22 March 2011

Legal Status of Electronic Transactionse & e-Commerce. email & SMS Admissible as Valid Documents in Sri Lanka

21st March 2011, www.dailynews.lk, By Sunil D B Abeyaratne - BASL Secretary and IT Committee Chairman of the Colombo Law Society

Electronic transactions are carried over electronic medium (eg the Internet) while their counterpart, traditional commercial transactions take place using paper based medium.

There is no doubt that the entire world tends to maintain documentation electronically due to its involvement of low cost, less storage space for storing and the availability of facilities to enter into contracts even without meeting or having a conversation with each other from different parts of the world.

Further, considering its availability, convenience, involvement of low cost and time factor, transactions over Virtual Private Networks (VPN) are becoming popular day by day.

As a result, majority of business transactions in the world have taken place under e-Commerce and consumers prefer to enter into online purchasing with the development of internet.

Since there should be a legal acceptability, adoption and recognition of electronic transactions, the United Nations Commission on International Trade (UNCITRAL) made the General Assembly Resolution 51/162 of 16.12.1996 which guided to enact the Model Law on Electronic Commerce (1996).

Accordingly, most of the member countries have adopted laws to recognize electronic transactions like its counterpart traditional contracts without any difference. As a result, Sri Lanka also has enacted the Electronic Transactions Act No. 19 of 2006 following the said Model Law.

Legal recognition of electronic documents

To accept any documents as a reliable document before Law, the same must be in writing and authenticated. If the e-document is capable to fulfill the said requirements, it will be admissible irrespective of the medium of such document. However, different countries have given different level of recognition for electronic documents.

Position in Sri Lanka

According to Section 18 of the Prevention of frauds Ordinance in Sri Lanka; a document must be reliable to be legally accepted. Further, Legislature in Sri Lanka enacted the Electronic Transactions Act No 19 of 2006 mainly to recognize and facilitate for electronic commerce and to encourage both public and private sectors to promote electronic transactions avoiding disputes over the admissibility of e-documents and matters relating to e-transactions like in some other countries.

Accordingly, electronic documents like e-mails and short messages (SMS) are admissible as valid documents in Sri Lanka.

However, there are certain restrictions on application of Electronic Transactions Act as specified under section 23 of the Act.
Authenticity of an electronic document in Sri Lanka

Section 18 of the Prevention of Frauds Ordinance requires the signature of the maker of the document to prove its reliability. This is not new to the legal system in this country or elsewhere in the world.

There are two ways to authenticate a document in electronic transactions (I) by authentication according to provisions in a contact between parties and (ii) authentication through third party records.

Provisions on cryptography, encryption, digital signatures, Certification Authority and certification of Service Providers those are relevant to authentication and security of e-documents have been provided under the said-transactions Act.

Other important provisions relevant to Electronic Transactions Act in Sri Lanka

(i) Section 8 of the Electronic Transactions Act explains the use of electronic records and electronic signatures in Government Institutions and statutory bodies.

(ii) Chapter III of the Electronic Transactions Act explains the governing law for acknowledgment of receipt of electronic message, document or other communication relevant to Electronic Contracts.

(iii) Section 14 of the Act explains how to decide the time and place of dispatch and receipt of electronic records.
Differences on legal issues between e-commerce and traditional commerce

There are some universally accepted and established principles governing the law of contracts. Though there are lots of similarities between these counterparts, one has to face practical difficulties when the concepts under traditional contracts apply on e-commerce as they are.

There may be instances in which some modifications of traditional principles are needed for electronic transactions.

Electronic messages very often cross borders (of countries). There may be various theories applied by different jurisdictions on formation of a contract, applicable law, agreed terms by parties to the e-agreement and finally, jurisdictions to institute actions when there is a violation of such contract under e-commerce.

E-tailers’ advertising on the Computer screen shall be considered as ‘an invitation to treat’ and not as an offer unless otherwise agreed by the parties to the contract. The computer operator has to make an offer for goods or services by clicking ‘I Accept’ button and icon or click wrap agreement.

Thereafter, the e-trailer (advertiser) will have to accept or refuse (directly or indirectly) the offer.

Value of goods or services advertised by e-tailers, target groups or jurisdictions of such advertisements, financial risk on non-performance by ‘offerer’ or ‘offeree’ must be evaluated by look and feel of the website.

Under the Electronic Transactions Act in Sri Lanka, the law recognises expression of an ‘offer’ and ‘acceptance’ in electronic form.

Making of payments under online transactions

Parties can decide and agree on ‘the mode of payment’ even under e-Commerce like in traditional trade and commerce.

However, when there is no such agreement there are number of directions introduced by some countries dealing with this issue.
Risk involved in online payment

Consumers in most of the countries including Sri Lanka use to make payments using credit cards under online transactions. Such electronic transactions are vulnerable to intrusions by hackers and crackers and such payments are always under major security risk to the credit cardholder.

Further, a country like Sri Lanka does not have directions enforced for online transactions and there is no way to cancel or return the payment after the acceptance of goods or services.
Legal remedies available against breach of e-contracts

Aggrieved party can complain to the Consumer Protection Authority, institute of actions against unlawful enrichment, take actions under the ‘provisions of Payment Devices Frauds Act No. 30 of 2006, Computer Crime Act No. 24 of 2007 and Provisions under Payment and Settlement Systems Act, No. 28 of 2005’.

Preventive steps to be taken under e-commerce and e-transactions in Sri Lanka

It is always safe to have clear conditions agreed by the parties to the contract specifying the way to confirm transactions, applicable law to the contract, mode of payment and jurisdictions of courts under dispute resolution and so on.

Related Info :

Electronic Transactions Act No 19 of 2006

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