Computer Law & Security Report (2005) 21, 423e426

ELECTRONIC CONTRACTING

Concluding leases by e-mail
Ter Kah Leng
NUS Business School, National University of Singapore

Abstract In a landmark decision, the Singapore High Court has held that it is possible to enter into a legally binding lease simply by e-mail correspondence. The implications of this case on the requirement for writing and signature and its impact on e-Commerce will be examined below. ª 2005 Ter Kah Leng, NUS Business School, National University of Singapore. Published by Elsevier Ltd. All rights reserved.

A. SM Integrated Transware Pte Ltd v. Schenker Singapore (Pte) Ltd1
SM Integrated (SMI) and Schenker were both companies providing logistics services. SMI owned a warehouse which it was negotiating to rent to Schenker for the proposed storage of dangerous goods. The negotiations were conducted face to face, by telephone or e-mail correspondence. At no time was there any letter correspondence. Shortly before the lease was to commence, the third party, whose dangerous goods Schenker was proposing to store in SMI’s warehouse, no longer needed its services. Schenker thereupon withdrew from the lease, resulting in SMI’s loss of rentals during the two-year period of the lease. Three issues arose for consideration: (a) whether the negotiations between the parties culminated in a binding agreement and if so, (b) whether

the requirements of section 6(d) of the Civil Law Act were satisfied and (c) whether the lease was subject to a condition precedent. The first issue was decided in the affirmative, while the third issue was answered in the negative. This article will focus on the second issue.

B. Sufficient memorandum
Schenker’s defence to the second issue was that even if a binding contract had been concluded, it was unenforceable by virtue of section 6(d) of the Civil Law Act2 (CLA) and section 4(1)(d) of the Electronic Transactions Act3 (ETA). The CLA provides that for a lease to be enforceable there must

2 Cap 43, 1994 Rev Ed, the modern re-enactment of the relevant provision of the English Statute of Frauds 1677. Available at http://statutes.agc.gov.sg. 3 Cap 88, 1999 Rev Ed which is based on the UNCITRAL Model Law on e-Commerce, Singapore being the first country to adopt 1 the Model Law. Available at http://statutes.agc.gov.sg. [2005] SGHC 58. Judgment delivered on 30 March 2005. 0267-3649/$ - see front matter ª 2005 Ter Kah Leng, NUS Business School, National University of Singapore. Published by Elsevier Ltd. All rights reserved. doi:10.1016/j.clsr.2005.06.004

6 This excludes inter alia. Parliamentary Debates 1998. such as the need to protect the uninformed or the unwary. It was further argued that SMI could not rely on electronic records as the functional equivalent of paper records5 because leases came within the list of transactions excluded under section 4(1)(d) of the ETA. and to promote legal and business infrastructure for secure E-commerce: section 3(b) ETA. No hard copy of any e-mail was exchanged. The word ‘‘usable’’ is intended to cover not only human use but also computer processing’’. Prakash J found support for this view in the IDA-AGC Consultation Paper mentioned above: ‘‘Even where legal form requirements apply. Kah Leng application of the ETA provisions rendering electronic records the functional equivalent of paper records.133. Moreover the Minister has power to modify any of the excluded transactions by virtue of section 4(2) of the ETA. 5 Section 7 ETA provides that an electronic record satisfies a rule of law that requires information to be written if the information therein is accessible so as to be usable for subsequent reference.9 It recognizes that the law lags behind technology and so ‘‘should not place obstacles in the way of adopting practical and commercially viable electronic means as they become available’’. as a matter of law.gov. Column 254.agc. Whether an e-mail could satisfy the requirements of writing and signature would be decided by construing section 6(d) itself and not by ‘‘blindly’’ relying on section 4(1)(d) of the ETA. it also recognizes that continued exclusion might be justified on grounds of public policy. any lack of appropriate technology to effect ‘‘an electronic equivalent of a paper transaction should not by itself dictate that such a transaction must be excluded from section 4 of the ETA’’. T. She went on to state that the ETA did not change the common law position in relation to the CLA. While noting the ‘‘conservative approach’’ taken by the ETA in respect of leases falling within the section 4 exclusions.7 Since then. Returning to the argument made on behalf of Schenker that the exclusionary section 4 prevented reliance on the recognition of electronic records as the written equivalent. SMI counterargued that the ETA could not be so construed as disabling reliance on electronic records. the draft Logistics Service Agreement and the acceptance of its terms together constituted the necessary memorandum. 8 Joint IDA-AGC Review of Electronic Transactions Act. Electronic records or signatures Which are to facilitate E-commerce.6 The original reason for the exclusions is relevant to the grounds of judgment. electronic means of communication could not satisfy the requirements of section 6(d) of the CLA. Does e-mail correspondence satisfy ‘‘writing’’? It was argued on behalf of Schenker that since all written communication was conducted by e-mail. the description of the subject mater and the consideration as were required by the CLA. eliminate barriers arising from uncertainties over writing and signature requirements. Stage II e Exclusions Under section 4 of the ETA. e-Commerce was thought to be in its infancy and a conservative approach was taken so as not to establish a complete functional equivalent between a paper and an electronic record.10 It is interesting to note that leases have not been identified as being one of the transactions in need of continued exclusion from the functional equivalent of paper. they contained the identities of the parties. This is undertaken by the Infocomm Development Authority of Singapore (IDA) and the Attorney-General’s Chambers (AGC) which have released a Public Consultation Paper. Available at www.8 The Paper suggests a wide Halsbury’s Laws of Singapore Vol 7 Butterworths Asia. 2000 at para 80. 10 Note 8. 4 . exclusions under section 4 may not necessarily prevent such transactions from being done electronically. 9 C. having regard to the need to construe the ETA consistently with what is commercially reasonable in the circumstances and to facilitate e-Commerce.424 be a sufficient note or memorandum in writing and signed by the party to be charged. the judge held that this did not mean that. On the other hand. accepted SMI’s submission that the requirement of writing and signature in section 6(d) of the CLA could not be construed in such a manner as to exclude the use of electronic forms. When the ETA was first enacted in 1998.sg under Publications & Speeches. Prakash J. 25 June 2004. IT (including controls against fraud) has developed so significantly that a review of the ETA is timely. which will be consistent with the aims of the ETA. Furthermore. such correspondence could not constitute the written evidence of the lease nor satisfy the requirement of signature under the CLA. para 2.3. Prakash J concluded that the e-mail of a specified date with its attachment. leases from the application of Part II and IV of the ETA.4 Furthermore. The learned judge. The Guide to Enactment of the UNCITRAL Model Law (Article 6) states that ‘‘accessible’’ is ‘‘intended to mean that computer data should be readable and able to be interpreted and that the software required to satisfy those requirements may need to be retained. 7 Electronic Transactions Bill.

typewriting. 12 Cap 1. the UK Law Commission took the view that e-mail satisfied the definition of ‘‘writing’’ under 425 the Interpretation Act 1978. It would be a matter for legal interpretation whether an electronic form satisfies a particular legal requirement for writing or signature. where the Court of Appeals of Iowa held that the keeping of records in a computer satisfied the requirement of keeping a ‘‘written record’’.sg.17. the learned judge held that the e-mail correspondence which constituted the memorandum of the contract was ‘‘in writing’’ for the purpose of section 6(d) of the CLA. An ordinary man in the street would be amazed to find that he had not made a binding contract when all the terms had been agreed upon. In another American case. Agreeing with SMI’s submissions. Statutory Interpretation. Was the e-mail signed? It was argued on behalf of Schenker that no party had ever signed a hard copy letter or document. para 85. 14 Note 8.gov. This was not a problem in the present case as the parties readily admitted sending and receiving the relevant e-mail messages and no one testified that the documents in the agreed bundle were not true copies of the e-mail correspondence. it is submitted. photography and other modes of representing or reproducing words or figures in visible form’’. e-mail messages are ‘‘words. the learned judge suggested. Allstate Insurance Company.5. in the absence of a legislative provision.14 although there was a lack of consensus on this matter.17 D. The e-mail messages and attachments could also be printed out as they were in the present case and included in the agreed bundle of documents. This. SMI had submitted that the natural meaning of the term should be extended to include technological developments as there is a presumption that: ‘‘Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes since the Act [CLA] was initially framed [an updating construction]. The learned judge found the above submissions. 4th Ed. 2002 at p 762. 11 . In the advisory paper mentioned above. 17 Note 1. to find that such a diskette would not constitute the requisite ‘‘written’’ notice. Clyburn v.agc. She was pleased to arrive at this conclusion which was ‘‘dictated by both justice and common sense’’ and considering that so much business is now transacted via the Internet and likely to increase further. The recognition of electronic correspondence as writing would be entirely consistent with this aim as long as the existence of the writing could be proved. 2002 Rev Ed. The learned judge also accepted the views of foreign law commissions and foreign courts relied upon by SMI. Prakash J stated that the aim of requiring written evidence in certain contracts was to protect against fraud and sharp practice. lithography.15 Similar reliance was placed on Wilkens v. On the other hand.Electronic contracting could still possibly satisfy the legal requirements without reliance on the provisions of the ETA. SMI’s response was that the common law takes The definition of Schedule 1 is in pari materia with the Singapore definition.16 the District Court of South Carolina held that a computer floppy diskette could constitute ‘‘written notice’’ under the terms of a statute.’’11 The learned judge derived further support from section 2 of the Interpretation Act12 which defines writing to include ‘‘printing. para 2. 16 826 F Supp 955 (DSC 1993).’’13 In any case. Turning to section 6(d) and its predecessor. Butterworths. in visible form’’ when displayed on the monitor screen. could be satisfied by storing and printing out a copy of the electronic communication. a person would be astonished to find that he had made a paperless contract through e-mail. the Statute of Frauds 1677. 15 At para 3. could be avoided by making the agreement ‘‘subject to contract’’. Available at http://statutes. although the underlying digital information will not be ‘‘writing’’ for the purposes of the Interpretation Act. in the Commission’s view. Iowa Insurance Commissioner. The opposite view was that there must be some physical memorial but this. Hence there was no memorandum that had been signed by the party to be charged [Schenker]. SMI argued. based on the UK Law Commission’s advisory paper ‘‘Electronic Commerce: Formal Requirements in Commercial Transactions’’ (December 2001) to be persuasive.1. there being nothing in the relevant legislation that precluded the keeping of these records in a computer. The information on the floppy diskette could be retrieved and printed as ‘‘hard copy’’ and in today’s paperless society. The court noted that the advent of the computer age changed substantially record-keeping procedures. 13 Bennion. the court was not prepared.

a name typed on the e-mail or appearing beside the e-mail address at the top of the message has been held to suffice. E. Klotz Bach. the learned judge awarded the damages that SMI sought. NUS Business School. A typewritten signature or one typed onto an e-mail and sent or 18 T. Cloud Corporation v.20 the Superior Court of Massachusetts.sg Andrew Phang. It represents an enlightened and progressive approach which facilitates electronic transacting in a convenient. National University of Singapore. A printed slip may suffice if it contains the name of the defendant. His name appeared in the line reading: From:. additional safeguards may be desirable. That. Fifoot and Furmston’s Law of Contract e Second Singapore and Malaysian Edition. This is directly applicable to the present case where there was no signature appended by Schenker’s authorized representative to the bottom of any of his e-mail messages. Ter Kah Leng. The traditional protection against fraud secured by writing and signature has served its purpose but the advent of paperless electronic transactions renders these requirements incompatible when technological tools are available to provide the necessary on-line security. Prakash J therefore held that the requirement of signature had been satisfied. 20 14 Mass L Rep 360 (2001). The intention never to cast the ETA exclusions in stone is far-sighted. The learned judge inferred from this that he knew that his name appeared at the head of every message next to his e-mail address so clearly that there could be no doubt as to who the sender was.29 and 3. if properly proven. But this may not always be the case. in interpreting the equivalent of section 6(d) of the CLA. 1998 at p 368. Butterworth Asia.19 Of relevance are two recent American decisions. cost effective and efficient way. was not the case here. the basic legal functions of a signature are performed by way of a method that identifies the originator of a data message and confirms that the originator approved the content of that message. In the second case. Overall. Hasbro. Having found that SMI had proved that there was a concluded contract between the parties. Comment It is apparent that the evidence in the present case was clear-cut. It looks at the function of a signature namely.edu. Prakash J said that the true owner of the e-mail address could dispute the authenticity of the messages purportedly sent out by him. In Shattuck v. is best achieved by an electronic signature. rather than the form of the signature. duly evidenced by a written memorandum and signed by Schenker.18 SMI contended that the typed names in the e-mail were sufficient to satisfy the requirement under section 6(d) because the authenticating intention of the ‘‘signatories’’ had been clearly demonstrated. Alluding to the possibility of ‘‘spoofing’’. There was no dispute as to the originator or signatory to the e-mail correspondence. The Guide to Enactment of the UNCITRAL Model Law article 7 states that: ‘‘In an electronic environment. the presence of the sender’s name on an e-mail would satisfy the signature requirement under the Statute of Frauds. 19 Paras 3. Kah Leng forwarded is sufficient. E-mail address: bizterkl@nus.34. The learned judge further stated that the common law did not require handwritten signatures for the purpose of section 6(d) of the CLA. The signature that is required under section 6(d) has been liberally construed so that it need not be at the foot of the memorandum or a signature in the popular sense of the word. probably the most secure functional equivalent of a handwritten signature.426 a pragmatic approach as to a signature requirement. however. 21 314F 3d 289 (2002).’’ This. . the judgment has far-reaching implications for e-Commerce. In addition. The present case represents a valiant attempt on the part of the law to keep up with new business practices as e-Commerce evolves. Cheshire.28. For this reason. held that an e-mail correspondence which contained a typed signature at the end was ‘‘signed’’ with the intent to authenticate the information contained in the correspondence. as authentication. but he confirmed that he had sent out the relevant messages. also held the view that the typing of a name into an e-mail was capable of satisfying a statutory signature requirement. as is submitted. SMI also relied on various Australian and American authorities which concluded that electronic communication satisfied the ‘‘signature’’ requirements. 3. The decision is timely and consistent with imminent legislative changes. Inc21 the US Court of Appeals for the Seventh Circuit held that although the e-mail contained no signature. The UK Law Commission in the advisory paper mentioned above.