On electronically or digitally formed contracts in Bangladesh

According to the Interpretation Clause of the Contract Act 1872, a 'contract' is an agreement enforceable by law. An 'agreement' refers to 'a promise or a set of promises' forming consideration for each other. And a promise arises when a proposal is accepted. Therefore, an agreement refers to an accepted proposal that consists of an 'offer; and an 'acceptance'. In this regard, the acceptance has to be from free consent of the offeree and for a lawful consideration with a lawful object. So long as all these elements of forming a contract are present, a legally binding and enforceable contract can be formed— be it verbally, in writing, or even electronically.

An electronic contract may be entered into in a number of ways. Firstly, a scanned copy of the signed agreement can be shared with other party for counter signature, which will be deemed as enforceable following the signing of both the parties. An easier way of forming electronic contract would be by email. For ensuring certainty, the terms and conditions of an agreement should be reproduced in an email with the express intention of creating a contractual legal relationship, which can simply be accepted by the other party with clear and express affirmation of acceptance. For this purpose, a mere inclusion of the name under the body of the email would suffice.

Therefore, electronic contracts can be entered into through various modes of communication such as email, internet, and fax. The only essential requirement is compliance with the necessary pre-requisites provided under the Contract Act 1872, which are offer and unconditional acceptance, lawful purpose and consideration, capacity of parties and their free consent. Therefore, once an offer is accepted through any modes of communication such as email, internet and fax, a valid contract will be formed unless otherwise specifically provided by law in force in Bangladesh.

A question may arise as to the admissibility of an electronically formed contract in a court of law or in an arbitration proceeding. In this regard, section 35 of the Stamp Act, 1899 is of relevance which states, if an instrument chargeable with stamp duty is not fully stamped, then it shall not be admitted in evidence for any purpose, nor shall it be acted upon registered or authenticated by any such person having authority to receive evidence or by any public officer. However, such instrument can be admitted in evidence on payment of the deficient duty, together with a penalty of a sum equal to ten times of such deficiency or any other penalty applicable. As per Section 2(14) of the Stamp Act 1899, 'instrument' refers to every document by which any right or liability is, or purports to be, created, transferred, limited, extinguished or recorded.

Moreover, pursuant to sections 6 and 7 of the Information and Communication Technology Act, 2006, electronic signatures and instruments are categorically recognised as valid for any purposes where a physical signature or instrument is required as per prevailing laws. Therefore, although forming and executing a contract electronically does not make it void, voidable or unenforceable, the same might be subjected to inadmissibility pursuant to the Stamp Act 1899. In this regard, should a situation arise where an electronic agreement is required to be made admissible in a legal proceeding, an application would have to be made to the adjudicator seeking permission to make the payment of applicable stamp duty. It may also be noted that for certain agreements, the Stamp Act, 1899 provides exemption from payment of duties, in which cases, the electronic agreement would be automatically admissible in any legal proceedings.

Having said so, it is pertinent to note that there is a subtle difference between the e-contracts and digital contracts. The Information and Communication Technology Act, 2006 defines 'electronic signature' using the identical definition of the term provided in UNICTRAL Model Law on Electronic Signatures. Section 2(1) of the Act refers to 'electronic signature' as a data in electronic form in, affixed to or logically associated with, a data message which may be used to identify the signatory in relation to the data message and to indicate the signatory's approval of the information contained in the data message.

On the other hand, a digital signature is referred to as a type of electronic signature which is created and verified by using cryptography. In short, it involves a unique feature that is in digital form like fingerprint that is embedded in a document. The signatory party is required to have a digital certificate for being able to be linked to the document. In Bangladesh, digital signature is authorised by certain certifying authorities in compliance with the ICT Act 2006. In order obtain a digital signature, an application has to be made to one of the certifying authorities licensed by the Controller of Certifying Authority Bangladesh. In contrast, electronic signatures can merely be a scanned image of handwritten signature, a digitised fingerprint, or even a name merely typed at the end of an email.

The writer is an Associate at Tanjib Alam and Associates.