Lexis insights

Legal news, views and insight from LexisNexis Hong Kong

22 June 2020 | by LexisNexis Hong Kong

Signing commercial contracts and/or documents using electronic signatures is a growing tendency for business parties to adopt while working from home amid the COVID-19 outbreak. This summary provides some practical guidelines for parties entering contracts via e-signature methods.

The validity and enforceability of a contract is not greatly affected because of its form in Hong Kong. Under some exceptions, it is the substance and not the form that determines a contract.

The Electronic Transactions Ordinance (Cap. 553) (“ETO”) lays out the provisions regarding electronic transactions. The current contract law framework also governs electronic contracting developments.

  1. Can I enter into a contract without physical signature?

    Generally, many contracts can be agreed without a physical signature and in fact a lot of them are not signed. The contracts are valid once they met the requirements of offer, acceptance, consideration and an intention to create legal relations.

    Acceptance may be constituted by different methods, which includes signatures. Others include an email sent from the party agreeing and confirming to the terms of the contract, or an electronic “signature image” attached to an email replying the sender or clicking an “I accept” box on an internet form would constitute acceptance.

  2. How will a party know that I am authorised to sign?

    Practically, parties are concerned whether the individual who sends the email confirming acceptance is in fact an authorized person of the party to the contract. To ensure that this is the case, it depends upon the contract type and the credit risk undertaken by the parties.

    In some situations, a party may want to make sure that the contract is not signed by an impersonator. If it is unfortunate that an impersonator signs the contract, the innocent person or company is not likely to be bound by the actions of the impersonator. Further, for cases involving unauthorised company signatures, the consequences for those actions are less definite and is to be determined on a case-by-case basis.

    There are a few ways to verify a person’s identity and authority:

    A.to require sight of an identity card;
    B.for a person signing as a signatory of a company, the other party may request sight of board resolutions and constitutional documents;
    C.for companies using company secretary for signatory, the other party may request confirmation that the company secretary is duly authorised for the signatory and that the document has been duly executed by that company; and
    D.two-factor authentications.

  3. What if a party receives a contract that has a signature block?

    Practically, if you receive a contract with a signature block, you are expected to return the document with a signature. The ideal way to sign the contract is to print off the signature page, sign it, scan it in and email it with the other pages of the contract back to the sender.

  4. The Do’s and Don’ts for Signature Images

According to Schedule 1 to the ETO, do not use signature images:

  1. to sign certain deeds;
  2. for powers of attorney;
  3. for trusts;
  4. for real property, stamp duty instruments, wills, oaths, affidavits, statutory declarations;
  5. for Government conditions of grant and Government leases etc.

The details could be found in Schedule 1 to the ETO. From the above list, if a party still wishes to use a signature image, they should not do so without first consulting a competent legal professional for their legal advice.

Do use signature images:

It is uncommon that a rule of law requires a document to be signed. However, this is subject to section 6 of the ETO, that “…the method used is reliable, and is appropriate, for the purpose…” and the confirming parties were allowed to use a signature image.

The Lexis Insights articles are provided for reference purposes only and are not intended, nor should they be used, as a substitute for professional advice or judgment or to provide legal advice with respect to specific circumstances. If you require any legal advice or other expert assistance, please consult a competent professional adviser.

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