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Welcome to an easy-to-follow Q&A guide, designed to clarify the sometimes confusing world of contracts. Ever been confused about how to sign a contract? You are not alone. We are here to explain the basics and make signing contracts easy to understand for everyone. Q1: Are electronic signatures legally valid? Yes. Electronic signatures are recognised as legally valid under laws such as the Digital Signature Act 1997 and the Electronic Commerce Act 2006. However, electronic signatures cannot be used for certain documents such as Power of Attorney and such documents must be properly executed according to relevant legal requirements. Q2: Must all parties sign on the same copy of a contract? Not at all. Parties can sign the contracts in counterparts, meaning each party can sign a separate copy. When combined, these copies constitute the full, enforceable agreement. Q3: How many copies of a contract need to be signed? The number of copies that need to be signed typically corresponds to the number of parties involved. For instance, in a two-party agreement, each party would sign two copies in a physical setting. In the case of electronic signing, a single copy is adequate. Q4: Is it necessary to sign or initial every page of a contract? No. It is not mandatory to sign every page. Generally, signatures are only needed on the designated signatory sections (it is usually located at the last page of the contract). However, initialling each page can prevent unauthorised alterations to the contract. Q5: Are witness signatures required for all contracts? Business contracts usually do not need a witness. Personal documents like wills, often require witness signatures for added legitimacy and to uphold the document in a legal setting. Q6: Is it necessary to stamp a signed contract? Stamping signifies that any applicable taxes or duties on a document have been paid. Even without stamping, a contract that is properly signed by all parties is still a legally binding document. However, for a contract to be admissible in court as evidence, it needs to be stamped. Contracts should be stamped promptly after signing (within 30 days from its execution) to avoid late penalties. This Q&A is intended to simplify your approach to contract signing. Remember, while we provide a basic outline here, the specifics can differ based on where you are and the details of your situation.

Welcome to an easy-to-follow Q&A guide, designed to clarify the sometimes confusing world of contracts. Wondering why contracts are important in business dealings? You are not alone. We are here to clarify why signing contracts is crucial for any business transaction. Q1: Can a contract provide clarity and reduce misunderstandings? Absolutely. A written contract serves to lay out the roles and responsibilities of each party involved, which significantly reduces the possibility of misunderstandings. It acts as a point of reference for what was agreed upon. If disputes arise, the court will turn to the contract to determine the intentions and agreements of the parties to resolve the disputes. Q2: How does a contract offer legal protection? A contract is a legally binding document that is enforceable in a court of law. This legal enforceability offers a layer of protection for the rights and interests of everyone involved. It ensures that each party’s expectations are met and provides a legal remedy if contract has been breached. Q3: Is there a financial benefit to having a contract? Drafting a contract does involve some costs, but these are generally much lower than the expenses incurred from legal battles due to disputes. Contracts provide a more efficient and cost-effective way to resolve issues, as they lay the groundwork for the resolution process and can often prevent disputes from escalating to the need for court intervention. Q4: Does a contract help in making transactions more professional? Yes, having a contract underscores the professionalism of a business transaction. It demonstrates a commitment to honour the terms and an understanding of business protocols, which can help establish and maintain trust between parties. Q5: Can having a contract prevent disputes? Contracts often prevent disputes before they start. By having clear terms and conditions laid out, there is less room for disagreement. Furthermore, a contract can include mechanisms for dispute resolution, making it easier to handle any disagreements that do arise without resorting to litigation. Q6: What happens if you enter a business deal without a contract? Without a contract, there is no formal record of the terms of your agreement, which may lead to misunderstandings and disagreements that are difficult to resolve. This may result in damaged business relationships, financial loss, and potentially expensive and time-consuming litigation. This Q&A is designed to highlight the importance of contracts in business transaction. By establishing clear terms, contracts offer clarity and safeguard rights. Before engaging in any business activity, it is wise to ensure that a well-drafted contract is in place.

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.