Things To Take Note Of Before E-Signing/ Digitally Signing A Document

Must a contract be hand signed?

In reality, it is not entirely necessary- no law in Malaysia says a traditional signature is required for a valid contract- a thumbprint, or any other markings, can still be considered a valid signature, as long as it can establish the party’s intention to enter into a contract.

Electronic signature (e-signature) is one example of it. Let us have a look at it.

Qs & As in relation to this topic

Question: What is an electronic signature?
Answer: An electronic signature (as defined under section 5 of the Act) includes any letter, character, number, sound, or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature.

Question: What is the main governing law on this topic?
Answer: Electronic Commerce Act 2006.

Question: Can a contract be agreed upon and signed electronically?
Answer: Yes- the court noted that contracts cannot be denied enforceability merely because they are signed electronically.

Question: What are the requirements governing e-signatures in a contract?
Answer: Section 9 (1)(a)-(c) states that for the contract to be valid, the signature must:

1. Be attached to or is logically associated with the contract (in electronic form); 
2. Adequately identifies the person and adequately indicates the person’s approval of the contract about the attached signature and 
3. It is as reliable as is appropriate (the signature) for the contract.

Question: How do you determine the authenticity of the signature?
Answer: Some pointers for you to consider:

1. Whether the means of creating the electronic signature is linked and under the sole control of the creator of the signature; 
2. Whether any alteration made to the signature after it is penned down is detectable; and 
3. Whether any alteration made to the contract after the signature is penned down is detectable.

Question: How can you confirm the identity of the party on the opposite end (if the opposite party is e-signing it?
Answer: In Yam Kong Seng & Anor v Yew Weng Kai, the Federal Court noted that this can be easily solved when:

1. The party who penned the signature can just send an SMS (or even email) to verify his identity and to confirm that he is the one who signed the documents; and 
2. By looking at the number used to send the SMS or even the email account, a party can easily identify who penned the signature.

Question: Are there practical limitations to e-signatures?
Answer: Yes. In this regard:

1. You can (mostly) only use e-signatures on commercial transactions. The list of transactions that must use conventional signatures includes:
   1. Power of attorney;
   2. The creation of wills and codicils;
   3. The creation of trusts; and
   4. Negotiable instruments. 
2. What happens when there are instances of multiple users sharing an email/ phone number? In the event where one party chooses to back out from the contract, how does one prove the identity of the signatory under such circumstances?
3. Not all laws have been updated to expressly allow the use of electronic signatures. For example (amongst many others), there is no clear directive as to whether electronic signatures can be used to sign a share transfer form- so can a person use e-signature? Or not? This remains unanswered.

In conclusion, always check first as to whether an electronic signature is allowed in that particular transaction before you sign a document electronically.

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