HOW TO USE E-SIGNATURES FOR CONTRACTS (Hong Kong)
10th June 2020
Is an e-signature valid in Hong Kong? What are the best tips for using e-signatures?
Hong Kong’s Electronic Transactions Ordinance (ETO) permits e-signatures for contracts and other legal documents, except for contracts with government entities.
There are 3 conditions:
• The e-signature must be attached to or logically associated with the electronic version of the contract
• The procedure used must be reliable and appropriate for the purpose
• The counterparties must consent to the e-signature procedure.
E-signatures and Digital Signatures: the ETO distinguishes the two:
• e-signature: no particular process is required, so you can insert a scanned signature, use a mouse or a stylus or your finger to sign on a track pad or touchscreen, or use one of the online e-signature Products
• Digital signature: this means a signature process using private key and public key encryption, where the authority certifying the process must be recognised by the Hong Kong government
• If the counterparty is a government entity then you must use a digital signature which will need to be supported by the relevant validity certificates.
Problems with virtual signings:
• For several years it has been common practice to exchange signed contracts by email using scanned signatures and also to send only the signed signature page, and even to send a signed signature page in advance of closing
• You have to decide if everybody is going to send the signed original by post or courier afterwards. Nowadays more and more clients want to rely only on the e-signature
• If the procedure becomes too relaxed there can be problems
• In the English Mercury case, which is likely to be followed in Hong Kong, it was held that attaching only the signature page from an older version of the document and letting the lawyers attach that page to the final version, was NOT VALID EXECUTION of a deed. The case was in 2008 and at the time caused a lot of debate about virtual signings. Since Coronavirus virtual signings have become necessary and these concerns are even more relevant. The document was a Deed, not a simple contract and the law required the whole document to be approved. Signing the signature page in advance and the fact that the document subsequently changed, caused the problem.
Our recommendations (note below, everybody must consent). For contracts which are not deeds, the person signing can:
• print only the signature page, sign it and email it
• or - print the whole contract, sign it and email it
• then, sign and send only the signature page signed in advance stating that it should be held to his order (i.e. held and only released in accordance with his instructions); usually the lawyers coordinating the signing will send final versions to all parties, who must approve them and authorise the attachment of their signature page.
For Deeds, general practice in Hong Kong is that you need a document with a “wet” signature. This is because most Deeds are used for more important long-term transactions such as real estate, wills and trusts. Many documents require registration or specific laws apply to them (such as wills) which require more formality in order to be valid. This article deals with commercial and other contracts, (including by Deed), as long as they are not in one of those special categories.
Some Deeds are less formal or require no registration. All Deeds need to be signed and also delivered however. The common law is what defines a Deed and the common law view based on Mercury is that:
• the final contract in Deed form should be emailed to all parties
• those signing should print and sign the signature page (or the whole document) and send the signed page with the whole contract (or the signed contract) in a single email
• normally the signed versions would be emailed back to the law firm coordinating the signing process
• those signing should confirm whether the deed is deemed to be delivered when received, or when it is deemed to be delivered.
• note it is best to send the signature as a pdf and not a Word document because it’s more difficult to change. However it is not impossible to manipulate a pdf. Security is an issue. This is why these processes are mainly coordinated by law firms or companies use something like Docusign.
Witnessing: if signature of a document needs to be witnessed (many Deeds, and some contracts which are not Deeds require this), the general view among lawyers is that witnessing by Skype / Zoom / Facetime etc is not sufficient: the witness should be physically present with the person signing the contract and they can both attach an e-signature. Also note that a witness cannot be another signatory to the contract or the signatory’s spouse or child.
VERY IMPORTANT: CONSENT to the procedure: in order to comply with the ETO, the procedure must be agreed in advance by all counterparties. Of course this makes sense anyway from a practical point of view. Preferably, the contract itself should contain a clause setting out the procedure for e-signature which everyone agrees to by signing the document. We remind the contract parties of this in the emails arranging signature. The agreed procedure could be in a separate email but it’s much better to put a clause in the document so that it speaks for itself.
Foreign companies and foreign law: if companies from multiple jurisdictions are signing the contract, you need to check that e-signatures are allowed by the law of those jurisdictions, just in case it is later discovered that the procedures are not valid, and a foreign company argues that it is not bound by the contract. If the law governing the contract is not Hong Kong law, you need to check the foreign law.
Documents for which the ETO does not allow you to use e-signatures:
• powers of attorney
• trusts and wills
• documents relating to land
• most negotiable instruments (according to the ETO, this does not include cheques which include the words “not negotiable“).
“Negotiable instrument” means cheques and bills of exchange where the legislation requires possession of a physical document and you cannot “possess” a virtual document.
Other comments:
• The easiest way is to use e-signature rather than digital signature
• You don’t have to use Docusign, Adobesign, Pandadocs, or the equivalent BUT they do have security advantages: they are encrypted and usually stored in secure data centres where even employees cannot access them.
Facey & Associates LLP
Hong Kong, June 2020
Hong Kong’s Electronic Transactions Ordinance (ETO) permits e-signatures for contracts and other legal documents, except for contracts with government entities.
There are 3 conditions:
• The e-signature must be attached to or logically associated with the electronic version of the contract
• The procedure used must be reliable and appropriate for the purpose
• The counterparties must consent to the e-signature procedure.
E-signatures and Digital Signatures: the ETO distinguishes the two:
• e-signature: no particular process is required, so you can insert a scanned signature, use a mouse or a stylus or your finger to sign on a track pad or touchscreen, or use one of the online e-signature Products
• Digital signature: this means a signature process using private key and public key encryption, where the authority certifying the process must be recognised by the Hong Kong government
• If the counterparty is a government entity then you must use a digital signature which will need to be supported by the relevant validity certificates.
Problems with virtual signings:
• For several years it has been common practice to exchange signed contracts by email using scanned signatures and also to send only the signed signature page, and even to send a signed signature page in advance of closing
• You have to decide if everybody is going to send the signed original by post or courier afterwards. Nowadays more and more clients want to rely only on the e-signature
• If the procedure becomes too relaxed there can be problems
• In the English Mercury case, which is likely to be followed in Hong Kong, it was held that attaching only the signature page from an older version of the document and letting the lawyers attach that page to the final version, was NOT VALID EXECUTION of a deed. The case was in 2008 and at the time caused a lot of debate about virtual signings. Since Coronavirus virtual signings have become necessary and these concerns are even more relevant. The document was a Deed, not a simple contract and the law required the whole document to be approved. Signing the signature page in advance and the fact that the document subsequently changed, caused the problem.
Our recommendations (note below, everybody must consent). For contracts which are not deeds, the person signing can:
• print only the signature page, sign it and email it
• or - print the whole contract, sign it and email it
• then, sign and send only the signature page signed in advance stating that it should be held to his order (i.e. held and only released in accordance with his instructions); usually the lawyers coordinating the signing will send final versions to all parties, who must approve them and authorise the attachment of their signature page.
For Deeds, general practice in Hong Kong is that you need a document with a “wet” signature. This is because most Deeds are used for more important long-term transactions such as real estate, wills and trusts. Many documents require registration or specific laws apply to them (such as wills) which require more formality in order to be valid. This article deals with commercial and other contracts, (including by Deed), as long as they are not in one of those special categories.
Some Deeds are less formal or require no registration. All Deeds need to be signed and also delivered however. The common law is what defines a Deed and the common law view based on Mercury is that:
• the final contract in Deed form should be emailed to all parties
• those signing should print and sign the signature page (or the whole document) and send the signed page with the whole contract (or the signed contract) in a single email
• normally the signed versions would be emailed back to the law firm coordinating the signing process
• those signing should confirm whether the deed is deemed to be delivered when received, or when it is deemed to be delivered.
• note it is best to send the signature as a pdf and not a Word document because it’s more difficult to change. However it is not impossible to manipulate a pdf. Security is an issue. This is why these processes are mainly coordinated by law firms or companies use something like Docusign.
Witnessing: if signature of a document needs to be witnessed (many Deeds, and some contracts which are not Deeds require this), the general view among lawyers is that witnessing by Skype / Zoom / Facetime etc is not sufficient: the witness should be physically present with the person signing the contract and they can both attach an e-signature. Also note that a witness cannot be another signatory to the contract or the signatory’s spouse or child.
VERY IMPORTANT: CONSENT to the procedure: in order to comply with the ETO, the procedure must be agreed in advance by all counterparties. Of course this makes sense anyway from a practical point of view. Preferably, the contract itself should contain a clause setting out the procedure for e-signature which everyone agrees to by signing the document. We remind the contract parties of this in the emails arranging signature. The agreed procedure could be in a separate email but it’s much better to put a clause in the document so that it speaks for itself.
Foreign companies and foreign law: if companies from multiple jurisdictions are signing the contract, you need to check that e-signatures are allowed by the law of those jurisdictions, just in case it is later discovered that the procedures are not valid, and a foreign company argues that it is not bound by the contract. If the law governing the contract is not Hong Kong law, you need to check the foreign law.
Documents for which the ETO does not allow you to use e-signatures:
• powers of attorney
• trusts and wills
• documents relating to land
• most negotiable instruments (according to the ETO, this does not include cheques which include the words “not negotiable“).
“Negotiable instrument” means cheques and bills of exchange where the legislation requires possession of a physical document and you cannot “possess” a virtual document.
Other comments:
• The easiest way is to use e-signature rather than digital signature
• You don’t have to use Docusign, Adobesign, Pandadocs, or the equivalent BUT they do have security advantages: they are encrypted and usually stored in secure data centres where even employees cannot access them.
Facey & Associates LLP
Hong Kong, June 2020