Stung!

Software manufacturers would say this is scaremongering. After all, digital signatures are now legally binding. The Electronic Communications Act 2000 that came into force in July has put them on the statute book. Email is also a legally binding form of communication, as Norwich Union would tell you. It was sued because of comments made by staff on email about one of its competitors.

Electronic and paper communications now have equal legal status too. So it would seem there shouldn't be any legal worries when collaborating electronically. However, some lawyers still preach caution, and many companies that have taken the plunge into using collaborative software hold backup copies of projects on paper in case a dispute should arise.

Is this caution justified? What are the practical guidelines for safe electronic collaboration? Peter Goodwin, author of a Building Centre Trust report out this month on barriers to IT integration, claims companies are not taking legal issues seriously enough. "People have gone into this area thinking about the practicalities of running a project on these systems, without considering legal issues, and are stretching the limits of their professional indemnity insurance," he says.

In his report Goodwin identifies three areas of legal concern for businesses collaborating electronically: the risk of data being corrupted or lost; the legal status of electronic documents; and interfacing with a third party, for example an application service provider such as BIW Technologies or Buildonline. The report offers three solutions to overcome these problems.

Interchange agreement
To combat the risk of data being lost or corrupted, it suggests using the UK standard interchange agreement, set out by the Electronic Commerce Association. "This is a set of rules you agree on before the project starts," explains Goodwin, "which you can add to your contract so they are legally binding or just have as an informal agreement, though I would advise adding them to the contract. The JCT contract makes provisions for this type of add-on now. Although there are still problems with these guidelines, following them makes the situation a lot clearer."

Although digital signatures now have the same legal status as paper signatures, Goodwin says that in court lawyers still challenge their validity by arguing that electronic documents are easier to tamper with than paper ones. You can guard against this pitfall by using two sets of guidelines from the British Standards Institute, known as PD0008 and PD5000. "These guidelines show the procedure for managing electronic communications in a robust way so the information will be much more difficult to undermine in court at a later date," Goodwin says.

For guidance on interfacing with third parties, Goodwin refers back to the interchange agreement. "The agreement puts the responsibility on the contracting parties to keep track of the data. As long as your own office systems are robust and you maintain records and audit trails of your own, you should be OK if anything does go wrong with the third-party system."

Confusion
He adds: "There has been a lot of confusion over these issues. The legal and insurance professions seem unsure of how to deal with electronic collaboration. The steering group that guided and critiqued the Building Centre Trust report, which included many top information and technology professionals in construction, also identified this as an area that was preventing integration of IT."

Goodwin prefers to err on the side of caution. "I would still advise companies to ensure that their systems are sufficiently robust before discarding their paper records and to think carefully about what they are going into," he says.

Ian Hamilton, managing director of the Construction Industry Computing Association, confirms that clear guidelines are a priority. "All parties need to understand the issues and set out some simple rules at the start of the project. The British Standard is a good starting place."

Hamilton identifies risk management as another important area. "There needs to be agreement on who is responsible for what in the project and how the risk will be shared. If, for example, a drawing is different at one end to another and an incorrect version is worked on, it needs to be set out whose responsibility it is to put it right."

Construct IT, the research organisation based at Salford University, is writing a how-to guide on internet security, including legal and insurance issues, that is due out later this year. The industry-owned ebusiness organisation Construction Industry Trading Electronically produced a how-to guide on legal and security issues in May.

Tim Cole, community manager at CITE and director of software provider Causeway, says that as more companies take the plunge into electronic collaboration, legal issues come to the fore. "There is a need for people to gain greater knowledge about collaborating electronically, so they can be more comfortable doing it," he says. "There is a danger that if they are unaware of the issues it will put them off using collaborative software."

Cole adds that reaching an agreement on how to trade electronically is vital. "The project team needs to make sure that all parties are involved at the legal level and that there is a consensus about how to collaborate electronically."

CITE is also involved in eLegal, a two-year, European Commission-funded research project on construction technology law. The pan-European project, headed by Loughborough University, is due to report in November 2002. IT and construction law firm Masons is acting as adviser on UK law to Loughborough for the project. Ed White, a lawyer with Masons' I&T Technology Group and part of eLegal, says the project's main aim is to provide contract clauses relating to technology.

Contract clauses
"As currently drafted, most standard form contracts such as the JCT and New Engineering Contract do not provide for formal notices to be effective if made using email or project websites. These contracts may be amended to allow for such electronic communication of notices, and the eLegal project aims to develop contract clauses that will allow for this."

He adds: "Generally speaking there is no legal problem with using digital signatures. But for them to be effective all of the parties giving and receiving documents using them must have the technology at their disposal. The legal framework is being put in place, the technology is available and it is now up to businesses to adopt it. As far as legal admissibility is concerned, an electronic document can carry as much weight as a paper one."

But like Goodwin, White remains unconvinced that electronic collaboration is completely legally safe. "Unless a party has the utmost confidence in the systems on which electronic documents are generated and stored, it is still advisable, in the case of important documents, to keep a hard copy. As long as projects run smoothly nobody worries too much about the legal issues, but the potential is there for disputes."