With COVID-19 being the major catalyst in the past few years have prompted new practices of working from home or working from abroad and transacting electronically, it is undeniable that the future of business will depend heavily on electronic means. In Hong Kong, the Electronic Transaction Ordinance (Cap. 553) (“ETO”) provides the framework for the conduct of electronic transactions and governs the use of electronic and digital signatures. The ETO is “modelled on” the UNCITRAL Model Law on Electronic Ordinance (1996).
Electronic Signature / Digital Signature
Digital signature is about document integrity : using digital device to prove that (1) no one has altered the original document, and (2) the document being presented is not a forgery. Electronic signature is a method for entering into a legal agreement in a digital environment. Pursuant to section 2(1) of ETO, an electronic signature is “any letters, characters, numbers or other symbols in digital form” which is attached to the electronic document and executed or adopted for the purpose of authenticating or approving the electronic document.
The following three requirements, if met, will make an e-signature valid and enforceable under Hong Kong law :-
1. The e-signature is attached to or logically associates itself with the electronic message for the purpose of identification and indicates the authentication or approval of the information contained in the electronic message;
2. The e-signature is reliable and appropriate for the purpose of the electronic message; and
3. The recipient of the electronic message consents to the use of the e-signature.
Although there is no express required form for the e-signature under the ETO, the most common and widely recognizable forms of the e-signature may be a sign-off in an email, a signature signed with a stylus on a touchscreen device or a signature generated from an e-signing platform, etc.
The digital signature, under the ETO, is a form of electronic signature and is valid and enforceable if the document fulfills these requirements in Hong Kong :-
1. It is supported by a recognized certificate;
2. It is generated within the validity of that certificate; and
3. It is used in accordance with the terms of that certificate (e.g. recognition of the recognized certificate has not been revoked or suspended by the Government Chief Information Officer).
Limitations on the use of E-signature
Section 3 of the ETO provides that Sections 5, 5A, 6, 7, 8 and 17 do not apply to inter alia any requirement for the signature of a person under a rule of law in a matter or for an act set out in Schedule 1 unless the rule of law expressly provides otherwise. Schedule 1 provides that electronic signatures are not recognized amongst others for :-
1. Testamentary documents such as wills or codicil;
2. Trusts (other than a resulting implied or constructure trust);
3. Powers of attorney;
4. Documents relating to land and property transactions (e.g. lease, sale of property or stock);
5. Oaths and affidavits;
6. Statutory declarations.
Schedule 2 sets out the court proceedings that do not apply the use of e-signatures, from proceedings in the higher courts such as the Court of Final Appeal, Court of Appeal, and Court of First Instance, etc. to lower courts such as the Small Claims Tribunal, etc.
When executing contracts, the parties’ express intention for the execution method is of utmost importance. It would be preferred for the contract to specifically allow virtual execution of the contract and any virtual closing thereafter. Unless there is a counterpart clause within the contract or express consent in writing by the recipient party for the use of e-signatures, it may still be a risk to execute agreements without parties signing on the same original document, exchange original signed copies or scanned copies of the full executed agreement.
The Hong Kong case of CRB v Mark Richard Charlton Sutherland  HKDC 624 sheds some light on the current view of the Hong Kong court regarding the use of e-signatures. The subject document in dispute was a soft copy of written retainer letter between the Plaintiff law firm and the Defendant client. The law firm partner of the Plaintiff emailed the written retainer letter to the client and the email contained the signature block of the relevant partner but the attended document was not signed or dated by the Plaintiff law firm. The court found that the empty signature block does not constitute an “electronic signature” of the relevant partner of the plaintiff in relation to the terms of the written retainer letter. The court also found that the requirements under sections 6(1)(c) and (e) of the ETO (i.e. that the electronic signature is attached to the electronic record and that the recipient consents to the use of the method) have not been met.
Although e-signatures are convenient, consideration should still be taken on whether the e-signature would be legally recognizable on the purported electronic document and whether the use of it would be secure and reliable enough to identify the relevant parties and that parties have associated themselves with the contents of the electronic document.
If you have any questions on the above eNews or relating to any companies or commercial law matters, experienced lawyers in our firm would be happy to assist you.