Covid-19 to drive for better adoption of e-contracts

The global outbreak of Covid-19 is a crisis forcibly changing Bangladesh and pushing it towards digitalisation. In addition, the rapid emergence of industrialisation and globalisation has formed a great basis for the growth of technology and the rise of this computer age.

With the e-commerce boom and the growing trend of commercial transactions being concluded by way of the internet, execution of contracts by electronic means has become quite prevalent. Be it buying a product from the market or hiring a taxi, we are governed by contracts in our daily lives of which some we know and some we unknowingly become a part of.

In today's times, everything from shopping a product online to the signing of an international treaty over the internet constitutes an e-contract. Going forward, will e-contracts become the new mode of determination of rights, liabilities and obligations? How prepared is our legal system for such a challenge?

E-contracts in Bangladesh

Bangladesh is no stranger to digital agreements or e-contracts. In its endeavour to keep pace with the global momentum, Bangladeshi legislation, in the recent past, has accepted digitisation of the process of execution of contracts.

Although e-contracts are recognised in Bangladesh, and there are laws governing them, the prevalent approach towards the execution of contracts in Bangladesh is still the traditional way of 'ink – signatures'.

Legality & evidentiary value of e-contracts

Close to an everyday paper contract, an electronic contract is also primarily governed by the codified provisions of the Contract Act, 1872 (Bangladesh), as applicable to contracts in general. 

Hence, an electronic contract also cannot be validly executed unless it satisfies all the essentials of a valid contract, such as offer and acceptance; lawful consideration; lawful object; free consent; parties to be competent to contract; intention of parties to create legal relationship; certainty and possibility of performance; not be expressly declared to be void; and compliance with formalities under different laws governing the agreement.

Each and every other statute applicable to an electronic contract is to be read in conjunction, and not in substitution, with the Contract Act. Therefore, in this context, if an electronic contract has been formed over a series of electronic communications where the essential elements of the contract (such as offer, acceptance, consideration etc.) are captured separately, then proper maintenance of all such electronic records and emails becomes essential to prove the record of the contractual arrangement between the parties.

Electronic contracts have also found statutory recognition under the Information and Communication Technology Act, 2006 (ICT Act). Amongst other things it specifically states that a contract shall not be deemed unenforceable, solely on the ground that electronic form/means were used for communication of proposals, acceptance of proposals, revocation of proposals or acceptances, as the case may. The ICT Act also recognises "digital signatures" or "electronic signatures" and validation of the authentication of electronic records by using such digital/electronic signatures.

However, the contracts through electronic means, such as through e-mail communications (or execution of electronic contracts) have also been recognised by Bangladeshi courts from time to time.

Courts in Bangladesh have taken a favourable stance towards enforcing electronic contracts. However, there is a lack of specific jurisprudence on e-sign in Bangladesh. From an evidentiary standpoint, the admissibility of an e-contract as 'evidence' is governed by the Evidence Act 1872.

The Evidence Act categorises presumption of validity of documents in two buckets: (i) documents that are presumed valid (i.e. if any party refutes the validity, it has the onus to prove the same); and (ii) documents that are to be proved as valid (i.e. the party relying on the document has to establish its validity).

Further, a conjoined reading of ICT Act and Evidence Act vests presumptive value in e-sign rendered by way of digital signature similar to wet ink signature and in case of litigation, the burden of proof would rest on the party challenging the authenticity of digital signature.

Jurisdiction of courts under e-contracts

Delineating the nature of e-contracts, one question which often comes to fore is – which court would have territorial jurisdiction to try disputes arising out of such e-contracts?

The Code of Civil Procedure, 1908 ("CPC") prescribes the manner of determining the jurisdiction of civil courts in Bangladesh, based on two fundamental principles: (i) the place of residence of the defendant; and (ii) the place where the cause of action arises.

Subject to the above, while the parties remain free to determine the choice of courts to adjudicate their disputes, they can choose only such court(s) which is/are not barred from exercising jurisdiction, i.e. parties cannot confer jurisdiction upon a court which does not have jurisdiction to entertain their case.

Customarily, contracts contain a specific provision with respect to the place of execution thereof, and the courts of such a place would have territorial jurisdiction to entertain and try the disputes arising under such contracts if in accordance with the CPC as aforesaid.

However, since e-contracts are not physically signed/executed and are concluded in a virtual space, simply imposing the traditional principles of jurisdiction, applicable to physical contracts, to such transactions can prove to be challenging.

The jurisdictional issues of e-contracts have, however, been addressed to an extent under the ICT Act. Section 13 of the ICT Act governs the provisions relating to time and place of dispatch and receipt of an electronic record, and addresses the issue of deemed jurisdiction in electronic contracts.

Having said that, the place of contract in an e-contract for the purposes of determining jurisdiction (i.e., the place where the cause of action arose) would be deemed to be where the originator has his place of business and where the addressee has his place of business.

However, since Section 13 of the ICT Act is subject to the mutual agreement of the contracting parties with respect to the agreed place of contract, it is recommended that all parties in their electronic contracts provide for a specific clause on jurisdiction and dispute resolution mechanism.

Ultimate observation

The expansive legislative and judicial objective appears to be clear that any legally valid acts that are ordinarily performed would continue to be valid even if performed electronically or digitally, as long as such electronic/digital performance consists of all the attributes of legally valid contract, as may be prescribed under the applicable laws.

Nonetheless, determination of territorial jurisdiction for e-contracts becomes complicated in the absence of geographical or national boundaries for execution and implementation of such contracts.

While the ICT Act, Evidence Act, and judicial interpretations related to contracts in general, have to a certain extent clarified the jurisdictional aspect of e-contracts, in view of the aforesaid discussions, it is prudent to clearly specify both jurisdictional and governing law provisions in the e-contracts, to avoid future conflicts on jurisdictional or choice of law issues. 

Bangladeshi laws are not averse to the idea of e-contracts and the courts have consistently upheld the validity of e-contracts. However, it is the rigid mind-set of the people that comes in the way of execution of e-contracts. It would be safe to conclude that an era of e-contracts is going to take over the traditional mode of execution of a contract and willingly or unwillingly the Covid-19 crisis has pushed people even further towards the same.

Md Mamonor Rashid is an Advocate & Legal Researcher at CM&A LCP. He can be reached at [email protected]

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.