Articles

Contracts serve as the cornerstone of business transactions and establish the rights and responsibilities of all parties involved. Once contracts are signed, they become legally binding documents on the parties and cannot be changed or amended at the parties’ discretion. However, there are situations where amending a signed contract becomes a necessity to accommodate changes in plans and circumstances. In this article, we will explore the process of amending a signed contract, offering insights and guidance to you. Review the Existing Clause in the Contract: In most contracts, you will find an amendment or variation clause within the contracts that outlines the conditions of making changes. These clauses are usually located at the end of the contract, often in the final few boilerplate clauses. The standard amendment or variation clause usually require prior written consent of all parties involved before any changes to the contracts can be made. For example, a common phrasing might state, “No variation of any provisions of this Contract shall be binding unless made in writing and signed by all parties.” If your contract lacks such a clause, the usual method is to make changes in writing. This can include email correspondence or other written communication. However, be cautious with handwritten notes in pencil or the absence of the other party’s signature in the amended copy, as these may not be recognised by the court as valid amendment, as confirmed by the Court of Appeal in Kee Wah Soong v Yap Boon Hwa and Another Appeal [2018] 1 LNS 1284. Amend the Contract in Writing While email or handwritten communication is more convenient, it is generally advisable to record amendments through a proper legal document known as an “Addendum.” An Addendum is a legally binding document that outlines the changes to the original contract, the changes may include adding a new clause, deleting an existing one, or modifying a clause. For example, common language used in an Addendum might include wordings like “The terms of Clause 1.1 of the Tenancy Agreement shall be amended to read as follows”. Once the intended changes are clearly defined in the Addendum, the parties involved in the original contract will sign the Addendum and date it to signify their consent to the amendments. In the event of disputes, the courts will consider the original contracts as well as the addendum to determine an issue. For example, in the case of Hewlett-Packard (M) Sdn Bhd & Anor v Agih Tinta Sdn Bhd [2022] 9 CLJ, the Court of Appeal referred to the addendum and determined that the respondent, who was initially not a partner of HP, later became an affiliate through an addendum with Sunlight, a partner of HP. Making oral changes to a contract is not recommended. This is because oral communication frequently results in more disputes and can prolong the process of ascertaining the parties’ intentions. In court, oral evidence is typically more difficult to admit as evidence when there is a written document available. Who Can Amend the Contract? In most scenarios, a contract can only be amended if all parties who originally signed it unanimously agree to the proposed changes. This ensures that the fundamental spirit and intent of the contract are preserved, and no party can unilaterally impose changes without the others’ consent. However, in certain contracts, such as bank facility agreements, one party, often the bank, may be granted the authority to make changes without requiring the consent of the other party. This unilateral amendment power will be specified in the contract terms. When dealing with such contracts, it is important to carefully review the agreement to understand which party holds the authority to make alterations. Practical Steps to Amend a Contract: We will now outline a series of important steps you can take to effectively amend the contract: Review the original contract to identify the section or clause that needs modification. Communicate openly with the other party involved. Discuss the proposed changes, explain your reasons, and listen to their perspective. Sometimes, parties can come to a mutual agreement without making any changes to the contract. If all parties agree to the proposed changes, the next step is to document these changes in writing. As discussed above, an Addendum may be used to formally record the changes. Maintain records of all correspondence and documents related to the changes. These records may serve as evidence in the event of future disputes and offer clarity of the agreed-upon modifications. Be careful when making material changes to a contract. These are changes that substantially alter the original terms. In some cases, creating an entirely new contract may be wiser than amending the existing one. Contracts are designed to protect the legal interests of the contracting parties. When it comes to amending a signed contract, it requires careful consideration, open communication, and documentation. By following the steps outlined in this article, you can effectively navigate contract changes, ensuring the continued legal protection of your interest in commercial transactions.

Is electronic signature legally recognised by law? Digital Signature and Electronic signature (E-Sign) may be used interchangeably, to refer a signing tool for signer to sign on a softcopy. Signing is an action to infer that the signer has indeed, read, understand and agreed/approved to the content of a document. Traditionally, signing is done on a physical document or an object when the signer performs stokes on it, this includes fingerprint signing. With the advancement of technology, signing today, can be performed digitally by affixing, name, mark and even drawing to the softcopy which we refer to Electronic Signature or Digital Signature. Although the purpose of both terms meant the same, however, they refer to very different mechanism in terms of framework, security and admissibility. Electronic Signature In Malaysia, Electronic Signature is governed by Electronic Commerce Act (ECA)[1] to refer any letter, character, number, sound or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature. In another word, as long as an individual affixed his “name” on a PDF, that “name” would be regarded as an Electronic Signature. The main purpose of ECA is to recognize electronic messages in commercial transactions. For an Electronic Signature to be admissible, the law requires that where a signature is required, and if the document is in the form of electronic message, an electronic signature must fulfill the following requirements: Subsection 2 also provides that an electronic signature is as reliable as is appropriate if So long as the requirements laid down in Section 9 of the ECA is satisfied, then the requirements of the law on electronic signature is fulfilled. However, Section 10 of the ECA specifically provides that for documents which requires a seal to be affixed, such as Power of Attorney, Wills, Trust documents and Negotiable instrument (Bank Cheques), these documents were specifically mentioned under the Schedule of the Act, must not be admissible by Electronic Signature unless it is affixed by a digital signature as provided under the Digital Signature Act 1997. Here, it clearly shows that our legislature distinguished electronic signature from digital signature. Digital Signature On a technical standpoint, Digital Signature, an enhanced version of Electronic Signature, provides a higher threshold of security measures compared to an electronic signature. Unlike an Electronic Signature, where the true identity of the signer can easily be faked, for instance person A signed the signature of person B through impersonation, Digital Signature provides a higher level of profiling towards the identity of a signer. The Malaysian legislation has also provided the definition of Digital Signature in Digital Signature Act 1997[2], which stated as the transformation (created using the private key that corresponds to the signer’s public key) of a message using an asymmetric cryptosystem such that a person having the initial message and the signer’s public key can be accurately determine whether the message has been altered since the transformation was made. The legislation has provided a much more technical definition to Digital Signature compared to Electronic Signature. In a simpler term Digital Signature is a mathematical scheme for verifying the authenticity of digital messages or documents, which includes the signer and sender. However, Section 62 of the DSA provides a set of requirements for a document to be legally binding: In Malaysia, there is only a few recognized Digital Signature options available which is certified and validatied by licensed certification authorities. They are: This would mean, documents signed by other foreign Digital Signing platform do not have the same legally binging effect since they do not have the appropriate license as the Certification Authority. In summary, when Malaysian law mandates the use of a seal on a document, Section 10 of the ECA stipulates that a digital signature is the minimum requirement. Before opting for either an electronic signature or a digital signature, parties should, especially when dealing with documents that traditionally require a seal, carefully consider the balance between: (i) the convenience of electronically signing documents using e-signature tools, and (ii) the legal risks associated with the potential challenges to the validity or compliance with statutory requirements of such e-signatures. If employing digital signatures in such cases proves to be overly complex or logistically challenging, opting for physical signatures on the document may still be a prudent choice. [1] https://lom.agc.gov.my/ilims/upload/portal/akta/LOM/EN/Act%20658.pdf [2] https://lom.agc.gov.my/ilims/upload/portal/akta/LOM/EN/Act%20562.pdf

As professionals involved in corporate and commercial law, a question that often comes to the forefront is: Is initialling every page of a contract necessary for its legal validity? Whether you’re a legal advisor, a business owner, or someone about to sign a substantial contract, the uncertainty around this topic can be daunting. We delve deep into this area, comparing it against established legal norms and drawing upon real-world scenarios to give you a comprehensive understanding. What Does Initialling a Page Mean? Just like seasoning enhances the flavor of food, initialling a contract can serve to enhance its validity, though it’s not the primary ingredient that makes it enforceable. Initialling usually involves marking the bottom right corner of each page of a contract with your initials, essentially an abbreviated form of your full signature. The Many Forms of Initials While there’s no one-size-fits-all approach to initialling, the most common form is the first letter of your first name combined with the first letter of your last name. Think of it as your personal seal, not unlike a medieval knight’s coat of arms, offering identification and a smidgen of authority. Is Initialling a Legal Requirement? Malaysia’s Stance on Initialling Contracts In Malaysia, and indeed many jurisdictions, initialling each page of a contract isn’t legally mandated. A contract can be valid if it fulfills key elements like offer, acceptance, consideration, legal capacity of parties, intention to create legal relations, and mutual consent. Case Law Insights The Malaysian High Court, for instance, has clarified this aspect through various rulings. In the case of Tan Suan Sim v Ooi Joo Aik [2023], the focus was on the signature at the end of the will, not any initials on preceding pages. Similarly, in the Mohd Pkhruddin Bian v Zulkarnain Diris [2021] case, the court looked beyond mere signatures and initials to ascertain whether the contract was entered into voluntarily. Sectoral Variations However, it’s worth mentioning that some industries, particularly banking, financial services, and real estate, prefer the practice due to their stringent contract requirements. Think of it like using both a belt and suspenders; it may be overkill for everyday wear, but if you’re doing acrobatics, it’s prudent. The Benefits of Initialling Even if the law doesn’t explicitly demand it, think of initialling as a “best practice.” Here are some compelling reasons: Enhancing Clarity and Confirmation: Like a series of breadcrumbs in a dense forest, initials can guide both parties through the labyrinth of legal jargon, confirming mutual agreement on each clause. Enhancing Contract Security: Imagine your contract as a house. Initialling each page is akin to installing additional locks on each door. It serves as a deterrent against unauthorized insertions or alterations. Reinforcing Contract Enforceability: Initialling can add a layer of robustness to your contract, especially when deliberating contract validity in court. It acts as tangible evidence that both parties were in full agreement, down to the very last page. Electronic Contracts: A Different Ball Game  With the advent of digital technology, we see a shift towards electronic contracts. Unlike paper contracts, e-contracts come with unique identifiers and audit trails that serve the same purpose as handwritten initials. Document IDs and Audit Trails In e-contracts, document IDs and audit logs provide a digital footprint that tracks the contract’s history. It’s like having a built-in security camera system, recording every change and signature. Risks Associated with Digital Signatures However, digital technology isn’t foolproof. The risks of tampering and unauthorized changes exist in both handwritten and digital contracts. Conclusion So, is initialling every page of a contract necessary for its legal validity? In a nutshell, no. But is it highly recommended? Absolutely. Initialling serves as both a protective measure and a clarification tool, leaving no stone unturned in affirming the mutual agreement between parties. It may not be the law, but it certainly is a wise practice. Frequently Asked Questions (FAQs)   Is it legally mandatory to initial every page of a contract in Malaysia? No, it is not legally required but is often considered best practice. How does initialling benefit the parties involved in a contract? It enhances clarity, security, and enforceability. Are electronic contracts safer than traditional contracts? Both have their own set of risks and benefits; it’s essential to understand your specific needs. What elements make a contract legally valid? Offer, acceptance, consideration, legal capacity, intention to create legal relations, and mutual consent are key. Is initialling prevalent in certain industries? Yes, especially in banking, financial services, and real estate. ***** About the author: This article was written by Daphne Sit, Senior Associate, Corporate & Commercial – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Introduction: In the rapidly evolving landscape of the digital age, startups are emerging as vital drivers of innovation and economic growth. Intellectual property (IP) plays a pivotal role for these budding ventures as it empowers them to gain competitive edge in the market. What is Intellectual Property? At its core, intellectual property encompasses the intangible assets resulting from human intellect and creativity. It recognizes and safeguards the products of our imagination, enabling creators to control and benefit from their unique works. Whether it’s a ground-breaking invention, a thought-provoking novel, an inspiring artwork, a captivating design, or a recognisable brand logo, intellectual property rights play a pivotal role in promoting progress, encouraging competition, and driving economic growth. Types of Intellectual Property: Copyright: Copyright is a legal term used to describe the rights that creators have over their literary and artistic works. Works covered by copyright range from books, music, paintings, sculpture, and films, to computer programs, databases, advertisements, maps, and technical drawings. Securing copyrights enables startups to prevent unauthorised reproduction, distribution, and public display of their works, especially crucial in the digital landscape.  Patent: A patent is an exclusive right granted for an invention. Generally speaking, a patent provides the patent owner with the right to decide how or whether the invention can be used by others. In exchange for this right, the patent owner makes technical information about the invention publicly available in the published patent document. Patents encourage technological advancements and foster innovation, protecting novel and non-obvious inventions. Startups with unique products or technologies can rely on patents to safeguard their innovations. Trademark: A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises. Trademarks date back to ancient times when artisans used to put their signature or “mark” on their products. Trademarks protect distinctive signs, symbols, names, and logos used to identify and differentiate products or services in the marketplace. They serve as valuable assets for businesses, establishing brand recognition and consumer trust. It is worth noting that the new trade mark law now also extends protection to non-traditional marks, including colour, shape, sound, and motion. Registering trademarks provides startups with the means to safeguard their brand identity from potential confusion among consumers, allowing them to establish a strong brand presence and foster customer loyalty. Industrial Design: An industrial design constitutes the ornamental or aesthetic aspect of an article. A design may consist of three-dimensional features, such as the shape or surface of an article, or of two-dimensional features, such as patterns or lines. Industrial designs safeguard the unique visual appearance of a product, encouraging innovation in design and preventing unauthorised copying. Geographical Indication: Geographical indications and appellations of origin are signs used on goods that have a specific geographical origin and possess qualities, a reputation, or characteristics that are essentially attributable to that place of origin. Most commonly, a geographical indication includes the name of the place of origin of the goods. Geographical indications provide protection against misappropriation, fostering economic development and preserving local traditions. Trade Secrets: In addition to the aforementioned types of intellectual property, trade secrets also play a crucial role in protecting confidential information. Trade secrets are IP rights on confidential information that may be sold or licensed. They encompass valuable business information, such as manufacturing processes, formulas, algorithms, customer lists, and marketing strategies, which provide a competitive advantage to companies. While the name of the individual client is not confidential, the list or database of clients on which a business has expended time and effort to compile may be.[1] The unauthorised acquisition, use, or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of trade secret protection. Trade secrets are not publicly disclosed like patents or trademarks but are protected through confidentiality agreements, non-disclosure agreements, and strict internal protocols. The Importance of Intellectual Property: Competitive Advantage: IP protection empowers startups to safeguard their unique products, services, or brand identities, differentiating them in the market and attracting customers. Market Value and Investment Opportunities: Intellectual property assets enhance a startup’s market value, attracting potential investors or partners. Strong IP protection demonstrates the company’s commitment to innovation and potential profitability. Revenue Generation: IP protection enables startups to commercialise their innovations through licensing or franchising agreements, generating revenue by granting others the right to use their IP in exchange for royalties or fees. Legal Recourse: IP protection empowers startups to take legal action against infringers, deterring potential competitors from copying or misusing their innovations and helping to maintain market share. Conclusion: In conclusion, intellectual property is a valuable asset for startups, paving the way for growth, innovation, and commercial success. By recognizing and protecting their intellectual property rights, startups can thrive in the competitive market and realize their full potential in the dynamic world of entrepreneurship. [1] Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632 ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Meta Platforms, formerly known as Facebook, recently launched an app called Threads, which quickly gained over 10 million users within the first seven hours[1]. The app aims to provide a more personal and intimate way for users to connect with their friends and followers. However, Meta’s competitor, Twitter is not happy with Threads, and has accused Meta of misusing its “trade secrets and other intellectual property” to develop the Threads app. Twitter attorney Alex Spiro claims that Meta hired several former Twitter employees who still had access to confidential information and trade secrets. Twitter also accused Meta of using such information to further develop the “copycat” app[2]. In a letter sent to Meta’s CEO and founder Mark Zuckerberg, Twitter’s lawyer Alex Spiro wrote: “Twitter intends to strictly enforce its intellectual property rights, and demands that Meta take immediate steps to stop using any Twitter trade secrets or other highly confidential information.” In response, Meta has denied these allegations, asserting that Threads is a “new and innovative” app that does not infringe on Twitter’s intellectual property. The company has expressed confidence that it will prevail in the face of these accusations. So is Meta’s Thread a threat to Twitter’s trade secrets? It’s still early to say for sure. However, the allegations against Meta are serious, and the outcome of the allegation could have a significant impact on the tech industry when trade secrets are involved. Interestingly, this turn of events includes a shift in perspective from Twitter’s owner, Elon Musk. In the past, Musk has criticised the farcical[3] nature of intellectual property registration and has made many of his own inventions open source[4]. However, in a surprising move, Musk has decided to take legal action and threaten to sue Meta for alleged trade secret violations. This suggests that Musk now sees Meta’s Thread as a genuine threat to Twitter, contradicting his previous stance on open innovation and the importance of safeguarding intellectual property, particularly trade secret. This gripping case raised crucial questions about the importance of safeguarding trade secrets and intellectual property. Trade secrets confer a competitive edge and valuable assets for businesses, and they must be safeguarded carefully. Instead of waiting for potential infringements that could lead to future difficulties, businesses should focus on safeguarding their trade secrets. What is Trade Secret? A trade secret is confidential information that gives a business a competitive advantage[5]. Trade secrets can include anything from product formulas to marketing strategies. In Twitter’s case, the source codes and users’ database are their trade secrets. Trade Secret Protection in Malaysia In Malaysia, trade secrets are recognised as confidential information but do not require registration for protection. Unlike other forms of intellectual property, trade secret protection is enforced through legally binding contracts rather than specific legislation. Disputes regarding trade secret infringement can only seek remedy for infringement under the common law tort of breach of confidentiality as no direct statutory protection nor definition of trade secret exists. Trade secrets are eligible for protection as long as they meet specific criteria: they must be commercially valuable, known only to a limited group, and the rightful holder must take reasonable steps to keep them confidential. How to Safeguard Trade Secret We learned that trade secrets confer a competitive edge to businesses. To safeguard trade secrets, it is recommended that you establish confidentiality agreements, non-disclosure agreements (NDAs), and clauses to prevent employees and other parties from divulging confidential information. These agreements should be in place during and after employments to ensure the ongoing protection of trade secrets. In Malaysia, trade secret protection relies on legally binding contracts rather than specific legislation. Disputes regarding trade secret infringement are typically resolved through Malaysian courts. In Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd[6], the court ruled that for a trade secret dispute to be actionable, the specifics on the trade secrets must be identified. In this case, the plaintiff’s failure to specifically identify the confidential information (the trade secret) led to their case being dismissed. This shows the importance of carefully identifying the trade secrets that you believe have been infringed upon. Conclusion: The case between Twitter and Meta is a complex one, and the outcome is still uncertain. However, the case raises important questions about the future of trade secrets in the tech industry. As the tech industry becomes more competitive, it is likely that we will see more cases of trade secret theft. Businesses in the tech industry need to be aware of the risks of trade secret theft and take steps to protect their confidential information. [1] https://www.forbes.com/sites/siladityaray/2023/07/06/zuckerberg-says-threads-crossed-5-million-signups-in-first-four-hours-as-musk-rails-against-instagram/?sh=29ccc4ad632c [2] https://www.cbsnews.com/news/twitter-threatens-lawsuit-meta-threads-elon-musk-mark-zuckerberg/ [3] https://www.businessinsider.com/elon-musk-patents-2012-11 [4] https://www.tesla.com/blog/all-our-patent-are-belong-you [5] https://www.wipo.int/tradesecrets/en/ [6] [2016] 3 MLJ 417. ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

In our previous article, we explored the significant transformation brough about in the legal industry by Artificial Intelligence (AI), perceiving “the law as data”, which has brought about significant transformations in the legal industry. However, it is crucial to fully grasp the phrase “AI sees the Law as data” as “AI sees the Law as data but not as Law”. While AI serves as a valuable tool in the legal field, it is essential to acknowledge the challenges it faces in practical legal applications, particularly in niche areas of law or smaller jurisdictions. Drawing a parallel, let’s consider the example of a knife: while it is an indispensable instrument in culinary settings, it can also pose potential danger if not used appropriately. While technology has made significant advancements, it still faces challenges when dealing with complex legal knowledge, especially in niche areas of law or smaller jurisdictions. According to Neil Sahota, the essence of AI lies in the training process provided to the machine which depends on supplying the system with data and algorithms to discern patterns, make predictions, or accomplish specific tasks. In simple terms, despite being fed with vast amount of data, AI still lacks critical thinking abilities and a practical understanding of the law. It relies solely on detected patterns and does not possess the same understanding of the law as a human lawyer. This results in a garbage-in-garbage-out scenario, hindering its effectiveness in addressing complex legal matters. Accuracy: Acquiring high-quality data for an AI system poses a challenge in the legal field. While diverse sources are used, ensuring accuracy becomes difficult once resources such as published books, Wikipedia articles, and a refined “Common Crawl” repository are exhausted. Unlike human lawyers who learn from handpicked reliable sources, AI models are fuelled by both labelled and unlabelled data, potentially leading to erroneous outcomes. Additionally, if trained on inaccurate data, AI models may generate hallucinations or fabricate facts. Interestingly, AI systems are only as good as the data on which they are trained. If the data is inaccurate, the AI system will also be inaccurate. A New York lawyer is facing possible sanctions after citing fake cases generated by OpenAI’s ChatGPT in a legal brief filed in federal court. The incident occurred in a personal injury lawsuit against Avianca, where the lawyer used ChatGPT to supplement his legal research. However, the judge discovered that six of the cited cases were bogus, leading to doubts about the reliability of the lawyer’s sources. The mistake gained media attention and prompted discussions about the need for verification when using AI-powered tools in legal research. Therefore, one should approach AI as a helpful starting point, rather than a definitive source. AI system may also have limited awareness of different legislation and jurisdictions. In a niche area or a small jurisdiction, AI models might not be effectively trained to address specific needs. Therefore, legal professionals should exercise caution when relying solely on AI-generated content for legal drafting. It is important to consider the limitations and potential inaccuracies of AI models and ensure that human expertise and verification are incorporated into the process. Bias Concerns: Similar to their human counterparts, AI systems can exhibit biases. Biased training data or algorithms design can result in unfair treatment of certain individuals or groups. Using historical data that reflects past mistake can lead AI systems to replicate these biases. AI systems can learn from the data they are trained on. This means that if an AI system is trained on data that is biased, the AI system will also be biased. For example, if an AI system is trained on a dataset of legal cases that predominantly favours men, the AI system may be more likely to recommend that men be given lighter sentences than women. The bias in AI systems can damage public trust in the legal system. For example, if people believe that AI systems are biased against them, they may be less likely to report crimes or cooperate with law enforcement. Addressing this challenge requires mechanisms for detecting, measuring, and mitigating biases in AI systems, ultimately promoting fairness and equity in the legal field. Transparency: Understanding the decision-making process of AI systems is crucial in the legal field. Transparency builds trust among legal practitioners, clients, and the public. By providing clear explanations and justifications for AI-generated outcomes, we can ensure ethical and responsible use of AI. Achieving transparency involves explainable AI techniques, documentation of AI processes, and external audits of AI systems. Despite these challenges, the use of AI in the legal field is expected to continue growing. AI has shown us the potential to pave the way towards AI Lawyer but not as a replacement of human expertise and judgement, yet. Even though there are many examples online where AI falls short, the reality is that it is very suitable for handling legal tasks under the supervision of a knowledgeable legal expert. While AI cannot replace human expertise and judgement, it serves as a valuable tool that enhances the capabilities and efficiency of legal professionals in the digital age.   ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.