The use of electronic means by businesses to sell products to their consumers or to enter into transactions among one another is becoming ever more common place. An often overlooked issue is the legal effectiveness of such electronic communications, particularly where the typical formalities seen with written agreements may not be present. Put more simply, can two parties enter into a binding contract by e-mail? If they attempt to do so, how do they sign their agreement? Finally, how will such an agreement be impacted by a legal requirement that an agreement be in writing?
A little known source of guidance is Ontario’s Electronic Commerce Act, 2000, S.O. 2000, c. 17. The statute has been in effect since October 2000, but, surprisingly, has received little judicial attention. The Act ensures the legal effectiveness of electronic contracts, subject to exceptions for certain types of contracts discussed below, and further provides where electronic versions of information or documents will satisfy legal requirements that they be in writing. The following is a brief outline of some of the useful provisions of the Act for electronic commerce:
- Electronic documents will satisfy a legal requirement that a document be in writing, in a particular form, or an original so long as that the electronic document can be appropriately retained, retrieved, and organized, and that where an original is required, there exists a reliable assurance as to its integrity;
- Electronic signatures, which include any electronic information a person adopts as a signature and that can be associated and attached to the electronic document, will satisfy a legal requirement that a document be signed or endorsed;*
- Electronic documents or information will be considered to be provided to another person where they are sent electronically to the person (i.e., e-mail), or where they are displayed to the person in the course of an electronic transaction;
- Contracts and their terms can be offered, accepted, and formed by means of electronic information or electronic documents, including clicking on an appropriate place on a computer screen;
- Contracts can be formed by a computer program or other electronic means that acts or responds to electronic documents or information, even without the review of an individual at the time of the act or response (subject to certain rules to address errors); and
- Electronic information and documents are deemed to be
- Sent from the sender’s place of business at the time the electronic communication enters an information system outside the sender’s control; and
- Received at the addressee’s place of business at the time the electronic communications enter an information system designated by the addressee for the purpose of receiving the information or document of the type sent, or, if no such system is designated, at the time the addressee becomes aware of the information or document in its information system and is able to retrieve and process it.
Finally, whenever dealing with electronic information or documents, the following caveats should be kept in mind:
- The Act does not require a person to accept documents electronically, but will infer consent from a person’s conduct;
- The rules on contract formation, those outlined in points #4, 5, and 6 above, can be modified by agreement between the parties, and
- The Act does not apply to the following types of contracts:
- Wills and codicils;
- Trusts created by wills and codicils;
- Power of attorney;
- Documents that create or transfer interests in land and require registration to be effective against third parties, including agreements of purchase and sale;
- Negotiable instruments; and
- Documents of title (e.g. warehouse receipts).**
With this rarely considered statute in mind, those transacting business digitally now have an additional tool to ensure the legal effectiveness of their electronic agreements. Yes, you can enter into a binding agreement by e-mail; yes, the contract can be signed digitally instead of by hand; and yes, your electronic contract can be as good and effective as if it were in writing.
* While ss. 11(3) and 11(4) of the Act contemplate that certain classes of documents could have more stringent requirements for digital signatures, as of December 2012, no class of documents have been prescribed by regulation.
** The Act, however, provides an exception for documents of title that arise in connection with the carriage of goods. Providing the electronic document is crated in a manner that gives reliable assurance that the right or obligation, with respect to the goods, has been transferred, the electronic document will satisfy a requirement for a written document of title.
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