ReSA Regulatory Framework for Business Transactions (RFT) The Review School of Accountancy 5" Floor CMFF! Building 813.Gor R Papaand § Loyola sts ‘Sampaloc. Manila 735-9807 / 734-3989 / (0910) 439-1320, resareview@hotmat com Atty. R. Rosales « Atty. J. Domingo Atty. N. Valderrama RFBT ~ 11: ELECTRONIC COMMERCE ELECTRONIC COMMERCE ACT. (CA oF RA 8792, Declaration of Policy: The State recognizes [The vital role of information and communications technology (ICT) in nation-building: 2 The need to create an environment which supports and ensures the availability, diversity and affordability of ICT products and services; ‘The primary responsibility of the private sector im contributing investments and. services. in telecommunications and information technolos” 4. The need to develop. with appropriate training Programs and institutional policy changes. ‘human resources for the information fechnoloxy age. labor force skilled in the use of ICT and a Population capable of operating and utilizing clectronic appliances and computers, its obligation to facilitate the transfer and prometion of technology; to ensure network security connectivity and neutrality of technology for national benefit; and need to marshal, organize and deples national information infrastructures. ‘comprising in both telecommunieations network and strategic information services, including their interconnection to the global information networks, with the necessary and appropriate financial, diplomatic and tecknical framework, systems and facilities Objective: The ECA aims to facilitate domest ternational dealings. transactions. arrangements information through the utilization of electronic. ‘optical and similar medium, mode. instrumentality and technology to recognize the authenticity reliability of electronic documents related 1 such activities and {0 promote the universal use of clectronic transaction in the government and general public. Sphere of Application: The ECA shall apply to any kind of data message and electronic document used in the context of commercial_and non-commercial ies to include domestic and international dealings, transactions, arrangements. agreements ‘contracts and exchanges and storage of information. Definition of Terms Addressee refers to a person who is intended by the Originator to receive the electronic data message oF electronic document. The term does not include 3 person acting as an intermediary with respect 10 that clectronic data message or electronic data doctan-nt Computer refers to any device oF apparatus which. by electronic, electto-mechanical, or magneue impulse, ‘or by other means, is capable of receiving, recording. ansmitting, storing. processing. retrieving. or producing information, data figures. symbols or other nodes of written expression accord ‘matheniaticat and logical rules o of performing any fone or more of these functions. Data Message refers to information received or stored by electron ‘optical o, similar near Information and Communications System refers 10 1 syston intended for and capable of generating, sending, receiving, stor electronic data messages or electronic documents and includes the computer system or other similar device by oF in which data is recorded or stored and any procedures related to the recording or storage of ‘cleetronis data message or electronie document. signature refers 1o any distinctive mark. chetacierisi. and/or sound in electronic form. the identity of @ person and attached to oF aseoviated with the electronic data message vr electronic document or any methodology or provederes employed or adopted by a person and executed or adopted by such person with the intention ff authenticating or approving an electronic data message or electronic document ecirenic Document refers to information or the eatitinn of information, data, figures. symbols 1" makes of written expression, described or inowever represented, by which a right is established (or an obligation extinguished, or by which a fact may be prove and aifirmed, which is received, recorded, transmitted, stored, processed, retrieved or produced electro ep Electronic Key refers to a sec md sleteady sensitive information that cross over public channels into a form decipherable only. with a "uate ecitome hey I £4 relers to a person who mn behalf of anctier perwin and with respect 10 a panicular onic document sends. reveives andor stores provides other services in respect of that elgetronic data messee + electronic document Originator refers to a person by whom, oF sche bel? the electric document purports to have bee -d andior sent. The term does not x asan intermediary with respect created gene ingle person act tethat electronic doc Service provider reters to a provider of = 1 Oveline services or network access or the ‘operator of facilities therefor, including entities o Yering the transmission, routing, or providing oFReSA - The Review School of Accountancy connections for online communications, digital or otherwise, between or among points specified by user, of electronic documents of the user's ‘choosing; or 2 The mecessary technical means by which lectronic documents of an-originator may be stored and made accessible to designated or undesignated third panty Such service providers shall have no author modify oF alter the content of the electronic data message or electronic document received or to make any entry therein on behalf of the originator. addressee ‘or any third party unless specifically authorized to do 50, and who shall retain the electronic document in accordance with the specific request oF as necessary for the purpose of performing the services it was engaged to perform, Legal Recognition of Electronic Data Messages: Information shall not be denied legal effect, validity ‘or enforceability solely on the grounds that it sin the ‘data message purporting to give rise to such legal ‘effect, or that itis merely referred to in that electronic data message. Legal Recognition of Electronic Documents: Electronic documents shall have the legal effect, validity or enforceability as any other document or legal writing, and a) Where the law requires a document to be in writing, that requirement is met by an electronic document if the said electro document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference, in that i. The electronic document has remained complete and unaltered, apart from the addition of any endorsement and any authorized change, or any change which arises in the normal course of communication, storage and display; and Ji The electronic document is reliable in light Of the purpose for which it was generated and in the light of all relevant circumstances. 'b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from. cc) Where the law requires that a document be presented or retained in its original form, that requirement is met by an electronic document it i. There exists a reliable assurance as 10 the tegrity of the document from the time ‘when it was first generated in its fina form. and ji, That document is capable of being displayed 0 the person to whom it is to be presented: Provided, That no provision of the ECA shall apply (0 vary any and all requirements of existing laws on formalities required in the execution of documents for their validity For evidentiary purposes, am electronic document shall be the functional equivalent of a written document under existing laws. RFBT-11 The ECA does not modify any statutory rule relatin to admissibility of electronic data massages or electronic documents, except the rules relating 10 authentication and best evidence. Legal Recognition of Electronic Signatures: An electronic signature on the electronic document shall be equivalent (0 the signature of a person on ‘a written document if that signature is proved by showing that a prescribed procedure, not alterable by the parties interested in the electronic document, existed under which - a) A method is used to identify the party sought 10 be bound and to indicate said party's access to the electronic document necessary for his consent or ‘approval through the electronic signature; Said method is reliable and appropriate for the purpose for which the electronic document was generated or communicated, in the light of all circumstances, including any relevant agreement ©) Wis necessary for the party sought to be boun or order to proceed further with the transaction, to hhave executed or provided the electronic signature, and 4d) The other pany is authorized and enabled to verify the electronic signature and to make the decision to proceed with the transaction authenticated by the same » Presumption Relating to Electronic Signatures: In any proceedings involving an electronic signature, it be presumed that - a) The electronic signatare isthe signature of the ‘person to whom it correlates: and b) The electronic signature was affixed by that rson_with the intention of signi approving the electronic document unless the person relying on the clectronically” signed electronic document knows of has noticed of efecis in oF unreliability of the signature oF reliance on the electronic signature is. not reasonable under the circumstances Original Documents: 1) Where the law requires information to be presented or retained in its original form, that requirement is met by an electronic data message or electronic document if ) the integrity ofthe information from the time when it was First generated in its final form, a8 an electronic data message of electronic document is shown by evidence aliunde ot ‘otherwise. and 1b) where it is required that information be presented, that the information is capable of being displayed to the person to whom itis to be presented. 2) Paragraph (1) applies whether the requirement therein s inthe form of an obligation or whether the law simply provides consequences for the information net being presented oF retained in its ‘original form, 2) Forte purpose of subparagraph (a of prauraph wo teria for assessing integrity shall be whether the information bas remained complete and unaltered. apart from the addition of any endorsement and any change Page 2 of 9ReSA — The Review School of Accountancy which arises is the normal couse ‘communication, storage sind dieplay. and bb) the standard of refiabilty requiea +b assessed im the ight of purpose for I ne light the information was wenevte sm ofall the relevant circumstances Authentication of Electronic Datu Messages Elcetronie Docaments: Until the Supreme Court by appro documents, elevtrone data ‘ignmures, shall be authenticated by demonstrating, ing and Iaimed Mlentity of a user. device, oF anothce entity és an informacion ot ‘communication system, among other ways. as olla a) The electro rales shall have so provided, elvetroaie nature shall be authenteated proof that a letter, character. number af thee Symbol in electronic form. reptescnting the persons named im and attached t oF fa associated with an clestronie electronic document. of that the appropriate methodology of security procedures, wie applicable. were employed or adcpied by such person, with the i approving in an clectronic data message ot ‘lectronie document b) The electronic data message oF clesironie document shall be authenticated by prot that an Appropriate security procedure. wien «plicable was adopted and employed for the purpose af verifying the originator of an electronic data ind/or electronic document. dete! terror of alteration in the communication, conte CF storage of an electronic document or elec data message fiom a specific port. which, using algorithm oe codes, identifying words or numbers ‘eneryptions, answers back ot acknowledgement procedures, of similar security devices The Supreme Court may adopt such th authentication procedures, including the we of tlectronic notarization systems a necessary and advisable, as well as the certificate of authentication fon printed or hard copies of the elecironie document for electronic data messages by electronic notaries, service providers and other duly recognized or appointed certification authorities ‘The person seeking (9 introduce on electronic data message of electronic document in any kal proceeding has the burden ct _praung_its ‘authenticity by evidence capable of supporting a finding that the electronic data messave ur eleetrome ‘document is what the person claims it be In the absence of evidence to the comirary. the integrity of the information and communication system in which an electronic data message of electronic document is recorded ot sored may 9 legal preceeding that a{_all_material_times the that did not affect the integt data message andior electrome dow there are no other reasonable grounds i soubtt inegrity of the information system, nd commenication RFBT— 11 showing that the electronic data message stidor electronic document was recorded or red by a parte 10 the proceedings who i adverse i interest tothe party using oF ©) Bly showing thatthe electronic. Uta message andor electronic document was recorded or business by a person who & nol party othe proceedings and who did no act under the contro ‘tthe party sing the record. Admissibility and Evidential Weight of Electronic Data Message or Electronic Document: In any legal proceedings, nothing in the application ofthe rules on evidence shall deny the admissibility of an electronic -ssage or electronic document in evidence = a) On the sole ground that it isin electronic form: oF ground that it is not inthe standard written ‘and the electronic data message oF ind complying w sments under Sections 6 or 7 of the FC Inassessing the evidential weight ofan electronic data message oF electronic document, the reliability of the penerated, stored or communicated, the reliability of the manner in which tor was identified, and other relevant factors sven due regard in which it was, Retention of Electronic Data Message or Electronic Document: Notwithstanding any provision of law. cae or regulation tothe contrary a) The requirement in any provision of law that certain documents be retained in their original forms satisfied by eetaining them in the form of an clecttonic data message of electronic document ‘whieh + Remains accessible so as 10 be usable for subsequent reference: 1s retained in the form enerated, sent or received, or in a format which ean he demonstrated to accurately represent the electronic data message oF cleerronic document generated, sent of received: bul Enables the identification of its originator and addressee, as well as the determination of the date and the time it was sent or received bb) The requirement referred to in paragraph (a) is satisfied by using the services of a third party, provided that the conditions set forth in subparagraph s (i). (it) and (ii) of paragraph (a) in which it was, Proof by Affidavit The matters referred to on admissibility and on the presumption of integrity, may be presumed to_have been established by an 1 thebestof the deponent's tothe rights of parties in interest. Cross ~ Examination 1) A deponent of an affidavit that hasbeen introduced in evidence may be ¢ross-examined sof eight by a party to the proceedings who adverse in terest to the party who has introduced Page 3 0f9ReSA — The Review School of Accountancy the affidavit or has caused the affidavit to be introduced. 2) Any party to the proceedings has the right to cross-examine 4 person who is not party but recorded or stored the clectronic data message andor electronic document in the usual ordinary course of business. Formation of Validity of Electronic Contracts: 1) Except as otherwise agreed by the partes, an offer, the acceptance of an offer and such other vents required under existi F the formation of contracts may be expressed in, demonstrated _and proved by means _of lectroni ‘oF electron documents and no contract shall be denied validity or enforceability on the sole ground that its in the form of an electronic data message or electronic document, or that any ot all of the elements required under existing laws for the formation of contracts is expressed, demonstrated and proved by means of electronie data messages ‘or electronic documents, 2) Electronic transactions made through networking among banks, or linkages thereof with other entities oF networks, and vice versa, shall be deemed_consummated upon the actual dispensing of cash or the debit of one account and_the corresponding credit to another, whether such transaction is initiated by the depositor or by an authorized collecting party Provided, that the obligation of one bank, entity for person similarly situated to another arising therefrom shall be considered absolute and shall not be subjected to the process of preference of credits Recognition by Parties of Electronic Data Message or Electronic Document: As between the originator 1nd the addressce of an electronic data message or electronic document, a declaration of will or other statement shall not be denied legal effect, validity or ‘enforceability solely onthe ground that itis inthe form of an electronic data message Attribution of Electronic Data Message: 1) An electronic data message or electronic document is that ofthe originator iit was sent by the originator himself 2) AAs between the originator and the addressee, an electronic data message or electronic document is ‘deemed to be that of the originator if it was sent: a) by & person who had the authority to act of bochalf of the originator with respect to that lectronic data message or electronic document: or bb) by an information system programmed by, or on behalf of the originator 10 operate automatically. 3) As between the originator and the addressee, an aaddressce is entitled to regard an electronic data message or electronic document as being that of the originator, and to act on that assumption if a) in order to ascenain whether the electroni data message or electronic document was that fof the originator, the addressee properly applied a procedure previously agreed to hy the originator for that purpose, or RFBT-11 b) the electronic data message oF electronic the actions of a person whose relationship with the originator or with any agent of the originator enabled that person to gain access toa method used by the originator lo identify electronic data messages as his 4) Paragraph (3) does not apply 4) as of the time when the addressee has both received notice from the originator that the electronic data message or electronic document is not that of the originator, and has reasonable time to act accordingly: oF +b) ina case within paragraph (3) sub-paragraph (b), at any time when the addressee knew oF should have known, had it exercised reasonable care of used any agreed ‘procedure. thatthe electronic data message or lectronic document. was not that of the 5) Where an electronic data message or electronic document is that ofthe originator or is deemed to bbe that of the originator, or the addressee is cemttled to act on that assumption, then. as between the originator and the addressee, the addressee is entitled to regard the electronic data message of electronic document as received being what the originator intended to send, and to act on that assumption. The addressee is not so cemitled when it knew oF should have known, had it exercised treasonable care or used any agreed procedure, that the transmission resulted in any terror in the electronic data message or electronic: document as received 6) The addressee is entitled to regard each electronic data message or electronic document received as 4 separate electronic data message or electronic ‘document and to act on that assumption, except to ‘the extent that it duplicates another electronic data ‘message or electronic document and the addressee knew of should have known, had it exercised reasonable care or used any agreed procedure, that the electronic data’ message oF electronic document was a duplicate, Error on Electronic Data Message or Electronic Document: The addressee is entitled 10 regard the electronic data message or electronic document ‘received as that which the originator intended to send, and to act on that assumption, unless the addressee knew or should have known, had the addressee ‘exercised reasonable care or used the appropriate procedure a) That the transmission resulted in any error therein ‘orn the electronic document when the electromie data message or electronic document enters the designated information system, of b) That electronic data message of electromie document is sent to an information system which is not so designated by the addressee for the purposes. Agreement on Acknowledgement of Receipt of Electronic Data Messages or Electronic Documents: The following rules shall apply where, on ‘oF before sending an electronic data message or electronic document, the originator and the addressee Page 4 of 9