31 March 2020

The coronavirus demands high levels of flexibility and creativity from companies: As many employees work from home, established workflows are replaced by new ad-hoc processes. In addition, the extraordinary situation requires many contractual relationships to be adapted to the new circumstances. However, many contracts require that any amendment to the contract are to be agreed upon in written form – and thus the legally valid signature of two authorized representatives of a company. Hence, contract amendments and the signing of new contracts become a real "Home Office Challenge". With the following Dos and Don'ts, this challenge can be mastered more efficiently:

Do: Define your own formal requirements for new contracts in advance

Even if it is part of prudent business practice to conclude essential contracts in writing and to require that any changes thereto shall be done in the same form, the law only requires the written form as a formal requirement in certain cases (e.g. consumer credit contracts). In most cases, however, the parties are free to conclude contracts informally and to define their own formal requirements. For example, a contract may define that the formal requirement to conclude or amend the contract is a signature performed with a tablet pen and the subsequent delivery to the other party via e-mail.

Don't: Loosen up formal requirements informally

If a contract contains the provision that changes to the contract must be made in writing, the written form is deemed to be in accordance with the legal form requirement (personal signature according to Art. 13 f. CO). Thus, if the parties agree by e-mail to allow future contract amendments by e-mail, this will generally be without legally binding effect.

The circumvention of the handwritten signature by other means (e.g. by inserting a previously scanned signature) does also not comply with the legal form requirements. However, the prevailing doctrine today assumes that signing a contract copy and then sending a scan electronically to the other party must satisfy the legal requirement of the written form. In contrast to the prevailing doctrine, the Federal Supreme Court remains strict in this respect. In a rather recent ruling, it clarified that non-original documents contain only pictorial representations and there are no sufficiently reliable methods of proving that the signature contained therein has been reproduced unchanged and in full (Decision 9C_634/2014 of 31 August 2015, C 6.1.2).

Do: Sign an agreement to reduce existing formal requirements

If the parties wish to continue their cooperation primarily in digital form in the future, although they have previously signed their contracts in writing, they can state this in a written declaration and define in that declaration the formal requirements with which they wish to conclude and amend contracts in the future (or only temporarily).

Don't: Neglect termination formalities (and other time-critical declarations that are effective upon receipt by the other party)

When terminating contracts, the date on which the letter of termination is sent to the other party is usually of decisive importance, especially as this must often be done within a defined time period. For the postal delivery of traditional termination letters by registered mail, jurisprudence has established clear rules as to when, for example, a registered letter is deemed to have been delivered even if it has not been collected by the recipient. Such rules do not yet exist for electronic delivery. It is therefore recommended to send letters of termination (and other time-critical declarations that are effective upon receipt by the other party) either with sufficient lead time and to request an acknowledgement of receipt or, if this is not provided or there is not enough time, to send the declaration to the other party by traditional registered mail.

Do: Establish qualified electronic signature system

Even if the relaxation of formal requirements allows for more efficient contract processing, it also implicitly forgoes a significant advantage of the written form: The recognition of a debt contained in a signed document qualify as so-called judicial vitiation titles. These enable the creditor to directly initiate debt collection proceedings (Art. 82 SchKG). If a company does not wish to waive this privilege in digital business transactions, this can only be made possible by implementing a system with which qualified electronic signatures with time stamps can be generated (Art. 14 para. 2bis CO). However, the technical handling of such solutions remains cumbersome. At least, on 1 April 2020, the Federal Council has decided on a temporary relaxation for the creation of a certificate. The identification process for applicants may now also be carried out by video transmission.

If you have any questions on this topic, the members of our Information and Communication Technology team will be happy to assist you.

Author: Elias Mühlemann

Topics: Digital Business Law BitesLegal EngineeringCoronavirusFormalitiesDigitalization


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