Electronic Transactions Act Repealed And Re-Enacted

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1 Electronic Transactions Act Repealed And Re-Enacted Overview The Electronic Transactions Act ("ETA") (Cap 88), passed in Parliament on 19 May 2010, came into operation on 1. The ETA seeks to provide for the security and use of electronic transactions. The ETA repealed and re-enacted with amendments the previous edition of the ETA to align Singapore s laws on electronic transactions with the United Nations Convention on the Use of Electronic Communications in International Contracts which was adopted by the United Nations on 23 November 2005 ("UN Convention"). The UN Convention is the latest instrument developed by the United Nations Commission on International Trade Law in the area of electronic commerce. In addition, substantial portions of the previous edition of the ETA have been re-arranged and renumbered. This update focuses on the key features of the ETA and the changes to the previous edition of the ETA and is not intended to be exhaustive. Key Features Of The Electronic Transactions Act The key features of the ETA are set out below. Legal Recognition Of Electronic Records The ETA provides that information cannot be denied legal effect, validity and enforceability solely on the ground that it is in electronic form. It is likewise stipulated that an electronic record satisfies any rule of law that requires information to be in writing or that provides for certain consequences if it is not in writing as long as the information contained in the electronic record is accessible so as to be usable for subsequent reference. Requirement For Signature Where there is a legal requirement for signature, that requirement is satisfied if: (i) a method is used to identify the signatory and to indicate that signatory's intention in respect of the information contained in the electronic record; and (ii) the method used in (i) is either: 6 Rajah & Tann LLP

2 (a) as reliable as appropriate for the purpose for which the electronic record was generated or communicated; or (b) proven in fact to have fulfilled the functions described in (i) by itself or together with further evidence. Retention Of Documents Under the ETA, where a rule of law requires any document to be retained, the requirement is satisfied by retaining it in the form of electronic records subject to the following safeguards: (i) the information contained therein remains accessible so as to be useable for subsequent reference; (ii) the electronic record is retained in the format in which it was originally generated, sent or received; and (iii) the information as would enable the identification of the origin and destination of the electronic record, and the date and time when it was sent or received, is retained. A public agency may impose additional requirements for the retention of electronic records under its jurisdiction. The retention of documents rule under the ETA does not apply if a specific legislation already provides for electronic records retention. Provision Of Originals Where a rule of law requires a document to be provided or retained in its original form, that requirement is satisfied by providing or retaining the document in electronic form subject to certain conditions as follows: (i) there exists a reliable assurance as to the integrity of the information contained in the electronic record from the time the document was first made in its final form (ie the information has remained complete and unaltered, apart from the introduction of any changes that arise in the normal course of communication, storage and display); (ii) the electronic record is capable of being displayed to the person who must have sight of such record; and (iii) any additional requirements as may be imposed by a public agency which has supervision over the documents are satisfied. Formation And Validity Of Contracts It is provided for by the ETA that an offer and the acceptance of an offer may be expressed by means of electronic communications. Thus, a contract perfected through electronic means shall not be 2 Rajah & Tann LLP

3 denied validity or enforceability solely on the ground that an electronic communication was used for that purpose. In relation to this, it was made clear in the ETA that as between the originator and the addressee of an electronic communication, a declaration of intent or other statement shall not be denied legal effect, validity or enforceability merely because it is in the form of an electronic communication. Key Changes To The Previous Edition Of ETA The key changes to the previous edition of the Electronic Transactions Act are highlighted here. Consent And Variation The new section 5 of the ETA allows parties to a contract or transaction to derogate from or vary the effect of any provision in respect of the contract or transaction as well as exclude the use of electronic forms by agreement. The exception to this is the prohibition of such autonomy of the parties with regard to sections 7 to 10 of the previous edition of the Electronic Transactions Act as it is not intended that parties should be able to relax the minimum standards prescribed by those sections for electronic forms to achieve functional equivalence in respect of requirements under rules of law for writing, signatures, retention and originals, respectively. Electronic Signatures For consistency with the UN Convention, the ETA amended section 8 of the previous edition of the Electronic Transactions Act to align it with article 9(3)(b) of the UN Convention. Retention Of Electronic Records Section 9 of the previous edition of the Electronic Transactions Act provided that where there are legal requirements for retention of certain documents, those requirements can be met by retaining the documents in electronic form subject to, among other conditions, consent from the relevant Government agency being obtained. The ETA has amended section 9 of the previous edition of the Electronic Transactions Act to remove this consent requirement. The intention behind this is to provide for the default acceptance by Government agencies of electronic retention of documents. Government agencies would nonetheless be allowed to opt-out of the default position. Provision Of Originals The ETA has adopted a new section 10 for any document, record or information provided or retained in electronic form to be regarded as the functional equivalent of an original, subject to various conditions relating to integrity and accessibility being met. This amendment is in line with articles 9(4) and 9(5) of the UN Convention. 3 Rajah & Tann LLP

4 Time And Place Of Despatch And Receipt The ETA includes a new section 13 to replace the former section 15 in alignment with article 10 of the UN Convention to provide greater clarity on the time and place of despatch of electronic communications. The ETA deletes the former section 14 of the previous edition of the Electronic Transactions Act as it would otherwise conflict with the new section 13. Time Of Despatch The new section 13 of the ETA provides that the time of despatch of an electronic communication is the time when it leaves an information system under the control of the originator or the party who sent it on behalf of the originator. If such electronic communication has not left an information system under the control of the originator or of the party who sent it on the originator's behalf, the time of despatch is the time when the electronic communication is received. In comparison, section 15 of the previous edition of the Electronic Transactions Act provided that the despatch of an electronic record occurs when it enters an information system outside the control of the originator or the person who sent the electronic record on behalf of the originator. Time Of Receipt The new section 13 of the ETA provides that the time of receipt of an electronic communication is the time when the same becomes capable of being retrieved by the addressee (ie recipient) at an electronic address designated by the addressee. The time of receipt of an electronic communication at an electronic address that has not been designated by the addressee is the time when that electronic communication becomes capable of being retrieved by the addressee at that address and that addressee becomes aware that the electronic communication has been sent to that address. In comparison, section 15 of the previous edition of the Electronic Transactions Act provided that the time of receipt occurs when the electronic record enters the designated information system or if the electronic record is sent to an information system of the addressee that is not the designated information system, at the time when the electronic record is retrieved by the addressee. Place Of Despatch And Receipt The new section 13 of the ETA also provides for the place of despatch and receipt of electronic communication. It states that the place of despatch of an electronic communication is deemed to be the place where the originator has its place of business, while the place of receipt of an electronic communication is deemed to be the place where the addressee has its place of business. Invitation To Make Offers The new section 14 in alignment with article 11 of the UN Convention, to entrench a default rule that electronic communications proposing to conclude contracts, and addressed to the world at large, are to be treated as invitations to make offers (ie invitations to treat), subject to any clear indication that the person making the proposal intended it to be an offer capable of immediate acceptance. This would provide certainty in relation to the invitations to make offers. 4 Rajah & Tann LLP

5 Automated Message Systems The ETA includes a new section 15 in alignment with article 12 of the UN Convention, which provides that contracts formed through the use of automated message systems will not be denied validity or enforceability on the sole ground that no person reviewed each of the individual actions carried out by such systems or the resulting agreement. Error In Electronic Communications The ETA has also adopted a new section 16 in line with article 14 of the UN Convention, which allows for input errors in electronic communications to be withdrawn by the maker if certain conditions are met. Extension To Non-Contractual Transactions In view of the fact that many of the provisions in former Parts II and IV of the previous edition of the Electronic Transactions Act apply generally to both contractual and non-contractual contexts, the ETA has combined the provisions under a new Part II which now encompasses provisions on Electronic Records, Signatures and Contracts. Attribution The ETA also omitted section 13 of the previous edition of the Electronic Transactions Act in relation to attribution on the basis that it may be rather onerous when applied in the context of the Internet. This approach is more consonant with the principles of functional equivalence and nondiscrimination of electronic communications to avoid a duality of regimes compared with nonelectronic communications. Excluded Transactions The Excluded Transactions List in section 4 of the previous edition of the Electronic Transactions Act remains the same except for the fact that it has been moved to the First Schedule of the ETA. This is an editorial change to streamline the previous edition of the Electronic Transactions Act, by placing the key provisions which may be amended by subsidiary legislation in the Schedules. Concluding Words The amendments to the previous edition of the Electronic Transactions Act bring the law governing electronic transactions in Singapore in line with internationally recognised standards such as the UN Convention. It further provides greater clarity in relation to the law governing electronic contracts and transactions. It is hoped that these changes will provide greater impetus and comfort for parties to enter into contracts or transactions electronically. 5 Rajah & Tann LLP

6 Contacts Rajesh Sreenivasan Partner D (65) F (65) rajesh@rajahtann.com Steve Tan Partner D (65) F (65) steve.tan@rajahtann.com Please feel free to also contact the Knowledge and Risk Management Group at eoasis@rajahtann.com Rajah & Tann LLP is one of the largest law firms in Singapore, with a representative office in Shanghai and an associate firm, Kamilah & Chong, in Kuala Lumpur. It is a full service firm and given its alliances, is able to tap into resources in a number of countries. Rajah & Tann LLP is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility and reliability in dealing with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business and commercial problems. The information contained in this Update is correct to the best of our knowledge and belief at the time of writing. The contents of the above are intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as the information above may not necessarily suit your specific business and operational requirements. It is to your advantage to seek legal advice for your specific situation. In this regard, you may call the lawyer you normally deal with in Rajah & Tann LLP or the Knowledge & Risk Management Group at eoasis@rajahtann.com 6 Rajah & Tann LLP