“In the future the optimal form of industrial organization will be neither small companies nor large ones but network structures that share the advantages of both.”
Francis Fukuyama (1952 - ) U.S. Economist and Historian.
A. Introduction
The twentieth century witnessed the beginning of the computerisation of the means of production, technology, communication and commerce. The computerization of communication brought about the Internet revolution. The digitization and the dematerialisation of transactions and the means of paying for goods and services powered by the internet has created an ambience for a lot of businesses to be run or done from virtual offices, stores and network structures.
The Internet revolution has created an electronic platform for local and international online electronic communication, socialization, transactions, marketing, shopping, research, education, entertainment, banking, buying and selling, payment of bills and provision of services as well as the formation of the electronic contracts governing them.
A. Legal Framework
Treaties and international conventions on electronic contracts are not enforceable in Nigeria, until domesticated by legislation.Apart from passing into law the National Information Technology Development Agency Act, 2010 and the Cyber Crimes (Prohibition, Prevention, Etc.,) Act, 2015 signed into law on May 16, 2015 to provide the legal framework for combating prohibition, prevention, detection, response, investigation and prosecution of cyber crimes; and for other related matters,a number of draft bills meant to regulate electronic transactions,contracts and infrastructures in Nigeria are pending before the Nigerian Federal Legislature. These includes:
i. Electric Commerce (Provision of Legal Recognition) Bill of 2008
ii. Electronic Fraud (Prohibition) Bill of 2008
iii. Nigerian Antitrust (Enforcement, Miscellaneous Provisions, etc.) Bill of 2008
iv. Cyber security and Data Protection Agency (Establishment) Bill of 2008
v. National Internal Security Bill of 2009
vi. Security Communications Interception and Monitoring Bill of 2009
vii. Critical Infrastructure Protection Bill of 2009
viii. Computer Security & Protection Bill of 2009
ix. Electronic Transactions Protection Bill of 2010
Nonetheless, the absence of a statutory framework, to statutorily regulate electronic transactions and contracts in Nigeria does not render an electronic contract invalid or unenforceable in Nigeria as the Nigerian 2011 edition of its Evidence Act recognises electronic documentary evidence as proof of electronic transactions and the use of electronic signature for the authentication of electronic contracts. Moreover, the Cybercrimes (Prohibition, prevention, etc.) Act, 2015 though, a criminal legislation provides that, electronic signature in respect of purchases of goods, and any other transactions are binding.
B. Electronic Documents
1. What is an Electronic Document?
In the current Nigerian law on evidence a "computer" means any device for storing and processing information, while a "document" includes any device by means of which information is recorded, stored or retrievable, including computer output. This implies that, a computer is any device that not only stores information but also processes it, while a document includes a device that stores information or from which information is retrievable but does not process information. On the authority of the foregoing definition of a computer and a document in the 2011 Evidence Act, an electronic document is a document generated in a computer for the entering or the processing of information, which may be stored in or retrieved from the computer.
C. Electronic Contract
1. What is an Electronic Contract?
An electronic contract is piece of information, communications, or correspondences in an electronic document, creating obligations between two or more correspondents that are enforceable or otherwise recognisable at law.
2. Formation of Electronic Contract
Traditionally, a contract may be made or entered orally or in writing or implied from the conduct of the parties.The advent of the electronic documents as additional means of entering into a contract other than a paper document, has not change the basic requirements for the formation of a contract of a valid and enforceable contract.
It has however, added to the variant of a written agreement, thereby giving the parties intending to enter into a written agreement or contract the option of having it on the traditional paper document or in a dematerialised format of an electronic document.Whichever means a contract is entered or formed, the law recognises five vital ingredients as the constituent of a valid and enforceable contract.
These are offer, acceptance, consideration, capacity to contract and intention to create legal relationship. See: College of Medicine v. Adegbite (1973) 3 SC. 149; Nimanteks Associates v. Marco Const. Co. Ltd. (1991) 2 NWLR (Pt. 174) 411 at 427, per Tobi JCA (as he then was).
Thus,before there can be said to be the formation of an electronic contract between the correspondents, it must be apparent or implicative that, there was an offer and an acceptance backed by consideration with the intention to create a legal relationship between the correspondents who possessed/possess the capacity to enter into such a contract.
The determination of the date, time and place when an electronic document or piece of information is sent or received is crucial in the determination of the formation of an electronic contract.Click the discussion links below to view discussions on: What are the proofs you can tender in court to prove the delivery an email in the inbox of the recipient.
3. The Nature of Electronic Contract
Electronic contracts are entered or made not just via electronic mails or correspondences, but also by electronic communications on electronic platforms such as online instant messaging applications, in the likes of WhatsApp, Facebook Twitter, Blackberry or any kind of electronic communication platform, facility or device that, has the capacity for the exchange of electronic information.
It also includes automated contracts after filling electronic forms or by touching a digital button on a computer or an electronic device screen or by speaking to a device or by clicking on digital or electronic buttons or icons on pages of blogs ,website or any electronic devices which notifies or indicates that by clicking the button or by electronically ticking an inbox or by texting a code to your electronic communication service provider you automatically agree to be bound by the terms and conditions put forward by your service provider as terms and conditions that shall govern the electronic transaction you are about to transact online.
I am of the view that, electronic contracts are not and should not be limited to only online or cyber communications, but also an exchange of electronic telecommunication text messages, having all the elements of a valid and enforceable contract. Likewise,virtual agreements or agreements not made online but, in a dematerialised electronic format, stored in an electronic device, having all the elements of a valid and enforceable contract.
C. Electronic Signature
1. What is an Electronic Signature
A signature is any name, mark or writing used with the intention of authenticating a document. Most persons are comfortable with traditional contracts because of the security and familiarity with paper documents and handwritten signatures. An electronic signature, also called a digital signature is a secure, digital code attached to an electronically transmitted message that uniquely identifies and authenticates the sender.
It is interesting to note that, a signature that has been prepared and reproduced by mechanical or photographic means or a signature on a document transmitted by a facsimile machine are not classified as digital signature. See Black’s Law Dictionary 6th edition at page 1387. The classification of digital signatures should include signatures made with electronic or digital pens and biometrics.
2. The Nature of Digital Signatures
An electronic signature is a computer-generated signature by way of encryption. Encryption is the process of encoding messages or information in such a way that only authorized parties can access it. It is a computer security process by which the content of a message or file is scrambled using an encryption algorithm to generate cipher text which, can only be read by someone who has the right encryption key to translate it to the original plain text.
Encryption involves the use of two different translation keys namely: public and private keys. Each signatory possesses a private and public key pair, one key encrypts the information and another, mathematically related key decrypts it. The computer sending an encrypted message uses a chosen private key that is never shared and so is known only to the sender. In order to have an electronically signed document the following will apply:
a. A sender must first create a public-private key pair before an electronic communication can be digitally signed.
b. The private key is kept confidential by the sender and is used for the purpose of creating a digital signature.
c. A hash function is used in the signature generation process to obtain a condensed version of the data to be signed; the condensed version of the data is often called a message digest. The message digest is input to the digital signature algorithm to generate the digital signature.
d. The sender attaches the digital signature to the communication and sends both electronically to the intended recipient. The sender discloses his or her public key to the recipient.
e. When the digitally signed communication is received the recipient's computer runs a computer program containing the same cryptographic mathematical formula that the sender used to create the digital signature. The digital signature is automatically decrypted using the sender's public key.
f. If the recipient's program is able to decrypt the digital signature successfully, he or she knows that the communication came from the purported sender.
g. If a communication has been altered or tampered with because the recipient's program will create a second message digest of the communication. This second message digest is then compared to the original message digest. If the two match the recipient has now verified the integrity of the message.
It is important to emphasize that, the security of this format of electronic or digital signature system is dependent on maintaining the secrecy of the signatory’s private keys.
3. Certification Authority
The issue of the security of Web server used as the medium of electronic exchange of sensitive security data is an issue that calls for attention. In some jurisdictions ,this has been sorted out with the use of third parties to verify an individual's public key. Such a third party is called a certification authority, who acts as a middleman that both parties or computers trust. The Certification Authority confirms that each computer is in fact who it says it is, and then provides the public keys of each computer to the other.
4. The Legal Effect of Electronic or Digital Signatures
The effect of electronic or digital signature in the formation of electronic contracts includes:
a. Authentication and Verification - Authentication and verification of the integrity of electronic document or data and the identity of the signatory. Only a sender's public key will decrypt an electronic signature encrypted with the sender's private key.
b. Non-repudiation - Prevent repudiation by the sender later once the authenticity and integrity of a communication have been established. The recipient of a signed electronic document can use it electronic or a digital signature as evidence in demonstrating to a third party that the signature was actually generated by the claimed signatory.
c. Meets Statutory Requirement - Electronic document and signature satisfies the requirement by statutes such as the Statute of Frauds that some types of contracts must be in writing and signed by the parties.
5. The Use of Electronic Signature in Nigeria
a. Statutory Requirement
In Nigerian jurisprudence of evidence, an unsigned document upon which a claim or defence is founded is taken as a worthless and inadmissible evidence of such a claim. Even if it is admitted in evidence, the court would not attach any probative value to it. This is because a document which is not signed has no origin in terms of its maker. See Omega Bank (Nig.) Plc vs. O.B.C. Ltd (2005) 8 NWLR (Pt.928) 547 at 581 paragraph D, per Tobi JSC.
Although, a number of draft bills meant to regulate electronic transactions and contracts in Nigeria are yet to be passed into law, the Nigerian 2011 edition of its Evidence Act recognises the use of electronic or digital signature for the authentication of electronic contracts in contracts where a rule of evidence requires a signature or provides for certain consequences if a document is not signed.
Similarly, Evidence Act permits that, all electronic signatures may be proved in any manner, including by showing that a procedure existed by which it is necessary for a person, in order to proceed further with a transaction to have executed a symbol or security procedure for the purpose of verifying that an electronic record is that of the person.
I am of the view that, except in contracts where signatures are statutorily required to validate the contract, an electronic or digital signature is not necessary to validate an electronic contract in the manner the manual signature validates the contract expressed on paper. What is of legal consequence is the evidence in the electronic correspondences or dialogue between the parties that, there was an offer and acceptance backed by consideration with the intention to create legal relationship between the electronic correspondents who possessed or possess the capacity to enter into such a contract.
Likewise, the Cyber Crimes (Prohibition, prevention, etc.) Act, 2015 though a criminal legislation provides that, electronic signature in respect of purchases of goods, and any other transactions are binding and whenever the geniuses or otherwise of such signatures is in question, the burden of proof, that the signature does not belong to the purported originator of such electronic signatures shall be on the contender. Any person who with the intent to defraud and or misrepresent, forges through electronic devices another person’s signature or company mandate commits an offence and shall be liable on conviction to imprisonment for a term of not more than 7 years or a fine of not more than N10,000,000.00 or to both fine and imprisonment.
Under the Cyber Crimes Act the following transactions are excluded from the categories of contractual transactions or declarations that are valid by virtue of electronic signature:
(a) Creation and execution of wills, codicils and or other testamentary documents;
(b) Death certificate;
(c) Birth certificate;
(d) Matters of family law such as marriage, divorce, adoption and other related issues;
(e) issuance of court orders, notices, official court documents such as affidavit, pleadings, motions and other related judicial documents and instruments;
(f) Any cancellation or termination of utility services;
(g) Any instrument required to accompany any transportation or handling of dangerous materials either solid or liquid in nature;
(h) Any document ordering withdrawal of drugs, chemicals and any other material either on the ground that such items are fake, dangerous to the people or the environment or expired by any authority empowered to issue orders for withdrawal of such items.
b. Certification Authority
There are no such infrastructure yet in Nigeria like in some jurisdictions, where several national companies serve in this capacity for individuals and organizations for a nominal fee.
It is legally reasonable to conclude that, the non-existence of Certification Authorities in Nigeria as at the date of writing this blog, can be attributed to non-existence of a statutory legal framework for such Authorities.
D. Enforcement of Electronic Contract
1. Several Electronic Correspondences
It does not matter that an electronic contract involves several electronic correspondences or communication as it settled position of law that, in the interpretation of a contract involving several documents, the document must be read together as one. C.B.N. v. Igwillo (2007) ALL FWLR (Pt. 379) SC. 1385 at 1413, Paras. B-C.
2. Breach of Electronic Contract:
A breach of contract is committed when a party to a contract, without lawful excuse fails, neglects or refuses to perform an obligation he undertook in the contract or either performs the obligation defectively or incapacitates himself from performing the contract or by wrongfully repudiating the contract. Kemtas Nig. Ltd. v. Fab Anieh Nig. Ltd. (2007) ALL FWLR (Pt. 384) 320 at 342 Paras. B - C (CA).
3. Consequences of Breach of an Electronic Contract
It must be borne in mind that the simple operation of contract is that where parties voluntarily agree to do an act and one of the parties neglected or defaulted from carrying out or doing what was agreed to be done, then there is a breach of that contract by the party who neglected or defaulted in performing his or her own side of the contract and the person responsible for the breach of the contract will be liable in damages to the other party. Obimiami Brick & Stone (Nig.) Ltd. V. African Continental Bank Limited (1992) LPELR-SC.186/1990, Per Babalakin, J.S.C. (Pp. 93-94, paras. E-G),
4. Material Evidence of Electronic Contract
In the event of dispute on the contract or a breach of the electronic agreement, the computer printout of the content of the electronic or virtual contract entered in the cyberspace or stored in an electronic device can be tendered in court or in any alternative dispute resolution forum as prove of the agreement between the parties.
In Nigeria Evidence Act, 2011 signed into Law in July 2011 provides for the admissibility of computer-generated evidence stored on computer, electronic devices, media and platforms.
5. Forum for the Dispute Resolution of Electronic Contracts
One of the legal issues in an electronic contract, even paper contract is the forum or jurisdiction, where dispute resolution will take place in the event of a dispute. In Nigeria, in the absence of a dispute resolution forum clause, a suit for the specific performance upon the breach of any contract, may be commenced and determined in the Judicial Division in which such contract ought to have been performed or in which the Defendant resides or carries on business.
6. Choice of Laws
Where there is no choice of governing law clause in a contract, whether an electronic or a paper contract and where the governing law cannot be implied; then the proper law of the contract would be applied. The proper law of a contract is simply the law of the place or jurisdiction with which the contract bears the closest relation. The factors usually taken into account include:
a. The place of contracting
b. The place of negotiation of the contract
c. The place of performance
d. The location of the subject matter of the contract
e. The domicile, residence, nationality, place of incorporation and place of business of the parties
7. Likely Dispute Issues in the Enforcement of Electronic Contracts:
The following peculiar issues may crop up in the enforcement of an electronic contract:
1. Negligence or carelessness with passwords or access codes thereby enabling an impostor to use an electronic platform to defraud an unsuspecting correspondent.
2. Repudiate the electronic contract or denying liability on the ground that, an impostor entered the contract.
3. Not verifying the other party's identity before making commitments.
4. The sender proving the receipt of an electronic correspondence where the other party denies receipt.
5. The sender claiming the electronic correspondence received by the receipt is different from the one sent by he or she.
6. Hackers accessing, stealing, manipulating and corrupting electronic documents.
7. The statutory legal framework specifically regulating electronic transactions and contracts in Nigeria.
8. Electronic viruses corrupting a file and rendering it inaccessible.
9. Alteration of sent messages saved in sent box and inbox and deleting of emails.
10. Convergence of digital devices e.g. phone, camera, email, etc.
11. The statutory requirement for some contracts to be signed by the parties.
12. Limitation electronic data storage capacity.
13. Web security.
14. Failure to exercise due diligence.
15. Determination of the date, time and place when an electronic document or piece of information is sent or received.
E. Due Diligence
It is necessary for parties to an electronic contract to exercise due diligence to establish who they are dealing with online. A person who is negligent or careless with his or her passwords or access codes thereby enabling an impostor to use his or her an electronic platform to defraud an unsuspecting correspondent may not be able to avoid liability especially with the development an electronic or digital signature which verifies the source of an online correspondence.
F. Conclusion
The value of reliability placed on electronic correspondence in Nigeria is very low, as many users of electronic platform including some lawyers are either not aware that, electronic contracts can be implied or made from mere electronic correspondences without signatures or are wary of entering into a contract without a direct face to face communication. The latter may be due to the online fraudulent activities of internet fraudsters known as “yahoo boys” or due to ignorance of the fact that, transacting business on electronic platforms is cost effective and time saving compare to than traditional paper platforms.
The absence of a statutory legal framework on electronic transactions in Nigeria is enough to invoke doubts on the validity of the contract. Fortunately, however, the provisions of the Nigerian recent Evidence Act, 2011 on electronic evidence provides the necessary legal protection for the enforcement of electronic contract in Nigeria. Moreover, it is not the doubting or the believing of the validity of a contract that makes it valid or invalid in law, but the presence of the basic ingredients of a valid contract in the contract in issue, be it a paper or an electronic contract.
Formation of an electronic contract is not rocket science or an esoteric or complex transaction, as some perceive it, it only demand for more legal creativity on the part of the solicitor engaged to see to an enforceable electronic contract.
My free legal advice to anyone or organisation about to accept an electronic offer or sign a contract-agreement on paper, is to seek for a good Lawyer to review the electronic offer or contract, before electronically accepting the offer or before appending your signature.
You may contact Akintunde Esan for further illuminations on your paper or electronic contracts.
Akintunde Esan – Managing Partner, Ase Olodumare Chambers, Lagos, Nigeria. A Law Firm providing online and offline legal consultancy services on commercial, corporate, property, employment matters and disputes to local and international clients. He is a legal consultant on international and domestic contracts relating to Nigerian laws.
E-COMMERCE: FORMATION, VALIDITY AND ENFORCEMENT OF ONLINE AND ELECTRONIC CONTRACTS IN NIGERIA is a legal illumination of AKINTUNDE ESAN known as The LEGAL ADVISER ONLINE. Akintunde Esan is the Managing Partner & Principal Consultant @ ASE OLODUMARE CHAMBERS (Legal Practitioners/Consultants & Chartered Mediators)
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