Navigating Data Privacy Issues in Electronic Contracts: A Guide to PDPL Compliance

With the surge of digitalization and e-commerce, electronic contracts (e-contracts) have become a fundamental part of modern business operations. However, this growth in digital transactions has brought about an increased emphasis on data privacy, particularly concerning personal information shared during contractual agreements.

In Saudi Arabia, the Personal Data Protection Law (PDPL) serves as the primary legislative framework to safeguard personal data. Understanding how to address data privacy concerns in electronic contracts under the PDPL is essential for businesses to maintain compliance and protect individual privacy.

Understanding PDPL and Its Importance

The Personal Data Protection Law (PDPL) was introduced in Saudi Arabia to ensure that personal data is protected in accordance with international best practices.

The law, which came into effect in 2022, is administered by the Saudi Data and Artificial Intelligence Authority (SDAIA) and focuses on protecting individuals’ privacy in the digital realm.

It defines personal data as any information that identifies or can be used to identify an individual, such as names, identification numbers, contact details, and even biometric data.

The PDPL mandates that entities processing personal data—whether for commercial, governmental, or any other purpose—must adhere to strict guidelines regarding the collection, storage, use, and disclosure of personal data.

Non-compliance with the law can result in significant penalties, including fines and suspension of business operations.

Given the widespread use of electronic contracts, particularly in sectors like e-commerce, fintech, and telecommunications, ensuring that these contracts comply with the PDPL is crucial.

This article will explore the key steps organizations can take to address data privacy concerns in e-contracts while adhering to the provisions of the PDPL.

1. Obtaining Explicit Consent

One of the foundational principles of the PDPL is that personal data should only be collected and processed with the individual’s explicit consent.

For electronic contracts, this means ensuring that parties to the contract are fully aware of how their data will be used and have explicitly agreed to its collection and processing.

To address this, organizations must include a clear data privacy clause within the e-contract, outlining:

• The type of personal data being collected.
• The purpose of data collection and processing.
• Whether the data will be shared with third parties.
• The duration for which the data will be stored.

The consent must be given freely and specifically for each purpose of data processing. In the context of e-contracts, businesses should provide users with the option to either accept or decline these terms and ensure that acceptance is obtained through a verifiable means, such as an electronic signature or clicking on an “I Accept” checkbox.

2. Ensuring Transparency and Accountability

Transparency is a key requirement under the PDPL. Organizations must provide clear and easily accessible information about how personal data is being collected, processed, and stored.

This information should be included in the e-contract in plain language, avoiding legal jargon that may confuse the individual.

The contract should also include the identity and contact details of the data controller—the entity responsible for determining the purposes and means of processing the data. If a third-party processor is involved, this should also be clearly stated.

Furthermore, organizations must establish clear internal processes to ensure that the data privacy commitments made in the e-contract are followed.

This includes maintaining records of data processing activities, performing regular audits, and appointing a Data Protection Officer (DPO) when necessary to oversee compliance with PDPL requirements.

3. Implementing Data Minimization Principles

The PDPL requires that organizations only collect and process personal data that is necessary for the specific purpose outlined in the e-contract. This principle of data minimization helps to reduce the risk of unauthorized access to sensitive information and ensures that unnecessary personal data is not collected.

When drafting e-contracts, businesses must review the types of data they request and limit it to the absolute minimum required to fulfill the contractual obligation.

For example, if a customer’s identity verification is necessary, the contract should request only the data needed for that purpose (e.g., a name and identification number), avoiding the collection of extraneous information such as detailed addresses or employment history unless explicitly needed.

By adhering to data minimization principles, businesses not only reduce their exposure to privacy risks but also demonstrate compliance with the PDPL’s core tenets.

4. Data Security and Confidentiality

Security of personal data is a major concern under the PDPL. Businesses that enter into electronic contracts must ensure that the data they collect is stored securely and is protected from unauthorized access, disclosure, or loss. Failure to adequately safeguard personal data can lead to legal consequences and repetitional damage.

To address these concerns, organizations should implement the following measures:

• Encryption: Personal data collected through electronic contracts should be encrypted both in transit and at rest. This ensures that even if the data is intercepted or accessed by unauthorized parties, it remains unreadable.
• Access Controls: Businesses should limit access to personal data to authorized personnel only. Implementing strong authentication mechanisms, such as multi-factor authentication (MFA), can help mitigate the risk of unauthorized access.
• Regular Audits: Conducting regular security audits and vulnerability assessments can help organizations identify potential weaknesses in their data security infrastructure.
• Data Breach Notification: Under the PDPL, businesses are required to notify individuals and the SDAIA in the event of a data breach. E-contracts should include a clause outlining the procedure for responding to a data breach and informing affected parties.

By incorporating these security measures into the data processing practices associated with e-contracts, businesses can ensure compliance with the PDPL while maintaining the trust of their customers.

Learn more about Data Protection law in KSA

5. Data Subject Rights and How to Honor Them

The PDPL grants individuals several rights regarding their personal data, including:

• The right to access their data.
• The right to request corrections or updates to inaccurate data.
• The right to request the deletion of data.
• The right to object to data processing in certain circumstances.

To address these rights within the context of e-contracts, businesses should include a clear process for individuals to exercise their rights.

This process should be easily accessible, and the contact information for the relevant department or officer handling these requests should be provided in the e-contract.

Additionally, businesses must ensure that they are equipped to respond to these requests promptly and in accordance with the timelines set out in the PDPL. Failure to respect these rights can result in legal action and penalties under the law.

6. Third-Party Data Sharing and Cross-Border Transfers

In many cases, organizations may need to share personal data collected through e-contracts with third-party service providers or transfer it to entities located outside Saudi Arabia.

The PDPL imposes strict requirements on such activities, including obtaining explicit consent from the data subject and ensuring that adequate safeguards are in place.

For cross-border transfers, businesses must ensure that the destination country provides an adequate level of data protection comparable to the PDPL.

If this is not the case, the organization must implement additional safeguards, such as contractual clauses or binding corporate rules, to protect the transferred data.

The e-contract should clearly outline any third-party sharing or cross-border transfer of personal data, and the individual’s consent for such activities must be explicitly obtained.

Conclusion

Addressing data privacy concerns in electronic contracts under the PDPL is essential for ensuring compliance with the law and protecting individuals’ personal data.

By obtaining explicit consent, ensuring transparency, implementing security measures, honoring data subject rights, and adhering to data minimization and transfer restrictions, businesses can successfully navigate the requirements of the PDPL.