Legalities of Electronic Signatures in the Philippines
The use of electronic signatures in the Philippines remains a vast sea of opportunities that is unexplored by different industries. This article will help you understand the legalities of such and why the electronic signature is the future in the Philippines.
What Is An Electronic Signature?
Let’s start with the fundamental question that people usually ask. Under R.A. 8792 or the E-Commerce Act of 2000, an electronic signature is defined as any distinctive mark, characteristic, and/or sound in electronic form, representing a person’s identity and attached to or logically associated with the electronic data message or electronic document. The intention of which is to authenticate or approve an electronic data message or electronic document.
An electronic signature is visual. It can be anything — a dot, a line, an emoji, a photo of your signature that you use in your different documents and transactions, a click on a button that says “I agree,” and the list goes on. It would qualify as an electronic signature as long as the user associates that electronic mark with the electronic document or electronic data message.
How Do You Prove An Electronic Signature’s Authenticity?
The signing of documents, especially for contracts, is crucial. A signature signifies the creation of binding obligations between the signing parties. However, by signing the electronic document or electronic data message alone, it will not suffice to meet the law’s necessary requirements.
That is why a digital signature was created to ensure these requirements are followed to the dot. A digital signature is a machine-generated code that uses complex mathematical computation to make the electronic signature, and its accompanying electronic document or electronic data message secure and safe from being forged by others or changed without the consent of any of the parties. Digital signatures are provided by third-party trust service providers or information certifiers that vouch for the security, integrity, and reliability of the document or to verify the identity of the people signing it.
A digital signature uses complex mathematical computation, which is referred to as public-key cryptography. One of the best examples of such technology is blockchain technology. Blockchain, also known as a “distributed ledger,” can be used to record promises, trades, transactions, or simple items that need to be preserved. The data are mirrored or encoded across all nodes in a given network to ensure the records do not disappear. This allows everyone in an ecosystem to keep a copy of the common system of record.
Even the minutest alteration on the original document will have a corresponding change in the hash code which is basically like a fingerprint. So, any changes can be counter-checked, making the signatories confident in the validity and authenticity of the document as it is tamper-proof.
As to the legality of blockchain, you need not worry. The E-Commerce Act likewise provided the principle of technology neutrality. Such principle talks of not favoring one technology over the other. So, as long as the blockchain technology abides by Section 8 of the E-Commerce Act to secure electronic documents, electronic data message, and electronic signature, it remains legal.
Is Electronic Signature And Electronic Document Legal In The Philippines?
Yes, an electronic signature and an electronic document are both legal in the Philippines. The E-Commerce Act and the Supreme Court’s Rules on Electronic Evidence provide for such legality.
However, the E-Commerce Act is not without limits. The principle of limited recognition was put in place since the law broadly defined electronic signatures. Through this principle, the electronic signature will only be recognized as valid and binding if it passes the requirements under Section 8 of the E-Commerce Act.
Section 8 of the E-Commerce Act states that an electronic signature on the electronic document or electronic data message shall be equivalent to the signature of a person on a written document if there’s proof that a prescribed procedure, not alterable by the parties interested in the electronic document, existed.
Such procedure should have a method used to identify the party sought to be bound and to indicate said party’s access to the electronic document for his consent or approval through an electronic signature. Likewise, the method must be reliable and appropriate for the purpose for which the electronic document was generated or communicated, including any relevant agreement.
The electronic signature sought from the party will bind him to the obligations stated in the electronic document or electronic data message. The other party, who is also a signatory, is then authorized and enabled to verify the electronic signature and decide to proceed with the transaction authenticated by the same.
In effect, only electronic signature that is secured by a digital signature is recognized by the law (for documents required to be in writing and in original) as it makes the document unalterable/tamperproof and the signers identifiable. A digital signature guarantees the security and reliability of electronic documents.
Further, an electronic document, such as a contract, remains valid despite being done digitally and having an electronic and digital signature. Under Philippine law, a written signature is not a requirement for the validity of a contract. The only requirements needed for a valid contract are consent, object certain as the subject matter of the contract, and cause or consideration of the obligations.
Hence, a contract is valid if the legally competent parties follow the requisites and reach an agreement. Such an agreement can then be expressed electronically, verbally, or in a physical paper document as the law does not prescribe any form in most contracts. The Implementing Rules and Regulations of the E-Commerce Act also states that contracts cannot be denied enforceability merely because they are concluded electronically.
Is An Electronic Signature Admissible In Evidence In The Philippines?
For the Rules of Court governing evidence, Rule 130, Section 2 provides that documentary evidence consists of writings or any material containing letters, words, figures, symbols, other modes of written expressions offered as proof of its contents. Any electronic document shall be the functional equivalent of a written document under the Rules of Court.
The principle of Functional Equivalent was discussed in the creation of such a law. The principle was introduced through A.M. №01–7–01-SC or the Rules on Electronic Evidence. Rule 3 states that whenever a rule of evidence refers to the term writing, document, record, instrument, memorandum, or any other form of writing, such term shall be deemed to include an electronic document as defined in these Rules.
Under the same rule, it solidified that an electronic document is admissible in evidence if it complies with the rules on admissibility prescribed by the Rules of Court and related laws and is authenticated in the manner prescribed by these Rules.
Can All Documents Be Electronically Signed?
The E-Commerce Act of 2000 is not absolute. It does not allow the following documents to be electronically and digitally signed as they need to be notarized to be a public document and be valid and binding:
- A contract of partnership where immovable property or real rights are contributed.
- Donation of an immovable property.
- An agent’s authority (special power of attorney) to sell the land or any interest in the land.
- Royalty agreements involving the assignment of patents or patent applications.
- Subordinated loan agreements, i.e., agreements evidencing or governing subordinated borrowing of cash by broker dealers. The requirement applies to all subordinated loan agreements between a lender and a broker dealer.
- Secured demand notes, i.e., a secured demand note evidences the contribution of a secured demand note to a Broker Dealer and the pledge of securities and/or cash with the broker dealer as collateral to secure payment of such secured demand note.
- Application for registration of securities (Form 12–1) with the Securities and Exchange Commission (“SEC”), i.e., every prospectus must also be subscribed under oath by the issuer.
- Several corporate documents submitted to the SEC, such as articles of incorporation, voting trust agreements, applications filed by a foreign corporation for a license to transact business in the Philippines, general information sheets, application for registration securities, and reports and forms submitted by banks to the Bangko Sentral ng Pilipinas;
- Proxies issued by brokers and dealers.
- Tax Returns.
- The cession, repudiation, or renunciation of hereditary rights or of those of the conjugal partnership of gains.
- An agent’s authority over an object which would require public document.
- A cession of actions or rights proceeding from an act appearing in a public document.
- An assignment of a credit, right or action shall produce no effect as against third persons (although it remains valid between the parties) unless it appears in a public document, or, where the assignment involves real property, the instrument is recorded in the Registry of Property.
However, because of the pandemic, the 2020 Interim Rules on Remote Notarization of Paper Documents was legalized. The law allows the notarization of documents through video conferencing but only if either the notary public or the person seeking notarial service, or both, are residing, holding office, or located in an area under community quarantine. This applies only to paper documents and instruments with handwritten signatures or marks but not for the execution of notarial wills. There are more rules to follow regarding Remote Notarization of Paper Documents and if you are interested to read them, you can check out A.M. №20–07–04-SC.
With this move done by the Supreme Court, it is likely that more digitalization will be allowed for the legal profession’s processes. The documents mentioned above can hopefully soon be signed and notarized electronically following certain rules and not just under the exceptional circumstance stated in A.M. №20–07–04-SC. The Supreme Court is yet to make an announcement about this but there is a good chance it will be the future of the legal profession, too.
Why Switch To Electronic And Digital Signatures?
An electronic signature, coupled with a digital signature, will solve the problems of businesses, organizations, and the like during this time as the pandemic has created challenges for them. Many companies are transforming their systems digitally and are asking their employees to work from home or come up with hybrid work arrangements.
Now, because of such a setup, signing important papers can be difficult. This can be solved if the electronic signature and digital signature systems are delved into and maximized. If this is done, the possibilities are endless. However, people should continue using tools such as what Twala offers to help them operate efficiently without compromising legal compliance, authenticity, validity, and security.
References related to electronic signatures in the Philippines: