The Electronic Commerce Act 2006

The pre requisite for an electronic commerce transaction to be enforceable

 

Ever wonder what are the pre-requisites for an electronic commerce transaction to be enforceable? Jillian Chia explains …

 

 

INTRODUCTION

Due to the rapid growth of electronic commerce in recent times, there has been a surge in the usage of the internet for business transactions. Commercial transactions such as banking transactions and the purchase of goods and services are now frequently performed over the internet and other computer networks. Furthermore, communication via e-mail is now commonplace in the commercial world.

 

In line with this development, the Electronic Commerce Act 2006 (“the Act”) was enacted and came into force on 19th October 2006. The Act seeks to “provide for legal recognition of electronic messages in commercial transactions, the use of the electronic messages to fulfil legal requirements and to enable and facilitate commercial transactions through the use of electronic means”.

 

 

APPLICATION OF THE ACT

The Act does not make it mandatory for commercial transactions to be conducted electronically. It applies to situations whereby a person consents to using, providing or accepting an electronic message in a commercial transaction. Such consent may be inferred from the person’s conduct.

 

The scope of the Act also covers electronic commercial transactions carried out by the Federal and State Governments. However, the Act does not apply to certain transactions or documents, namely (1) power of attorney, (2) creation of wills and codicils, (3) creation of trusts, and (4) negotiable instruments.

 

 

‘Electronic’ and ‘electronic messages’ are respectively defined under the Act as:-

“the technology of utilizing electrical, optical, magnetic, electromagnetic, biometric, photonic or other similar technology”

“information generated, sent, received or stored by electronic means”.

Commercial transactions are defined as:-

 

“a single communication or multiple communications of a commercial nature, whether contractual or not, which includes any matters relating to the supply or exchange of goods or services, agency, investments, financing, banking and insurance”.

 

By virtue of the Act, information that is wholly and/or partly in electronic form is now legally recognised. Furthermore, information that is merely referred to in an electronic message has also been granted legal effect. This is provided the said information is accessible to the person against whom that information might be used. For example, a document attached and referred to in a commercial transaction via e-mail, will be legally effective as long as the receiver of that e-mail has access to that document.

 

 

FULFILMENT OF LEGAL REQUIREMENTS BY ELECTRONIC MEANS

The enforcement of this Act affirms the legal validity of commercial transactions conducted by electronic means. The formation of a contract and the communication, acceptance and revocation of proposals can now be expressed by electronic messages and are legally binding. The usual elements of commercial transactions (i.e. the contract be in writing, be signed or sealed, be in original form, be retained, be in a prescribed form, be served and delivered) can now be fulfilled by electronic means.

 

If there is a requirement for any information to be in writing, information in an electronic message that is accessible and intelligible for subsequent reference, will now suffice to fulfil that requirement.

 

The notion that one has to physically put pen to paper to sign a contract is now a thing of the past. The Act recognises “any letter, character, number, sound or symbol or any combination thereof created in electronic form adopted by a person as a signature” as an electronic signature and the Act goes on to stipulate that if the document is in the form of an electronic message, it can now be executed by an electronic signature. However, this is subject to conditions that the electronic signature has to be attached to or is associated with the electronic document, adequately identify the person and adequately indicate the person’s approval of the information in the document and be reliable.

 

Reliability of an electronic signature is established when the means of creating the electronic signature is linked to and under the control of that person only and as long as any alteration made to the electronic signature or to that document after the time of signing is detectable. If a seal is required to execute an electronic document, a digital signature (as defined under the Digital Signatures Act 1997) can now be used to fulfil that requirement.

 

Where there are requirements for a document to be in its original form, a document in the form of an electronic message will suffice to fulfil this requirement. Nevertheless, there has to be a reliable assurance as to the integrity of the information contained in the electronic document from the time it is first generated in its final form. The electronic document has to be accessible and intelligible so as to be useable for subsequent reference. The Act provides that integrity of the information is judged based on whether the information has remained complete and unaltered, whereas reliability will be based on all relevant circumstances including the purpose for which the document was generated.

 

If there are legal requirements for a document to be retained, served, sent or delivered in more than one copy, under the Act, it will now be sufficient if one electronic copy is retained, served, sent or delivered. However, one has to ensure that the electronic copy of the document is retained in the format it was generated or in a format which does not materially change the information contained in it. The electronic copy of the document must also be accessible and intelligible for future reference and has to identify the origin and destination of the document and the date and time it was sent or received.

 

In terms of effecting service, an information processing system has to be available to identify the origin, destination, time and date of the service, sending or delivery and for the acknowledgment of receipt of the document.  However the Act precludes the service of certain documents by electronic means, namely notices which are required to be served prior to commencing legal proceedings i.e. notice of default, notice of demand, notice to show cause and notice of repossession, as well as documents which are required to be served pursuant to legal proceedings i.e. originating processes, pleadings and affidavits.

 

Finally, where a document is required to be in a prescribed form, as long as the document in the form of an electronic message is formatted in the same or substantially the same way as the prescribed form, is accessible and intelligible for subsequent reference and is capable of being retained, it will be considered sufficient to fulfil that requirement.

 

 

COMMUNICATION OF ELECTRONIC MESSAGE

The Act also contains provisions setting out how to determine the ‘who, what, where and when’ of an electronic message.

 

 

Who?

An electronic message is deemed to be sent by the originator of the message if it is sent by a person who has the authority to act on behalf of the originator in respect of that message or if the message is sent by an information processing system programmed by, or on behalf of the originator to operate automatically.

 

A person who receives an electronic message is entitled to regard the message as being that of the originator except in instances where he has received notice from the originator that the message was not sent by him or the addressee knew or should have known that the message was not sent by the originator had he exercised reasonable care.

 

 

What?

What exactly did the originator of the message intend to send? Under the Act, there is a presumption that the electronic message is what the originator intended to send, and the addressee can act on that presumption unless the originator can show that the addressee knew or should have known that the electronic message received was an error. Therefore parties to a commercial transaction have to take precautions to ensure that any messages to be sent contains accurate information and are indeed intended for the recipient.

 

 

Where?

How does one determine the location of dispatch and receipt of electronic messages? The Act deems an electronic message to be sent from the originator’s place of business and received at the addressee’s place of business. If there is more than one place of business, it will be considered sent from the place of business that has the closest relationship with the transaction or in the absence of that, from the principal place of business. In circumstances where the originator or addressee has no place of business, it will be deemed sent or received, as the case may be, at the originator’s or addressee’s ordinary place of residence.

 

 

When?

With regards to the issue of time of dispatch, an electronic message is deemed by the Act to be sent when it enters an information processing system outside the control of the originator. Therefore it would appear that the time of dispatch will be when a person clicks the ‘Send’ button when e-mailing or the ‘Buy/Purchase’ button on an online store.

 

An electronic message is deemed to be received when the message enters the designated information system (where there is a designated system), for instance, when a message enters the inbox folder of an e-mail account, or where there is no designated system, when the addressee comes to know about the message.

 

Where the parties agree or the originator requests that receipt of the electronic message is acknowledged, that message will be treated as though it has never been sent until the acknowledgment is received. If the method of acknowledgment has not been agreed by the parties, any acknowledgment (automated or otherwise) or any conduct of the addressee which is enough to communicate receipt, will suffice as acknowledgment.

 

 

CONCLUSION

The Act is a step forward in the regulation of contracts effected by electronic means. It lays down the legal principles that apply to the formation of such contracts. The Act also lays down the requirements that have to be satisfied to establish the terms of these contracts, thereby enabling parties to put in place infrastructure that is capable of fulfilling these requirements.

 

The enforcement of the Consumer Protection (Amendment) Act 2007 on 15 August 2007 enables consumers who acquire goods or services through electronic means to file claims in the Tribunal for Consumer Claims under the Consumer Protection Act 1999. This will reduce the costs and expedite the disposal of litigation that arises from such transactions.

 

 

JILLIAN CHIA ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 
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