What Do You Need To Know Before You E-Sign / Digital Sign Any Documents?

Is it a must for us to pen down a signature on a document (for example, a contract) with an ink pen? Use the following button for more information and advice from Malaysia Lawyer:

In reality, it is not entirely necessary- there is no law in Malaysia that says a traditional signature is required for a valid contract. For that matter, a thumbprint, or any other markings is still a valid signature, as long as it can establish the parties intend to enter into a contract.

In today’s article, we will briefly share with you just that i.e. an alternative to the traditional signature- the electronic signature (e-signature).

The Laws Governing e-Signatures

Where can you find the law?Electronic Commerce Act1
What does the law say?TLDR:
1. Under Section 5 of the Act, an electronic signature is defined as any letter, character, number, sound or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature2.
2. The Act also states that contracts cannot be denied enforceability merely because they are concluded electronically3 i.e. it cannot be said that there is no contract between parties merely because parties decided to accept the offer by signing the contract electronically.
The requirements governing e-signatures in a contract:For the contract to be valid (e-signature contract), it must4:
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 in relation to the attached signature; and
3. It is as reliable as is appropriate (the signature) for the purpose of the contract.
How do you determine the authenticity/ reliability of an e-signature?Some questions to consider when determining the authenticity/ reliability of the signature:
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.

Pretty straightforward if you are the signatory. However, what happens if you are not the signatory i.e. the other party is the signatory? How can you confirm the identity of the party on the opposite end?

The Federal Court in Yam Kong Seng & Anor v Yew Weng Kai5 came up with a solution for this quandary:

  1. The party who penned the signature can just send a 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.

What Are The Practical Limitations Of e-Signatures?

  1. You can (mostly) only use e-signatures on commercial transactions. The list of transactions must use conventional signatures includes6:
    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.

And there you have it, you can sign a contract using an electronic signature. However, as mentioned above, there are certain documents or even transactions that might not allow a party to sign using an electronic signature. Therefore, to caution on the side of error, check whether electronic signature is allowed in that particular transaction before you sign a document electronically.

Consult with a lawyer before you e-sign/ digital sign any document:

1. 2006.

2. Electronic Commerce Act 2006.

3. Section 7 (2), Electronic Commerce Act 2006.

4. Section 9 (1)(a)-(c), Electronic Commerce Act 2006.

5. [2014] 4 MLJ 478/ [2014] 6 CLJ 285.

6. Section 2 of the Schedule, Elect6ronic Commerce Act 2006.