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Execution of contracts and electronic signatures

Updated: Apr 28

By Mockshi Silva Attorney at law BA(Economics)Hons.


This has raised many questions including how to execute a legal document by electronic signature. In this regard

i. the law applicable,

ii. the type of document to be signed and

iii. the form of signature to be used

will play a key role.

It is in this context that the electronic transactions act has gained importance today. 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 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).

The requirement of “writing” and “signature”

Despite the fact that most business transactions can be made through electronic means without a physical presence, the lack of trust and confidence in the usage of electronic signatures can be observed, especially when large sums of money and property are at stake, and this is mainly due to the lack of understanding of the corporate sector regarding the legality of electronic signatures.

Legislations, which have been enacted to provide security to business transactions, highlight the importance of signature and the requirement to be in writing. The section 4 of the prevention of frauds ordinance in Sri Lanka, states in very particular that no will, testament or codicil containing any devise of land or other immovable property shall be shall be valid unless it is in writing, signed by the testator and such signature shall be acknowledged by the testator in the presence of a notary and two or more witnesses.

The main obstacle in regard to the proof and enforcement of an electronic transaction was this requirement that certain contracts must be made in writing or should be in writing and signed by the parties thereto. 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.

The section 4 of the electronic transactions act overcomes this hurdle relating to the requirement of “writing” by expressly stating 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 provision equates any information contained in the electronic form as 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, the term “signature” has been given a narrow interpretation in our courts. For instance, in meyappan vs. Manchanayake (62 nlr 529 at 533), 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”.

If this definition provided by sansoni j is to be followed, an electronic signature will have no validity today and it is with a view of overcoming this legal obstacle that section 7 of the electronic transaction act has been provided with. Section 7 expressly states that when any written law requires a communication or document to be signed by a person, notwithstanding to anything to the contrary, such requirement shall be deemed to have been met 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.”

This section gives legal validity to signature in the electronic form.

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”. It is clear that this 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, there should be means of identifying the source or the sender, indicating the sender’s intent (for example to be bound by the terms of a contract), and ensuring the integrity of the document signed.

It is clear that text e-mail signatures 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. 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.

Lankaclear provides “lankasign” a digital signature, acting as sri lanka’s first certification service provider (csp) on the request of the central bank of sri lanka and organizations can obtain this signature service very conveniently.

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 the creation or execution of a will, or any other testamentary disposition by whatever name called, a bill of exchange as defined in subsection (1) of section 3 of the bills of exchange ordinance, a power-of-attorney as defined in section 2 of the power of attorney’s ordinance, a trust as defined in the trusts ordinance excluding a constructive, implied and resulting trust, a contract for sale or conveyance of immovable property or any interest in such property, or any other document, act or transaction specified by the minister by regulations made under section 24.

It is crystal clear that in the present context, where everyone, including government organizations are forced to work from home, the electronic signature can be used without fear of validity due to the enactment of the electronic transactions act. Any signature made electronically falls under the purview of this act while a digital signature would give special protection through electronic means to the documents enacted online. This valuable act ensures that the transactions in the corporate world do not come to a standstill in spite of being forced to remain indoors.


Reference


Marsoof s. Pc j ‘e-commerce and e-governance – some pertinent issues’

Marsoof s. Pc j (2006) ‘electronic transactions in the modern world: an analysis of recent sri lankan legislation’ in law college law review 2006

Jayadeva c. ‘electronic signatures – perspectives and problems


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

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