COVID-19 and electronic contracting

For years, organizations have moved their businesses digital. To consummate transactions and to otherwise engage in contractual activities, organizations have increasingly relied on electronic means of contracting using everything from webwraps and clickwraps (and hybrid variations of these forms of agreements) and electronic documents executed using electronic signatures.

With the outbreak of COVID-19 there are increasing pressures to use electronic methods to effect legal activities including to enter into agreements traditionally done using paper and for other things such as signing and commissioning affidavits for use in courts.

There are many thorny issues associated with replacing paper with electronic documents and electronic signatures. I wrote about them at length in Chapter 10 of my book Sookman Computer, Internet and Electronic Commerce Law. But, in view of the many questions we are getting, I thought a primer might be useful for people struggling to figure out whether they can quickly move to legally effective digital processes.

One good thing to know is that, in the absence of a specific legal requirement which mandates traditional techniques for meeting statutory requirements, the courts have generally taken a realistic view of modern business practices and have shown a willingness to interpret statutory provisions and adapt the common law to accommodate technological change.1, Indeed, where the reliability and trustworthiness of a new technology has been shown to be at least functionally equivalent to a traditional means of communication, the courts have had little hesitation in recognizing that such technologies fulfill the purposes and functions of the traditional systems. [2]

Canada recently entered into two trade deals, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Canada-United States-Mexico Agreement (CUSMCA), both of which were intended to ensure that signatories including Canada maintain legal frameworks that are, at least, consistent with the principles of the UNCITRAL Model Law on Electronic Commerce 1996. These treaties also require the parties, except in circumstances otherwise provided for under its law, not to deny the legal validity of a signature solely on the basis that the signature is in electronic form.[3] While the treaties are not self executing in Canada, there is a presumption that our laws are intended to comply with treaties that Canada enters into. Thus, ambiguities in our laws related to the validity of electronic documents can be resolved by reference to these treaty obligations.

Canada was able to ratify these treaties because, in addition to the common law, Canadian provinces and territories updated their laws to implement the Uniform Law Conference of Canada template legislation to remove barriers to electronic commerce in the Uniform Electronic Evidence Act [4] and the Uniform Electronic Commerce Act (the “UECA”).[5]

The UECA is designed to implement the principles of the UNCITRAL Model Law in Canada. It has three parts. The first part sets out the basic functional equivalents rules, and spells out that they apply when people involved in a transaction have agreed, expressly or by implication to use electronic documents. Part two of the UECA sets out special rules for particular kinds of communications including the formation and operation of contracts, the effect of using automated transactions, the correction of errors when dealing with a computer, and deemed time of sending and the place of sending and receiving computer messages. Part three makes special provision for the carriage of goods.

Provinces and territories, other than Quebec, enacted legislation generally modelled after the UECA. Quebec passed its own law to facilitate electronic transactions in An Act to Establish a Legal Framework for Information Technology, a law that will likely be amended soon. The Federal Government enacted the Personal Information Protection and Electronic Document Act (PIPEDA), which has some limited applicability. To fill the gap, the Federal Government also enacted some sector specific laws such as those recognizing electronic signatures in the Canada Business Corporations Act, and for the financial institution sector in the Bank Act, Insurance Companies Act and Trust and Loan Companies Act, and the Electronic Document Regulations to each of those statutes.

All of this good news does not mean that all electronic contracting methods will be enforced. The common law courts, for example, while flexible, have not enforced electronic agreements which in their view did not meet the requirements for a contract. Examples include those contracts that didn’t meet basic principles of offer and acceptance such as some forms of webwrap (or browse wrap) agreements, or so called “sign in wrap” agreements. Some courts have also not recognized some forms of ”signing” a document as being a legal “signature” such as a printed name at the end of an email that was automatically generated by the email program where there was no evidence that the person had intended to sign or authenticate the document. Also, while evidence legislation across the country has been modernized to facilitate the admissibility of electronic evidence, some courts have refused to admit such evidence where it could not be properly authenticated or be shown to be reliable.[6] Accordingly, getting back end and record retention processes right can’t be ignored.

There are also some caveats with relying on electronic commerce legislation. They typically have some carveouts. For example, the Ontario Electronic Commerce Act does not apply to wills and codicils, certain trusts, powers of attorney (to the extent that they are in respect of an individual’s financial affairs or personal care) or negotiable instruments. It also used to exclude agreements of purchase and sale, that created or transfered interests in land and required registration to be effective against third parties. But that exclusion was repealed, which is why many residential real estate agreements today are entered into using DocuSign. This tool is now also commonly used to enter into business agreements. Another tool, Syngrafii is also used to obtain electronic signatures.

Since the COVID-19 outbreak, many lawyers have been examining whether electronic signatures can be used to sign and commission affidavits. Unfortunately, both the Federal Court and courts in the provinces and territories have different rules, particularly as they relate to whether an affidavit has to be sworn “in person” before the commissioner for taking oaths. In view of the problems the “in person” rule could have had during this pandemic, the law Society of Upper Canada issued a special advisory that it will not interpret s. 9 of the Commissioner for Taking Affidavit Act, as requiring the commissioner to be in person with the affiant.

The Advisory states:

However, as a result of COVID-19, until further notice:

The Law Society will interpret the requirement in section 9 of the Commissioners for Taking Affidavits Act that “every oath and declaration shall be taken by the deponent in the presence of the commissioner or notary public” as not requiring the lawyer or paralegal to be in the physical presence of the client.

Rather, alternative means of commissioning such as commissioning via video conference will be permitted.

If lawyers and paralegals choose to use virtual commissioning, they should attempt to manage some of the risks associated with this practice as outlined below.

Managing the Risk of Virtual Commissioning:

If a lawyer or paralegal chooses to use virtual commissioning, the lawyer or paralegal should be alert to the risks of doing so, which may include the following issues:

Fraud
Identity theft
Undue influence
Duress
Capacity
Client left without copies of the documents executed remotely
Client feels that they did not have an adequate opportunity to ask questions or request clarifying information about the documents they are executing.

To manage some of the risks:

Consider whether there are red flags of fraud in the matter. To review these red flags, see the Federation of Law Societies’ Risk Advisories for the Legal Profession resource.*

Assess whether there is a risk that the client may be subject to undue influence or duress. If there is such a risk, consider if you are able to assist the client at this time without meeting in person.
Determine how to provide the client with copies of the document executed remotely.
Confirm your client’s understanding about the documents they are executing and provide adequate opportunity for them to ask questions during the video conference.
Be alert to the fact that persons may attempt to use the current circumstances and resulting confusion as an opportunity to commit fraud or other illegal acts. Where lawyers and paralegals choose to use virtual commissioning, they must be particularly alert to these red flags in order to ensure that they are not assisting, or being reckless in respect of any illegal activity.

For other posts about COVID-19, I encourage you to visit the McCarthy Tétrault LLP COVID-19 hub for the latest updates and considerations for your business.

____________________________________

1 Beatty v. The First Exploration Fund 1987 (1988), 25 B.C.L.R. (2d) 377 (S.C.); Rolling v. Willann Investments Ltd. (1989), 70 O.R. (2d) 578 (C.A.); Kanitz v. Rogers Cable Inc (2002), 58 O.R. (3d) 299 (S.C.J.)

[2] Re A Debtor (No. 2021 of 1995), [1996] 2 All E.R. 345 (Ch. D.)

[3] CPTPP Articles 14.5 and 14.6 and CUSMCA Articles 19.5 and 19.6

[4] Available at http://www.law.ualberta.ca/alri/ulc/current/eueea.htm.

[5] Available at http://www.law.ualberta.ca/alri/ulc/acts/eueca-a.htm.

[6] See R. v. Nardi, 2012 BCPC 318; R v. Durocher, 2019 SKCA 97; R. v. Marini, 2006 CanLII 34269 (ONSC).

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