Electronic Commerce Act

(This Client Guide provides general information and is made available to provide a general description of the Electronic Commerce Act in Ontario. This is not intended to constitute legal advice, which by its nature is situation specific. If you have questions about a specific e-commerce or other legal problem, you should consult a lawyer who will provide legal advice only after reviewing all the facts relevant to your situation, rather than relying on the general information provided in this Guide.)

The Ontario government has proclaimed the Electronic Commerce Act (the "Act") that regularizes electronic commerce and puts it on the same legal footing as a paper-based transaction. The immense potential for increased commercial activity from electronic transmission of documents has been slowed by the ambiguous status of such transmissions. The Act sets out a framework to provide legal clarity to such transaction while ensuring privacy protection and rules which govern the rights of the parties where there has been an electronic transmission mistake. The Act has been prepared to be consistent with the Uniform Electronic Conference Act (1999) adopted by the Uniform Law Conference of Canada which itself was based on the United Nations Commission Model Law on Electronic Commerce. Similar legislation has been enacted in three other Canadian provinces.

Existing e-Commerce contracts and procedures must be reviewed to ensure compliance with the statutory requirements.

For the time being, the Act does not apply to the making of a valid will, power of attorney for property or personal care by a person, trusts created by will or codicil, documents which transfer or encumber land (deeds and mortgages), negotiable instruments (cheques) and election documents. Electronic commerce procedures for these types of transaction will have to await further study according to the Ministry press release dated October 16, 2000.

Similarly, where any other statute expressly authorizes, prohibits or regulates the use of electronic information or documents, the other statute will prevail. For instance, the Rules of Civil Procedure permit electronic filing and contain extensive regulations and requirements. There are also substantial provisions outside the Act dealing with electronic land conveyancing and registration (such transactions are also explicitly excluded from the operation of the Act).

The basic purpose of the Act is to overcome the inherent transient nature of electronic information and to provide for procedures to replace technical legal requirements established by legislatures and courts in the context of paper based transactions. E-commerce may be partly in traditional form and partly in electronic form. The legal recognition of electronic information and documents generally is contained in section 4 of the Act, and for contracts, in section 19(3), of the Act. It provides that electronic information or a document which complies with the requirements of the Act is valid and enforceable (assuming that it is not otherwise invalid or unenforceable).

Certain statutes (such as the Sale of Goods Act and the Statute of Frauds) or other laws which require a document to be in writing or to be an original in order to be effective, are satisfied if the electronic information or document complies with the requirements of the Act.

To provide information or a document in electronic form, the Act requires that it be in a form that is:

1) accessible by the other party so as to be usable for subsequent reference; and

2) capable of being retained by the other person.

Merely making information available on a website is not sufficient to meet the accessibility requirements; however, sending an email or displaying it to the person in the course of a transaction that is being conducted electronically are examples set out in the Act as effective means of doing so.

Where a document must be retained, the person providing the electronic information or document cannot do anything to hinder the printing or storage by the recipient. Storage in a proprietary format should be carefully considered especially since the rapid pace of software upgrades means equally rapid changes in file formats. A newer version may no longer be able to open or access data stored in the file format of a much earlier version. Documents which don't meet the retention standards set out in the Act, but which were stored prior to the Act coming into force, satisfy the retention requirement notwithstanding non-compliance.

The retention requirements for a document that was sent in a written form but is to be retained in an electronic form are:

1) the electronic document is retained in the same format as the one in which the written document was created, sent or received. Obviously the storage capabilities of most word processors and email programs will meet this requirement; and

2) the information in the electronic document must be accessible so as to be usable for subsequent reference by any person entitled to have access to the written document or is authorized to require its production.

The retention requirements for a document that was originally sent in an electronic form are:

1) the electronic document is retained in the same format as the one in which it was created, sent or received or in a format that accurately represents the information contained in the document.

2) the information in the electronic document must be accessible so as to be usable for subsequent reference by any person entitled to have access to the written document or is authorized to require its production; and

3) where the electronic document was sent or received, information that identifies its origin and destination, date and time of transmission. Most current email technologies can provide this information.

The Act provides that the time of sending is to be the point at which a document enters an information system outside the sender's control. For AOL and other common information services used by both a sender and recipient, the time of sending is when the document is capable of being retrieved and processed by the addressee.

Information is received under the Act when it enters an information system and becomes capable of being retrieved and processed by the addressee in cases where the addressee has designated or uses an information system for that purpose. Where such a system is not used or designated by the addressee, receipt occurs when the addressee becomes aware that the information or document is in the addressee's information system and is capable of being retrieved and processed by the addressee.

The parties may agree to have other provisions govern sending or receipt. Be sure to check for any contractual notice provisions that may apply.

Destination and origin are presumed to be the sender and recipient's place of business. If a party does not have a place of business, the habitual place of residence is deemed to be that party's place of business. Where a party has multiple places of business, the one with the closest relationship to the underlying transaction is used.

Where there is a specific paper form or format required, an electronic version is satisfactory if::

1) it is organized in substantially the same way as the paper version would have been organized;

2) it is accessible by the other party so as to be usable for subsequent reference; and

3) it is capable of being retained.

The rules applicable where an original of a document is required by law are somewhat more complicated. The electronic document is effective if::

1) there is a reliable assurance that the document maintained its integrity from the time it was first created in its final form, whether as a written or electronic document; and

2) where an original is to be provided to a person, it is accessible by the other party so as to be usable for subsequent reference and is capable of being retained.

In assessing the integrity of the information, the Act prescribes the criteria of whether or not the information has remained complete and unaltered, apart from the introduction of any changes that arise in the normal course of communication, storage and display. This is to be determined in light of all of the circumstances, including the purpose for which the document was created. This saved the drafters of the legislation considerable effort in prescribing precise standards and allows for flexibility to accommodate future technologies. However, it will likely take some time to establish meaningful guidelines of integrity. Expert evidence will be an integral part of any disputed transaction.

Electronic documents can use an electronic signature to satisfy any legal requirements that a document must be signed or endorsed to be effective. However, certain documents or classes of documents will be prescribed as having to meet the conditions of

1) reliability in identifying the person; and

2) the association of the signature with the document must be reliable.

These conditions are to be assessed in light of all of the circumstances, including any relevant agreement and the purpose for which the document is created .

Some documents or classes of documents will have additional requirements and technology standards prescribed by regulation for effective electronic signatures. Such documents must comply with the requirements and standards set out in the regulations to use an electronic signature.

Where the law requires that a document be executed under seal to be effective, there will be regulations to prescribe the electronic manner of sealing a document.

An offer or acceptance of an offer (and any other matter that is material to the formation of a contract) may be effected by electronic information or document, or by an act (such as touching or clicking an icon or a place on a computer screen) or speaking.

As well, a binding contract may be formed by the interaction of electronic agents.

Where errors are made there are provisions to permit the avoidance of the contract as follows:

1) there is a material error in the information or document used in the transaction. This will involve a considerable amount of court testing before standards of materiality and error emerge. 

2) an electronic agent does not give the individual an opportunity to prevent or correct the error. Programmers will want to ensure that verification screens or dialogs are used when electronic data in a shopping cart, credit card information and the like is processed;

3) once an error is discovered, the individual promptly notifies the other person. As with all words of statutory construction, the jurisprudence will assess the timelines of the notification and some standards will likely be developed;

4) if consideration (something of value) is received as a result of the error, the individual who has received the consideration must either return or destroy it in accordance with the other person's instructions. Where there are no instructions, the consideration must be dealt with in a reasonable manner (reasonableness is often in the eye of a beholder until a court says otherwise). In cases where the individual does not benefit materially by receiving the consideration. Trivial consideration is likely to be disregarded.

The operation of the Freedom of Information and Privacy Act, the Municipal Freedom of Information and Protection of Privacy Act and any other privacy law is not affected by the Act. Their protection regimes remain intact.

Some security systems use fingerprints, voiceprint, retinal recognition and other personal characteristics as identifiers. The use of such "biometric" information does not receive the benefit of the Act unless it is expressly provided for in another statute or all parties to the transaction consent to its use.


If you have any questions or wish further information on e-Commerce matters, please contact a member of our E-Commerce Group.

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This page was originally created on October 20, 2000 and was last updated on August 29, 2001.
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