Signing On The Pixelled Line

Compared to its real-life counterparts, the virtual marketplace provides a fast and simple way of doing business. So why isn’t everybody doing it? The answer, in a word, is uncertainty. The simple fact nobody knows for sure if on-line transactions will be enforceable leads many cutting-edge businesses to shy away from this otherwise attractive option. This is all about to change.

Ontario introduced new legislation designed to remove barriers to e-commerce by giving effect to the principle of “functional equivalence”. Boiled down to basics, the principle is little more than a legalistic way of saying contractual relations will not be unenforceable simply because they are in electronic form.

The new legislation, appropriately entitled “An Act to promote the use of information technology in commercial and other transactions by resolving legal uncertainties and removing statutory barriers that affect electronic communication”, or Bill 88 for short, is based on the Uniform Electronic Commerce Act adopted by the Uniform Law Conference of Canada in 1999.

The UECA is based, in turn, on the United Nations Model Law on Electronic Commerce. The UN Commission on International Trade drafted the Model Law in 1996 to provide international standards for accepting electronic transactions. All political jurisdictions are expected to adopt local laws that are consistent with the standards set out in the UN Model Law. The United States, Australia, Singapore, Hong Kong, Ireland, India, Argentina and Colombia have already done so.


In Canada, the constitutional division of powers between the federal and provincial governments leaves contracts in the jurisdiction of the provinces. While a number of the provinces are flirting with the idea of enacting legislation of this kind, which province will win the race to enact remains to be determined.

Bill 88 includes the following noteworthy features:

• “Electronic Signatures” 1 will satisfy written signature requirements.

• Valid contracts can be made even if the electronic communication is automated at one or both ends of the transaction. The legislation removes the need for direct human interaction in the formation of contracts.

• It covers both existing and future technologies by providing a broad definition of “electronic”.

• It does not require a person to use electronic communications without his or her consent. However, consent may be inferred from a person’s conduct (e.g. by their actual use of electronic communications).

Perhaps most importantly, Bill 88 provides that two parties can use computers to exchange, store and “sign” legally binding documents through electronic means under a series of functional equivalency rules. For example, a requirement for written documentation will be met by an electronic equivalent so long as it has the capacity to be retained by the person it is provided to. In this regard, information is not capable of being retained if the provider inhibits its storage or printing. Passive availability (e.g. providing the information on a Web site) is not sufficient to meet the requirements that the information be “provided”.


Some documents were excluded from the legislation, presumably because they tend to require detailed rules and safeguards that cannot be addressed in a general statute. Among the exclusions are wills, personal powers of attorney, documents that create or transfer interests in land and require registration to be effective against third parties, as well as most negotiable instruments such as cheques.

Unless another statute specifically provides for its use, or both parties consent to a transaction, the legislation also does not apply to the use of so-called “biometric” information such as finger or iris scans, signature information, or voice recognition. This exclusion has its own unique basis – namely, everybody’s favourite e-evil: the protection of privacy.

Legislation of this kind should boost the volume of business through Internet-based marketing systems. Ontario estimates by 2003, Bill 88 will boost on-line business to the tune of $30.4 million.

1 An Electronic Signature means electronic information that a person creates or adopts in order to sign a document and that is in, attached to, or associated with the document.

Gabe Takach is a partner at the Toronto law firm of Tory Tory, where he heads up the firm’s technology contracting practice. He can be reached at [email protected]

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