Can a contract be concluded by e-mail?

Can a contract be concluded by e-mail?

Summary: Lawyer Vijai Parwani highlights a landmark case that saw the Singapore High Court change the traditional mind-set of what should constitute "writing" and "signature".

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Many people have this mistaken view that a contract must be in writing and witnessed by a lawyer to be binding. This is not necessarily so.

The general rule is that unless it is expressedly provided for in a particular Statute (to which I will refer to later on), a contract needs only these essential elements:-
  1. Offer and acceptance;
  2. Consideration;
  3. The intention to create legal relations; and
  4. Clear and certain terms.

Once these ingredients are present, a legally binding contract is formed. It does not matter that the ingredients are expressed orally as opposed to being documented in writing.

Of course, as lawyers, we always encourage our clients to reduce the terms of a contract to writing so as to forestall any disputes as to its existence or the exact nature of the terms that were agreed. The signature of a party is sometimes requested to be "witnessed" only again to preclude that party from claiming that the signature appearing next to his name, as the case may be, is not his.

In such a case, the witness would be called to give evidence that he had in fact seen the party append his signature next to his name. Thus, one should not sign as a witness blindly. This would give the other party the impression that the document was properly executed when this was not so, and the witness may unknowingly find himself at the wrong end of a litigation suit.

The exception
The fact that contracts need not be in writing to be enforceable is the general rule. One of the exceptions to this general rule is contained in section 6(d) of the Civil Law Act (CLA). This section states that for a lease of land to be enforceable, there must exist some written memorandum or note evidencing the terms of the agreement and this document must be signed by the person against whom the contract is to be enforced.

The law playing catch-up
In an ideal world, the law would have answers for everything. Unfortunately, we do not live in such a world. The law as we know it, is to be found in Statutes (which are written laws handed down by Parliament) and the common law (which is the ever changing body of law formed by the Courts through decided cases).

In an ideal world, the law would have answers for everything. Unfortunately, we do not live in such a world.

In a very recent case of SM Integrated Transware Pte Ltd v.s. Schenker Singapore Pte Ltd, the Singapore High Court had the opportunity to consider whether section 6 of the CLA was met where the parties had exchanged correspondence only through e-mail.

Basically, the facts were that the plaintiffs sued the defendants to recover damages for the latter's breach in failing to take up a lease of a warehouse.

The defendants raised three defenses. Firstly, it said that there was no concluded contract. Secondly, it said that even if there was a concluded contract as evidenced by the exchange of e-mail, none of these exchanges complied with section 6 of the CLA; and thirdly, the performance of the contract was subject to the fulfillment of an implied condition, which had not been met. For the purposes of this article, we are only concerned with the second defense.

In order to appreciate the defense, one has to look at the Electronic Transactions Act (ETA), which was much relied on by the defendants as well.

Sections 7 and 8 of the ETA provide that an electronic record or signature satisfies any rule of law requiring writing or signature. Sounds simple enough, but section 4 of the ETA states that these sections (i.e. sections 7 and 8) do not apply to any rule of law requiring writing or signatures for various matters, including any contract for the sale or other disposition of land.

The defendants thus submitted that the requirements of section 6 of the CLA had not been satisfied, since no hard copy of any letter or document was ever sent by either one to another, and all correspondence were by e-mail only.

At first glance, the defense seemed logical. In order to overcome this defence, the Plaintiffs had to establish two things (for the purposes of section 6 of the CLA) firstly that the e-mail could be considered to be in writing and secondly, that it was signed by the defendants even though it was in an electronic form.

The Court did not hesitate in adopting a very practical approach, seeking guidance in section 3 of the ETA which provides that the ETA should be construed consistently with what is commercially reasonable under the circumstances, and to give effect to its main purpose of facilitating electronic commerce.

Whilst the Court recognized that as a general rule, the ETA accepted that electronic records would satisfy legal rules relating to writing and signature in most commercial matters, its conservative approach as embodied in section 4 of the ETA did not extend these provisions to contractual matters falling within section 6 of the CLA. However, the court noted that this did not mean that, as a matter of law, electronic means of communications could never satisfy the requirements of section 6 of the CLA.

After considering various authorities and cases from different jurisdictions, the Court accepted that e-mail constituted "writing".

After considering various authorities and cases from different jurisdictions, the Court accepted that e-mail constituted "writing". The judge said: "I am pleased to be able to come to this conclusion which I think is dictated by both justice and common sense since so much business is now negotiated by electronic means rather than by letters written on paper and in future, the proportion of business done electronically will only increase."

With regard to the second issue of signature, the Court saw no difference between a handwritten signature and a typewritten one, and the latter would suffice for the purpose of satisfying the signature requirements of section 6 of the CLA.

In this case, however, the defendants' representative did not append his name at the end of his e-mail. The Singapore High Court did not see this as a problem. It was sufficient that at the beginning of the mail, the defendants representatives' name appeared in the "From: Tan Tian Tye tian-tye.tan@abc.com" column. The Court was ready to infer that he did not append his name at the end of the mail because he had full knowledge that as his name appeared at the head of every message, there could be no doubt that he was to be identified as the sender.

The Singapore High Court dismissed the other two defenses as well and concluded that there was a binding and enforceable contract between the parties.

The future
This case was decided only as recently as Mar. 30, 2005. It is to be welcomed by anyone who ever uses a computer for business. It changes the traditional mind-set of what should constitute "writing" and "signature".

It is a very progressive decision by many standards. The law recognizes that businesses will no longer be conducted in the ways of the past, and to some extent, the law has caught up with technology, even if this is only for a fleeting moment.

Vijai Parwani is the principal partner of Parwani & Co, a Singapore-based law firm.

Topics: SMBs, Apps, Collaboration, Legal, Software, IT Employment

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