E-Signatures in the Philippines: Legal Framework and Use Cases

Legal Admissibility of E-signatures

The Electronic Commerce Act of 2000 (“E-commerce Act”) establishes that an e-signature is legally equivalent to a physical one, provided certain conditions are met:

• A method is used to identify the party sought to be bound and to indicate said party’s access to the electronic document necessary for his consent or approval through the e-signature;
• Said method is reliable and appropriate for the purpose for which the electronic document was generated or communicated, in the light of all the circumstances, including any relevant agreement;
• It is necessary for the party sought to be bound, in order to proceed further with the transaction, to have executed or provided the e-signature; and
• The other party is authorized and enabled to verify the e-signature and decide to proceed with the transaction authenticated by the same.

In a legal proceeding, the law presumes that the e-signature belongs to the person it’s attributed to and was made with the intent to approve the document unless proven otherwise. If the conditions of the E-commerce Act are not met, the signature may still demonstrate consent, but the presumption of enforceability is removed.

Additionally, an electronic or digital signature authenticated under the Supreme Court’s Rules on Electronic Evidence is admissible as the functional equivalent of the signature of a person on a written document. The authentication process can be based on:

• Evidence that a method or process was utilised to establish an e-signature and verify the e-signature;
• Other means provided by law.
• Other means satisfactory to the judge as establishing the genuineness of the e-signature.

Key Requirements for Legal Validity

For an e-signature to be legally binding in the Philippines following conditions must be fulfilled:

• The signer must be aware of the electronic document and must intend to sign electronically, which may be demonstrated by actions such as typing, clicking, and writing.
• Both Parties must agree to conduct business electronically and agree through e-signature.
• The e-signature must be logically associated with the electronic document, often using timestamps or audit trails, signature fields, and timestamps.
• The document must not be altered after signing. E-signature can maintain document integrity by providing tamper-evident features that highlight any changes after signing.
• E-signature must meet the requirements set forth by the E-Commerce Act and also must be capable of being reproduced and retained accurately for future use.

When E-signatures Are Generally Accepted:

In the Philippines, simple e-signatures as widely accepted for various transactions, including:

• HR documents including employment contracts, NDAs, employee invention agreements, notices, and onboarding paperwork.
• Commercial Agreements such as purchase orders, sales agreements, service contracts, invoices, etc.
• Retail Agreements, including account opening forms, sales terms, service terms, user manuals, and policies.
• IP licenses (excluding trademarks).

However, depending on the use case, extra evidence to support such an e-sign may be required in the event a dispute arises.

When E-signatures May Not Be Valid:

Although there are no laws expressly prohibiting the use of e-signatures for any contract, certain documents still require a traditional physical signature, especially if notarization is needed. These include:

• A contract of partnership where immovable property or real rights are contributed;
• Donation of an immovable property;
• An agent’s authority (special power of attorney) to sell the land or any interest in the land;
• Royalty agreements involving the assignment of patents or patent applications ;
• All subordinated loan agreements between a lender and a broker-dealer;
• Secured demand notes;
• Application for registration of securities;
• Several corporate documents submitted to the SEC, and reports and forms submitted by banks to the Bangko Sentral ng Pilipinas;
• Proxies issued by brokers and dealers;
• The cession, repudiation, or renunciation of hereditary rights or of those of the conjugal partnership of gains;
• An agent’s authority over an object which would require public document;
• A cession of actions or rights proceeding from an act appearing in a public document; and
• An assignment of a credit, right or action shall produce no effect as against third persons (although it remains valid between the parties) unless it appears in a public document, or, where the assignment involves real property, the instrument is recorded in the Registry of Property.

Conclusion

E-signatures are legally recognized and enforceable in the Philippines, provided they meet specific criteria under the Electronic Commerce Act of 2000 and other applicable laws, rules, orders, and regulations. They offer a secure and efficient alternative to traditional signatures for many types of transactions, though certain documents, particularly those requiring notarization, still need a traditional signature. Always ensure compliance with the legal requirements to guarantee the validity of your electronic agreements.