SR

26-10-2020


CONCLUSION OF DISTANCE CONTRACTS – NECESSITY IN TIME OF COVID 19

From the beginning of the global Covid 19 pandemic and amplified physical distancing measures, necessity for finding alternative ways for concluding contracts compatible to distancing measures increased. Work from home, gathering ban, transport restrictions forced legal entities to perform their business activities without personal presence, which raised doubts in terms of form of concluding contracts which was usually performed by personal signage of the document.

 

The way of expressing the will when concluding a contract

In accordance with Law on Contracts and Torts the contract is concluded when the contracting parties agree on all essential constitutive elements of the contract. The will for concluding a contract, as a decisive element for its creation, can be expressed in various ways including traditional written and signed contract, as well as intention to enter into a contract expressed by words, usual signs or other conduct on the ground of which one may safely conclude of its existence.

The above means that most contracts may be concluded by oral agreement, exchange of e-mails, telephone conversation and number of other ways which enable physical distance measures, provided that the expression of will is made freely and seriously.

Contracts that concern services relating information technologies are usually already concluded electronically by entering certain symbols in provided fields, by filling out or ticking of the questionnaire etc., or in the form of the electronic contract in accordance with the Law on electronic commerce.

The law does not differentiate between the legal force of contracts concluded in the said way if there is no doubt in the contractual will.

However, in commerce, it is common and advisable that all contracts be concluded with written trace and formally, so that provisions of such contract are unquestionable and with little possibility of misinterpretation. Legal entities still have the most trust in written and personally signed contracts.

In situations where a written document is required to conclude a contract and the contracting parties are unable or unwilling to physically meet, different ways of concluding a contract exist.

 

Exchange of documents

The contract shall be considered concluded when the document is signed by all persons the document bounds. When exchanging documents, it is sufficient for both parties to sign one or each party to sign a copy of the document intended for the other party. It would be best to exchange the documents in a way that both parties obtain the original document with the original signature, however the same can also be done by exchanging scanned documents by e-mail or in any other way.

In some countries there are specific conditions for concluding a distance contract and signing the contract without presence of the other contractual party. This mainly relates to providing proof that the document is indeed signed personally (e.g. the presence of a witness is required). Serbian laws don’t specifically deal with this way of concluding a contract, but it is certainly recommended to gather as much evidence as possible that the contract is concluded i.e. personally signed remotely. For this purpose the contract may be signed before witnesses or via video conference, by exchanging e-mails which confirm that a specific person signed the documents and thus concluded a distance contract etc.

Contracts for which certified signatures, notarization or solemnization is necessary cannot unfortunately be concluded in said ways.

 

Electronic signature and electronic seal

What provides additional security when concluding a distance contract is signing of the contracts with electronic signature and electronic seal in accordance with the Law on Electronic Documents, Electronic Identification and Trust Services in Electronic Business. This way of concluding a contract is in rapid increase in line with the development of information technologies.

However, contracts and other legal transactions that by specific law require the form of signature verification, public confirmation (solemnization) or notarization, cannot be concluded in this way. This can be considered as shortcoming in regulations, as well as in technical solution of a profession which is clearly still not fully ready to open doors to opportunities that information technology provides.

When contracts for conclusion of which a special written form is required is concerned (such as employment contracts), they can be concluded remotely in electronic form with the necessity of signing of the same using a certificate, i.e. electronic signature, in accordance with the Law on Electronic Document, Electronic Identification and Trust Services in Electronic Business.

Amongst first, employment contracts were electronically signed by young doctoral students for jobs on scientific projects at the Ministry of Education and Science.

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Serbian legal regulations differentiate between electronic signature and qualified electronic signature. Electronic signature confirms the identity of the signatory of the electronic document, whereas qualified electronic signature, created by qualified means for creation of electronic signature, not only confirms but also guarantees the identity of the signatory and therefore has the same legal effect as a handwritten signature.

The fact that the validity and the probative value of the electronic signatures and electronic seal cannot be challenged only because they are in electronic form or do not meet requirements for a qualified electronic signature adds to the growing expansion of its use.  Neither the electronic document itself can be challenged for its validity, probative value, nor written form only because it is in electronic form.

A qualified electronic seal is subject to legal presumption of preserving the integrity and accuracy of data origin to which it is related.

As the use of electronic signature and electronic seal is growing, we can expect that its application will be expanded in conclusion of numerous other contracts, such as construction contracts, real estate purchase contracts, lifelong maintenance contracts etc.

 

Tendencies of distance business

It seems that the Covid 19 pandemic, with all measures that involve physical distance, will contribute to the accelerated development or electronic business in general. Information technologies provide solutions for various types of remote transactions, and now they provide solutions for legal transactions as well. With development of Smart Contracts which monitor the fulfillment of contractual obligations, contract law gained a completely new dimension. On the other hand, other segments of commerce also have a tendency to change to the electronic platforms.  After revolution made by crypto currencies, a recently the European Central Bank announced plans to introduce a new currency – the digital euro, which would represent a definitive entry into a new monetary era.

Serbian regulations are trying to follow the transition of transactions to electronic platforms, and we can expect the adoption of the Law on Digital Property, however there are still many gaps that should be regulated both by regulations and stands of competent institutions in a number of practical issues. This would primarily ensure trust of entities in this way of doing business. Unfortunately, it seems that the profession does not manage to follow and accept all available IT solutions at the same pace of their development, and currently, according to research, only 5% of IT business solutions is used in legal transactions.

In near future we can expect that the personal signing and obligatory physical presence to conduct transactions will be an exception. This will certainly be accelerated by the situation with Covid 19 pandemic, and perhaps it is time to optimistically glance in that direction and recognize that no matter how difficult circumstances are, business will always find a way to meet its fundamental premises – profit, if not directly material, that with alternative to gain time, save costs, open new business opportunities etc. which as a final result will again have an easier way of doing business and capital turnover.

 

For all further information or queries, please contact us.


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