With many more individuals and businesses limited to conducting their affairs through electronic means as a result of the COVID-19 pandemic, Paul Micallef Grimaud and Philip Formosa answer some salient questions on the legality of electronic commerce and contracts.
Do contracts that are signed by the parties in hard copy, scanned and sent electronically to the other party have the force of law?
Yes, unless (i) the parties have expressly excluded this possibility in advance, or (ii) the nature of the contract is one which falls within the category of excluded contracts listed in the E-Commerce Act.
The E-Commerce Act (Chapter 426 of the laws of Malta), which implements the E-Commerce Directive (Directive 2000/31/EC) into Maltese law, promotes the enforceability of electronic contracts by giving them the same force of law as ordinary contracts concluded by the parties in each other’s presence.
‘Electronic contracts’ are defined as contracts that are concluded wholly or partly by electronic communication or wholly or partly in an electronic form (including over e-mail).
There are, however, a few exceptions to this principle that arise from the law itself and which, in certain cases, are even specific to Maltese law. These include contracts that create rights over immovable property (but not lease agreement, which are expressly stated in the law as not being an “excluded field”), contracts that grant suretyship or collateral security, wills, trusts and powers of attorney, and agreements relating to family law matters.
Therefore, in the case of real estate, although the sale of an immovable cannot currently be concluded via an electronic contract (in large part due to the public deed requirements mentioned below), the present legal situation does allow for lease agreements to be entered into and concluded by the parties (the lessor and lessee) via electronic means. During these rather unprecedented times, this can potentially provide invaluable flexibility for a number of potential scenarios, such as for individuals who need to immediately find temporary accommodation (for instance, as part of a mandatory self-isolating measure) or should the parties to an existing lease wish to renew that lease but circumstances prevent them from being able to meet and sign that renewal in person.
There are a number of agreements that by law require specific formalities, such as being drawn up by a notary in the form of a public deed, a requirement which is for instance applicable to wills and sales of immovable property, and which has led those agreements being ‘excluded’ at law from being able to be concluded electronically.
The E-Commerce Act promotes the enforceability of electronic contracts
Furthermore, other agreements, such as the lease of property for a term in excess of two years, specifically require a private writing and consequently the signature of both parties or, in the absence of this, the attestation of the signatures by witnesses. Consequently, this is a particular requirement that needs to be borne in mind in relation to leases.
For the signing of contracts, does a scanned signature affixed to an electronic document or a scanned copy of a contract signed in wet ink and sent over by electronic e-mail to the counter-party suffice?
Generally, yes. Again, the law, this time an EU Regulation commonly referred to as the eIDAS Regulation (which replaced the Electronic Signatures Directive), comes into play.
The regulation gives recognition to all forms of electronic signatures, including scanned signatures. As a core principle, the eIDAS Regulation stipulates that an electronic signature, irrespective of its type, should not be denied legal effect (i.e. as a manifestation of the signatory’s consent) and admissibility as evidence in legal proceedings solely on the grounds that it is in electronic form. On the strength of that legal basis, such forms of signatures would thus suffice to give the contract being signed the legal validity of consent.
However, this principle of ‘legal effect’ or ‘recognition’ would not apply in cases where the parties have specified otherwise. Attention must therefore be paid to the formalities that may result from the agreement itself, or previous versions of the same agreement that had been concluded between the parties, as well as the law. Hence, for instance, parties may stipulate (or may have previously stipulated) the need for the signatures of all the parties to appear on one and the same document and not merely allow for the parties to sign a copy and simply send it over to the other party (such as via counterparts). The same applies to those agreements that the law (Civil Code) requires to be concluded by means of a private writing.
Furthermore, if relying on an electronic contract signed electronically, it is advisable to ensure you receive an acknowledgement of receipt by the other party of the signed version of the contract. In turn, if you have received an electronic contract which has been signed electronically, from a person which is not the signatory directly, it may also be recommendable to request the signatory to confirm, by separate communication, that he has in fact signed the agreement and that the electronic signature on the version which you received belongs to him.
This can provide useful evidentiary value should complications or issues later arise regarding the identity of the signatory and also have implications of validity of the conclusion of the agreement.
How can one be sure that the person who signed the agreement electronically is the person whose name is on the signature block?
This remains a concern and, if standard electronic signatures are used, may lead to some debate and the appointment of expert witnesses in a litigious scenario.
A potentially practical and useful measure could be to request the signatory to confirm in writing (for instance by e-mail) that one has signed the agreement and that the electronic signature shown on the version which you received is in fact their own.
As a means of addressing this potential room for doubt, the eIDAS Regulation also generally promotes the use of the more secure, advanced and qualified forms of electronic signatures, both of which provide and are recognised as providing, greater certainty of the identity of the signatory. This is recognised both as a matter of law, and also in a technical sense since, due to the particular nature and requirements of an advanced or qualified electronic signature, it is relatively more straightforward and quicker to ascertain the identity of the signatory and/or identify with an individual with the signature shown.
A qualified electronic signature carries with it a certificate of authenticity as to the identity of who the signature relates to, which certificate is issued by trust service providers which, in turn, are regulated under the eIDAS Regulation. It has been regularly described as the ‘gold standard’ in terms of conclusive probative value.
Apart from contracts, can companies validly conduct internal affairs, such as pass board resolutions, through electronic means?
Yes. The same principles applicable to electronic contracts and signatures apply to corporate documents, although the statutory filing of documents is subject to the procedures and internal practices of the Registry of Companies and other relevant competent authorities.
Therefore, companies can, unless prohibited by their own statute, pass resolutions electronically, convene meetings, issue notices to shareholders, auditors and directors, electronically. They can also hire employees and conclude transactions through electronic contracts, signed electronically.
Paul Micallef Grimaud and Philip Formosa are members of the IP Media and Technology practice group at Ganado Advocates and can be reached at email@example.com. This article does not constitute legal advice.
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