At Zeenat Al Mansoori & Associates we care about our clients and our community. In addition to the public health and humanitarian dimensions, the COVID-19 pandemic poses numerous complex legal issues. Our lawyers are engaged, in nearly every practice area, assisting clients in responding to the legal issues that they face as the unprecedented impacts from the pandemic are rapidly unfolding. We are developing this repository of COVID-19 Legal Insights to offer practical legal insight on important and timely legal issues that businesses and peoples may be facing. For any legal assistance on any COVID-19 pandemic related issues, please do contact us.
In this Insight, we discuss the use of electronic signatures and the rapid rise in electronic transactions during the time of the COVID-19 under the Electronic Communications and Transactions Law No. 54 of 2018.
The recommendation or requirement for many people to work from home to address the spread of the COVID-19 means that signing a paper copy of a contract by hand in-person in a physical meeting, or by circulation, or even in counterparts and sending a scanned PDF version of a signed contract by e-mail, may not be possible or practicable. Not every signatory working from home will have access to a printer and scanner at home and many businesses have strict IT security policies, which may prohibit the printing of documents outside the office. This has raised the question of the legality and validity of executing contracts by electronic signature under the laws of the Kingdom of Bahrain.
The starting point is that the Electronic Communications and Transactions Law No. 54 of 2018 (the Electronic Transactions Law) regards an electronic signature on an electronic document as the absolute equivalent to a handwritten or “wet-ink” signature on a paper document (Article (5) and Article (6) of the Electronic Transactions Law). This means that the use of electronic signatures and electronic documents in civil and commercial transactions is legal and valid.
The validity of electronic contracts
As a general principle, the contract must comply with the provisions prescribed in the law for its legality and validity. In order for a binding contract to be created the key elements including offer, acceptance, consideration, intention to be legally bound and certainty of terms must be present. The law does not impose a general signature requirement as a condition for the validity of all types of contracts. Therefore, the Electronic Transactions Law does not link the validity of an electronic communication or contract to the use of an electronic signature.
While electronic contracts are valid in most circumstances, electronic signatures are not always permitted, so it is important before use to carefully consider their validity and enforceability for this particular type of contract. There are statutory requirements for certain types of contracts or transactions to be signed in wet-ink and notarized by a notary and/or executed in the presence of one or more witness who attest the signature and/or other formalities in order to be in valid form. Common examples include immovable property transfers, marriage contracts, negotiable instruments, powers of attorney, title deeds, wills, and share transfers. When looking to contract electronically, consideration must be given as to whether or not there is any statutory form or other requirements for this type of contract to be valid and enforceable.
Subject to any statutory requirements on form or otherwise, which cannot be set aside, party autonomy means parties may choose to accept or not to accept to communicate or sign contracts electronically. Should the parties choose to accept electronic communication, the parties will need to consider whether the key elements for contract formation are present in the electronic communication or contracting process that is being used.
The Electronic Transactions Law defines the term “Electronic Signature” as electronic data that is attached to or associated with an Electronic Record in order to verify its authenticity, identify the signatory and link the content to that signatory and indicate the signatory’s intention in respect of the information contained in the Electronic Record.
The Law does not identify specific technological equivalents to particular functions of handwritten signatures. Therefore, an electronic signature may take a variety of forms, involving a varying degree of technological sophistication. A few examples are typed names in e-mails or at the end of text messages, PDFs, screenshots or photographs of “wet-ink” signatures, clicking an “OK box”, or digital signatures executed using “e-signature services” software, such as “DocuSign” and “Adobe Sign”. Generally, the requirements for an electronic signature will be met as long as there is a reliable method of identification of the signatory and a reliable method of indication of the signatory’s intention in respect of the information contained in the electronic communication as is appropriate for the purpose for which the electronic communication is generated or communicated and in the light of all the circumstances.
Whilst the Electronic Transactions Law includes provisions for a “Secure Electronic Signature”, which is created using a “Secure Electronic Signature Creation Tool” by a “Trusted Services Provider” third party who is authorized for such purpose and who shall issue a “Certificate of Secure Electronic Signature”, and there is a legal presumption that an electronic record, which uses a Secure Electronic Signature satisfies the requirements of the Law unless it is proven otherwise, (and by contrast there is no such presumption for simple electronic signatures), at the present time there are unfortunately no Trusted Services Providers authorized for such purpose.
The legal landscape
The Electronic Transactions Law is still new and the Implementing Regulations and Resolutions are yet to be put in place. There is also little by the way of court precedent on the interpretation and application of the Electronic Transactions Law. In response to the rise in transacting business electronically due to COVID-19, we anticipate legal landscape will evolve more quickly.
Where an electronic record is disputed, the following will be assessed:
- the reliability in the manner the Electronic Record was created, stored or sent;
- the reliability in the manner the Electronic Record was signed;
- the reliability in the manner in which the integrity and security of the Electronic Record was maintained with respect to the integrity of the Electronic Record.
To avoid potential disputes, it is also advisable to incorporate language in the contract explicitly consenting to the electronic transaction and affirming that specific electronic signature, whatever its form, is accepted by the parties. This would go some way to indicating the intention of the parties to be bound by the contract signed using electronic signatures.
Ultimately, electronic communications and electronic signatures are as secure as the process and technology used. Efforts should be taken to ensure there is an audit trail in place. Parties should carefully document the steps taken to authenticate the signature by confirming the signatory’s identity and associating the signature with the document to be signed, which can often be done with confirmatory e-mails. The document should also be protected from alteration post-signature.