By LOTHAR DETERMANN, JOHN SYEKEI AND DANIEL MWATHE
These days, companies are
pushing full throttle to accelerate their digitisation roadmaps. With
"shelter in place" ordinances and social distancing mandates, most
workers are at home. The days of
closing ceremonies are all but forgotten.
closing ceremonies are all but forgotten.
Emergencies, challenges and opportunities
are popping up left and right. No one has time for snail mail, ink and
paper. "Essential businesses" remain open. But, they, too, cannot easily
meet counterparties to sign contracts. Even essential businesses feel
an urgent need to revisit e-signature essentials.
The
pandemic notwithstanding, companies have to continue to comply with
existing laws and protect their interests with enforceable contracts,
valid consent declarations, formal records, effective applications for
government approvals, and other documents. All in-house and outside
counsel need a basic understanding of legal form requirements and
practical guidance for their clients.
ARE ELECTRONIC SIGNATURES LEGAL?
This
is usually not the right question to ask. No one is prohibited from
using electronic signatures anywhere in the world. The better questions
to ask are: are electronic signatures effective and binding? Do
electronic signatures and documents meet statutory form requirements? Do
they protect interests as well as handwritten signatures on paper
documents? Precise answers to these right questions are, unfortunately,
much harder to come by.
LEGAL FORM REQUIREMENTS
To determine whether
you can create a contract or record electronically to meet a certain
legal objective, you have to analyse the laws applicable to such
objective.
For example, if you want to assign copyright
protected works in Kenya, you have to make reference to the Copyright
Act, 2001. If you want to hire an employee in Kenya, you have to consult
the Employment Act, 2007. For some types of documents and transactions,
you must satisfy form requirements that cannot easily be achieved
electronically, such as certification before a public notary or
witnesses, official recordals, or handwritten documents or signatures,
for example, in Kenya for negotiable instruments wills, codicils and
testamentary trusts. But, many other transactions are subject to lighter
or no form requirements, including most commercial agreements between
corporate entities.
The Kenya Information and
Communications Act, 1998 recognises the validity of advanced electronic
signatures. In addition, a number of Kenyan statutes including the Law
of Contract Act were recently amended vide the Business Laws Amendment
Act, 2020 to recognise use of advanced electronic signatures.
In
addition to individual form requirements, most countries have enacted
specific statutes concerning electronic commerce, signatures and
transactions. Even though use of electronic signatures is recognised
under Kenyan law as highlighted above, there are practical difficulties
that could arise with regard to certification of advanced electronic
signatures.
PRACTICAL CONSIDERATIONS
Even
before the Covid-19 pandemic, individuals, companies and governments
recognised many advantages that electronic signatures and documents
offer over ink and paper, including speed, cost savings, convenience,
easier search and analysis, cheaper archiving and retrieval, automation
of retention/deletion, additional options to protect authenticity and
integrity, better evidence and identification, scalability,
standardisation opportunities, and arguably a plus for sustainability:
Don't print this article, save a tree. Forgery concerns apply equally to
electronic and ink-on-paper signatures, but electronic signature
technologies offer additional security measures.
Despite
all these advantages of electronic documents and signatures, companies
opt for "ink and paper" where they determine that an electronic document
or signature will not be accepted by a customer or government
authority, does not meet a particular form requirement, does not suffice
to create an enforceable contract, or will otherwise result in a
disadvantage.
Until
recently, many have also still resorted to ink and paper when they were
not sure — forgoing benefits of digitisation. But, the Covid-19
pandemic is putting extreme pressures on default inertia.
Clients
and their counsel are revisiting the question whether ink and paper is
necessary with acute urgency. Here is a checklist for electronic
signature essentials to assist in this process:
IS THE SIGNATURE OR DOCUMENT EVEN REQUIRED?
Even
if a document or signature is not legally required, companies
nevertheless often have good operational, customer or human relationship
reasons to document a consent or acceptance.
IS THE SIGNATURE LIKELY TO BE CHALLENGED?
Companies
should spell out applicable terms in documents, to reduce risks of
disputes or misunderstandings and to protect against undesirable legal
consequences.
WHERE WOULD THE SIGNATURE BE CHALLENGED?
Companies
can reduce risks under laws of unfamiliar jurisdictions with an express
choice of law and arbitration in a jurisdiction that recognises
electronic forum.
WHAT EVIDENCE DO YOU RETAIN TO PROVE VALIDITY?
Parties
who use electronic signatures should ensure that they have, retain or
present in court evidence to substantiate that it was the other party
who signed the electronic contract.
The checklist also
includes: Which additional measures can help reduce risks? How do you
manage the process? What e-signature technology is right for your
client?
Determann is a partner at Baker McKenzie,
Palo Alto, Syekei is a partner in the Bowmans Kenya office and Mwathe is
a senior associate in the Bowmans Kenya office
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