Legal validity and correct application of e-contracts

December 16, 2021 | 13:01
(0) user say
A recent survey on the obstacles preventing enterprises in Vietnam from applying e-contracts for their business showed that over 300 of the 500 participants said that they were concerned about the legal validity of the e-contract. Confidentiality is also another issue causing enterprises in Vietnam to be reluctant to apply the e-contract for their business activities.
Legal validity and correct application of e-contracts
By Pham Duy Khuong - Managing director, ASL LAW

In fact, the legal framework for contracts and e-contracts in particular is quite comprehensive and synchronous. Vietnam promulgated the Law on Electronic Transactions in 2005 based on inheriting most of the provisions under the UN’s Commission on International Trade Law on e-commerce in 1996.

On that basis, the Vietnamese government of has issued guiding legal documents, notably Decree No.130/2018/ND-CP detailing the implementation of the Law on Electronic Transactions on digital signatures and digital signature authentication services, and Decree No.52/2013/ND-CP on e-commerce. Legal documents guiding that law in specialised fields such as accounting, finance, banking, and insurance have also been promulgated, which accordingly create synchronisation and ensure the legal validity of the e-contract as well as the safety and integrity of the data messages contained in the e-contract.

Notably, the validity contracts rely on the criteria as prescribed in the Civil Code 2015, including: parties in the transaction must have legal personality or legal capacity in conformity with such transactions; parties in the transaction must act voluntarily; the purpose and contents of the transaction are not contrary to the law and/or social ethics; and the form of the contract must be in accordance with the provisions of the law, without relying entirely on how the contract is entered into.

Many enterprises have been concerned over the form of signing and executing e-contracts as they are not so familiar with them. However, electronic transactions occur every minute of every day in our daily lives. Transactions on e-commerce platforms such as Lazada, Shopee, Tiki, eBay, or booking a car via Grab are typical examples of electronic transactions, which are very popular for most people.

Confidentiality is another concern for enterprises to apply the e-contract for their business activities when information of electronic transactions is not only stored on the enterprise’s own system, but also backed up on the system of the digital signature authentication service provider for maintenance and technical troubleshooting, when the enterprise’s electronic database is crashing or being interfered with by any third party.

The current law does not clearly stipulate the obligations of the authentication service provider to secure confidentiality, hence, enterprises should be aware of this matter and must include, in the service contract, the confidentiality obligation of the authentication service provider.

Also, a question that many enterprises raise is how to prove the legal validity of the e-contract as the original version when dealing with a third party such as the bank, or with state authorities such as tax authorities or the courts.

In practice, Article 9 of Decree 52 provides legal basics for this matter, meaning legal validity as the original of e-documents. Accordingly, an e-document in a commercial transaction has legal validity as the original if it fully meets the following conditions: there is a reliable assurance of the integrity of information contained in the e-document from the time the information is first generated in the form of the e-document; and information contained in the e-document is accessible and usable in complete form when necessary.

The criterion for assessing integrity is that the information is complete and unaltered, apart from changes in the form arising in the process of communicating, storing, or displaying the e-document. One of the criteria for reliability assurance is when the electronic document is signed with the digital signature granted by a licensed service provider.

Thus, when the e-contract is signed, information contained in the e-contract is accessible and usable in complete form when necessary and the information in the e-contract is intact, then the e-contract shall have legal validity as the original. In reality, it is not difficult for enterprises to prove these three factors to third parties such as tax authorities or the courts. However, whether it is accepted by the third parties remains a question.

The decree amending Decree 52 will stipulate the regulations on authenticating the e-contract by a service provider licensed by the Ministry of Industry and Trade, known as the Certified E-contracts Authority.

When the amended decree comes into force, there will be one more service provider providing authentication services, probably for the purpose of verifying that they have content integrity and the process of verifying the content from time to time, without depending on technology or technicality changes.

However, there remains a question about the need to have another authentication services provider for the e-contract from another ministry, in the circumstance that Vietnam is under administrative reform. In addition, this also incurs costs for enterprises when they must pay for both services, just to make sure that the e-contract is reliable.

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional