Electronic contracts to be solidified under new law

Thursday 13 September 2018

Proposals to bring Guernsey contract law into 2018 have been put forward by the Economic Development Committee, that aim to solidify the position of electronic transactions.

Essentially, the new law will clarify that an electronic agent can, legally, make a contract, act on behalf of "natural persons", and be involved in a number of ways without revoking the legal validity of a contract.

Further to that, they set it into the law that "when a person uses an electronic agent for the purpose of contract formation, there is a presumption that that person intended to create a legally binding contract".

All of the changes seek to give more certainty and close loopholes that may have previously surrounded the validity of an electronic contract, versus a physical, paper one. Also, in a move to advance the island's support for FinTech, it is hoped the changes may "enhance the appeal of Guernsey as a jurisdiction for business".

The plans are an update to the Electronic Transactions Law from 2000, and have been developed as part of the Economic Development Strategy approved earlier this summer. 

While Economic Development said the previous law had been well received by the island's finance industry, and had been effective, it believed now was the right time for enhancements to be made to ensure "it continues to provide market leading legal solutions to industry with regards to the use of electronic agents in contract formation, execution, performance and termination."

As part of the core proposals, the ordinance would make provisions for the rules of private international law to still apply. This means the parties involved in a contract are always free to choose the governing law it follows if there is a conflict. For example if there was a conflict between the provisions of Guernsey law and the governing law of the contract, the rules of private international law will continue to apply. The legal effect, validity, and enforceability of a contract will continue be determined by the system of law applicable to the contract, as stated by this.

The proposals themselves were developed by a working group established with members of Guernsey Finance and Economic Developments Finance Sector Development Team involved. It also worked with other representatives of the local finance and legal industries.

They will go before the States for approval, and also ask the assembly to "direct the preparation" of any legislation that might be needed to enact the new proposals.