Navigating the Digital Marketplace: e-contract formation in Bahrain
Technology, Media & Telecoms Focus
The rapid growth of e-commerce and digital transactions has increased the demand for online contracts, also known as e-contracts.
Law Update: Issue 368 - Technology, Media & Telecoms Focus
Zeina AlbuainainAssociate,Digital & Data
Taimur TufailAssociate,Corporate Commercial
The rapid growth of e-commerce and digital transactions has increased the demand for online contracts, also known as e-contracts. These are legal documents created and signed electronically, without the need for physical paper or ink. They are increasingly used in various industries and transactions, such as sales, services, employment, finance, and healthcare.
E-contracts can take various forms, depending on the type and complexity of the transaction. Some common examples are browsewrap, clickwrap, scrollwrap, and sign-in wrap agreements. These agreements require different levels of user assent, ranging from implied consent through continued use of a website or app, to explicit consent through clicking a button or checking a box.
For example, in the case of browsewrap, a website would typically include terms and conditions and users are deemed to have provided their consent simply by browsing and/or downloading anything from the website. On the other hand, in case of clickwrap, scrollwrap and sign-in wrap agreements, users are in some way or the other required to give their acceptance either by way of clicking a button or checking a box, as mentioned above. Other e-contracts require more sophisticated authentication methods for accepting the contract (i.e., using electronic signatures through platforms such as DocuSign and the likes). The legal landscape in Bahrain requires the parties to comply with certain legalities which are discussed further below.
Compared to traditional paper contracts, e-contracts offer several advantages that can benefit businesses in the digital marketplace. For example, e-contracts can reduce transaction costs, especially for high-volume agreements, by eliminating the need for printing, mailing, and storing paper documents. E-contracts can also speed up the contracting process by allowing quick electronic sending and signing of documents. They could potentially enhance the security and privacy of the contract data by using both digital and physical security measures. Moreover, e-contracts can contribute to environmental sustainability by reducing paper use and waste.
The law recognises the validity and enforceability of e-contracts, as long as they meet certain conditions for the reliability, data integrity, and security of electronic information.
However, e-contracting also poses some legal challenges and risks that need to be addressed. One of the main challenges is ensuring the validity, enforceability, general legal compliance of e-contracts. Therefore, it is important for businesses to be aware of the applicable laws and regulations in their jurisdictions and the jurisdictions of their counterparts.
Different jurisdictions may have different laws and regulations that affect the validity and enforceability of e-contracts and electronic signatures. In Bahrain, e-contracts are governed by the Electronic Communications and Transactions Law (Decree Law No. 54 of 2018, as amended) (“ECTL”), which applies to all transactions and documents of all types, was enacted in 2018 to facilitate the development of the digital economy and promote legal certainty for electronic transactions.
The law recognises the validity and enforceability of e-contracts, as long as they meet certain conditions for the reliability, data integrity, and security of electronic information. The ECTL also provides for the legal recognition of ‘electronic signatures’ (defined as data in electronic form used to identify the signatory and indicate their intention), provided that these are (i) ‘reliable’ in the circumstances; and (ii) proven in fact to have fulfilled the function of identifying the signatory and indicating their intention/acceptance.
The law outlines factors to consider when determining the reliability of an electronic signature method, such as the regularity of system audits, the existence of declarations regarding the method's reliability, and the security of the system used. Trust service providers accredited in Bahrain (i.e., having received accreditation status from the Telecommunications Regulatory Authority) benefit from presumptions of reliability under the ECTL.
While the ECTL provides a comprehensive framework for the validity and enforceability of electronic contracts and signatures, it does not override the general principles of contract law under the Bahrain Civil Code (Decree Law No. 19 of 2001, as amended) (“Civil Code”). The Civil Code defines a contract and its elements, and provides rules for interpretation, modification, and termination of contracts. The Civil Code does not require a specific form for contracts, unless otherwise stipulated by law. Therefore, e-contracts must comply with the essential elements and terms of contracts, as well as any specific requirements for certain types of contracts. Some of the key requirements under the Civil Code in the context of contracts are (as is the case in most of the jurisdictions) that there should be an offer followed by valid acceptance and consideration, certainty, and legality of the subject matter. A contract may meet the conditions under the ECTL for electronic information to be deemed reliable, but could still nonetheless be unenforceable/invalid simply because it does not fulfil the conditions for a valid contract under the Civil Code (for example, if a contract lacks valid acceptance).
In all cases, to set expectations, it is advisable for parties engaging in e-contracting to explicitly acknowledge and clarify the means and validity of electronic transactions.
E-contracts are becoming more prevalent and convenient in the digital marketplace as they offer many advantages and opportunities for businesses and consumers, but they also pose legal challenges and risks that require careful attention and due diligence. E-contracting parties should be aware of the legal frameworks and implications of their agreements, and use appropriate tools and platforms for creating, signing, storing, and retrieving electronically executed contracts.
For further information,please contact Zeina Albuainain and Taimur Tufail.
Published in May 2024
