving technologies have made it not only unrealistic but pointless to reach to a permanent definition of e-commerce. It is probably for this reason that legal draftsman have not attempted to define the term “e-commerce”, but the definitions noted above can generally give some idea about this relatively new notion. According to Chissick and Kelman[3], “electronic commerce has started to revolutionize spending habits and will change the way everyone does business. The reasons for this are many and varied; globalization and dismantling of trade barriers, the deployment of smart cards and the internet...”
Contracts which are legally enforceable agreements, are composed of the fundamental elements of an offer, acceptance, intention, consideration and capacity to make a contract. Meeting of minds or consensus ad idem is also essential in the formation of a valid contract. An offer is an expression of the willingness to contract on specific terms. Just as a display of goods in a shop window does not make an offer, as expressed in Pharmaceutical Society of Great Britain v. Boot Cash Chemist[4], vendors advertising their goods or services on websites is merely considered as an invitation to treat and not an offer to sell.
An unconditional agreement to the offer presented in an acceptance and general contract law principles establishes that an offer is effective at the time it is communicated. In general, the postal rule has been applied for the determination of the moment of acceptance. In Byrne v. Van Tienhoven[5], the postal rule denotes that, where an offer is made and accepted by letters sent through the post, the contract is completed the moment the letter accepting the offer is posted, even though it never reaches it’s destination. In the cases Adams v. Linsell and Household Fire and Carriage Accident Insurance Co. v. Grant, it was held that the “expedition theory”, the mere act of posting a letter containing the acceptance brought about the contract. However, as an e-mail can only be sent by activating the ‘send’ key while being online, it has been suggested that an acceptance by email would be complete if and when the offeree sends the acceptance email, while being online.
Section 11 of the Act expressly provides that “in the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed in electronic form. A contract shall not be denied legal validity or enforceability on the sole ground that it is in electronic form.
Making contracts in cyber space is a crucial requirement of e-commerce and the Electronic Transactions Act helps to facilitate the procedure. The Act ensures that the principles of law that have been developed by the courts in regard to offer and acceptance can be applied unaltered to the modes of communication that have evolved in the information era.
Limitations in the Electronic Transactions Act that are yet to be resolved
The Electronic Transactions Act’s section 21(3) contains three important presumptions, which shall apply in all cases “unless the contrary is proved”. The first of these assumptions is that, all information contained in any data message, electronic document, electronic record or other communication is true. This is a dramatic turn around of the of the famous heresay rule. The second of these presumptions relates to the identity of the maker of an electronic document, and is to the effect that unless the contrary is proved, a court of law will presume that any data message, electronic document, electronic record or other communication was made by the person “who is purported to have made it”. The third presumption is to the effect that a court of law will presume the genuineness of any electronic signature unless the contrary is proved. Section 21 (1) clearly states that these provisions of the Electronic Transactions Act will apply notwithstanding anything to the contrary in the Evidence Ordinance and any other written law.
Whether these presumptions are still valid and can be accepted in the changing face of e-commerce, with the increasing rate of cybercrimes is to be pondered upon.
With the development of technology, and in particular the advent of cookies, web bugs and net spies, invasion of privacy on a systematic basis has become a common occurrence.
Also the Act applies to all business and commercial transactions which are electronic in nature, other than those specific areas that have been excluded by Section 23 of the Act, namely;
(a) the creation or execution of a will, or any other testamentary disposition by whatever name called,
(c) a Bill of Exchange as defined in Subsection (1) of Section 3 of the Bills of Exchange Ordinance,
(d) a Power-of-Attorney as defined in Section 2 of the Power of Attorney’s Ordinance,
(e) a Trust as defined in the Trusts Ordinance excluding a constructive, implied and resulting trust,
(f) a contract for sale or conveyance of immovable property or any interest in such property, or
(g) any other document, act or transaction specified by the Minister by regulations made under Section 24.
Consensus ad idem or the meeting of minds is an important concept and requirement of contract law. Even though the Electronic Transactions Act provide answers to ordinary questions that could arise in electronic transactions, the problem occurs when a human being transacts with an automated system or when two or more electronic agents transact business without any human intervention.
Reference
Ariyaratna B.A.R.R. (2016) ‘Contracting in Cyber Space: A Comparative Analysis of Electronic Transaction Law in Sri Lanka’ 9th International Research Conference – KDU, Sri Lanka
[1] (62 NLR 529 at 533) [2] As amended by Act No. 25 of 2017 [3] M. Chissick, A.K. (2000) Electronic Commerce Law and Practice, London [4] (1953 1 QB 401) [5] (1818, 160 ER 250)
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