trade ARTICLES

Legal Validity Of Electronic Contract Signing Amid Covid-19

Legal Validity Of Electronic Contract Signing Amid Covid-19

“With rapid developments in global trade and technology today, concluding a contract by traditional methods is gradually being replaced by electronic methods. Amid the Covid-19 pandemic, enterprises have adapted by signing contracts electronically to ensure safety.”

Forms of signing contracts by electronic method

Instead of signing a contract in the traditional method with physical signatures, the parties to the contract can now sign the contract through electronic methods. According to the Law on E-transactions 2005, “E-contracts mean contracts established in the form of data messages provided for in the Law on E-transactions 2005” – In which, “A data message means information created, transmitted, received and stored by electronic means” and “An electronic means is a means that operates based on electric, electronic, digital, magnetic, wireless, optical, electro-magnetic technologies or similar technologies”.  

“In the process of entering into and executing an e-contract, a notice in the form of a data message shall be legally valid like a notice in the traditional form”. According to the Law on E-transactions 2005, “An e-signature is established in the form of words, letters, numerals, symbols, sounds or other forms by electronic means, logically attached or associated with a data message and capable of certifying the person who has signed the data message as well as the approval of such person to the content of the signed data message”.

Contracts can be signed electronically via the following three methods:

  • Digital signature: Although not commonly used, digital signatures are often used when enterprises submit files for customs declarations, social insurance, taxes, electronic invoices or transactions with banks. They are also used to conclude contracts of small value.

To create digital signatures, the parties use a platform and specialized equipment (usually a USB token) provided by the company providing the digital signature certification service. This signature is inserted in the form of a digital signature into the contract to be signed.

According to the ‘Law on E-transactions, 2005’ and ‘Decree 130/2018/ND-CP’ provide guidelines on digital signatures and digital signature authentication. A digital signature is considered a type of electronic signature if it meets the conditions to ensure safety as prescribed by law. If the law requires a document to be stamped with a seal of the concerned agency or organization, such requirement with respect to a data message shall be considered having been met if the data message has been signed by an e-signature of the agency or organization.

  • Image signature: Signing contracts with visual signatures is also often used in transactions that are not large in value and are signed multiple times. The concerned party inserts an image of his/her signature in the signature box of the contract’s electronic data file which is then sent by email. 
  • Scanned signature: Signing contracts by using scanned signatures is often applied to multi-party contracts and when parties are at different locations. The contract is printed out from the electronic data and signed by each party directly on the paper document of the contract by means of a physical signature. The contract along with the physical signature on the contract is scanned and converted into an electronic scan. This scan is sent via email. Multinational contracts involving foreign individuals/entities often use scanned signatures to conclude contracts.

Validity of contracts signed electronically

  • For contracts signed by digital signature:

The current laws only recognize the validity of contracts concluded electronically by using digital signatures. According to the provisions of the ‘Law on E-transactions, 2005’ and the ‘Decree 130/2018/ND-CP’, the legal status of digital signatures is described as follows:

  • In case the law requires a document to be signed, such requirement with respect to a data message shall be considered to have been met if such data message has been signed by a digital signature and this digital signature meets the conditions to ensure safety as prescribed by law.
  • In case the law requires a document to be stamped with seal of the concerned agency or organization, such requirement with respect to a data message shall be considered to have been met if the data message has been signed by a digital signature of the agency or organization and this digital signature meets the conditions to ensure safety as prescribed by law.
  • Foreign digital signatures and digital certificates licensed in Vietnam complying with the prescribed laws are as legally valid and effective as digital signatures and digital certificates granted by public certification authorities of Vietnam.
  • For contracts signed by scanned signatures and image signatures:

The ‘Law on E-transactions, 2005’, ‘Decree 130/2018/ND-CP’ and ‘Decree 52/2013/ND-CP’ on e-commerce do not specify scanned signatures and image signatures. Therefore, scanned signatures and image signatures are not automatically considered as valid types of electronic signatures. This implies that contracts concluded electronically by means of image signatures or scanned signatures are not legally enforceable by default.

However, the law does not lay down any specific regulations that either recognize the validity of contracts signed with scanned signatures and image signatures or rule-out the validity of such contracts. Contracts signed by image signatures or scanned signatures are still considered legally valid as long as such signatures represent the will and voluntariness of the parties or the authorized person(s) who have the right to sign these contracts because:  

  • The Civil Code 2015 stipulates that contracts (civil transactions) can be concluded verbally, in writing, or through specific acts. The form of the contract will be the effective condition of the contract if so provided by law. This means that a contract can only be declared void for a breach of form if it is provided for by law. Besides, this Code also says, “The time when a written contract is entered into shall be the time when the last party signs the contract or by other forms of written acceptance”. Therefore, the Civil Code does not require that signatures on contracts to be physical signatures, and does not explicitly prohibit the use of other forms of acceptance expressed in documents, including image and scanned signatures.
  • In addition, if there is evidence to prove that the contracts are concluded with an image signature or a scanned signature that represent the will and voluntariness of the parties or their authorized persons who have the right to sign these contracts, then such contract shall remain in force and effect. Further, the Civil Code 2015 accepts the effect of contracts signed by person(s) who is/are not authorized to act on behalf of the parties concerned or by representative(s) who act beyond the authorization scope when: (i) the legal representative agreed/recognized the transaction, (ii) the legal representative has known and not objected within a reasonable time, and (iii) the legal representative was at fault, which resulted in the transacting person(s) not being aware that the person who has entered into and performed civil transactions with him or her does not have the right to represent the party or exceeds the scope of representation.

Therefore, the provisions of the Civil Code 2015 have formed the legal basis for the use of scanned signatures and image signatures to conclude contracts. This approach has limited, to an extent, the risk of the contract being voided.

Precedents in Vietnamese courts have paid more attention to determining the will of the parties when entering a contract than the form of consent to such contract. Therefore, although the laws have not specified the legal status of scanned signatures or image signatures, entering contracts with these two types of signatures is not explicitly prohibited.

In conclusion, utilizing the benefits of technology in signing contracts, is a suitable and effective solution for many enterprises, especially in the current pandemic scenario.

Date of writing: 09 June 2021

This article is based on the current laws at the above recorded time and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases which the readers want to apply. Therefore, this article is for reference only.

Share on facebook
Share on twitter
Share on linkedin
We'd love to meet you and let you the perfect solution