What You Need to Know About E-Contracts and E-Signatures

            Will transactions facilitated by electronic documents or signatures be honored?

            Fortunately, the law already allows it. The E-Commerce Act of 2000 or Republic Act No. 8792 gives legal effect to contracts and documents exclusively executed through online or digital means. Under this law, electronic documents or electronic signatures are functionally equivalents of their paper-based counterparts (Secs. 7 & 8, E- Commerce Act). Thus, businesses can execute electronic contracts by affixing electronic signatures on an electronic document. An electronic document is any writing on any medium that is produced, processed or transmitted electronically without any paper original or counterpart. Examples of electronic documents are PDF files created in a laptop, smartphone screenshots, emails, and SMS messages

            The E-Commerce Act also recognizes electronic signatures as the functional equivalent of a person’s signature so long it was affixed through a procedure that assures it is a genuine signature of the signatory. (Sec. 9, E-Commerce Act) An electronic signature can be as simple as affixing a digital representation of one’s signature on an electronic PDF document. However, for more contentious and substantial transactions, it would be advisable to avail of certified digital signature services which use encryption procedures to guarantee the identity of the signatory.

            Electronic contracts do not need notarization to be valid unless they involve certain matters for which the law requires notarization (such as rights over real estate). Please note, however, that as of date, there is no procedure justifying electronic notarization. Thus, for these specific contracts, a paper contract is necessary.

            To put it simply, what does the law require for an electronic contract to be valid? Just remember the following:

  1. Go fully digital, no paper originals or counterparts are needed;
  • Ensure that measures are taken to protect the integrity of the electronic contract such as encryption; and
  • Ensure that the electronic signature of the counterparty is genuine.