Are electronic signatures a safe way to execute contracts?
With the increase in travel restrictions due to the epidemic in recent years, more and more people as well as companies have started using electronic signatures to sign contracts.
As an emerging form, an electronic signature saves time and travel costs for contract parties on the one hand, but, on the other hand, it brings difficulties on how to determine the reliability of an electronic signature and the authenticity of a contract when disputes arise.
What is an Electronic Signature?
According to the Law of Electronic Signatures, electronic signatures means the data included and attached, in electronic form (electronic data) used to identify the signatory and to verify that the signatory has acknowledged the content therein. The electronic data mentioned here means information created, sent, received or stored by electronic, optical, magnetic or similar means, such as electronic contracts, e-mails, etc.
Are contracts signed in the form of Electronic Signatures legal?
Compared with traditional handwritten signatures, electronic signatures usually have higher reproducibility and changeability. The validity of electronic signatures in different countries often leads to differences in legal provisions based on whether or not a particular technology is recognized. China does not specifically designate or approve any particular electronic signature technology, but issued corresponding provisions in regard to the conditions that reliable electronic signatures and their certification bodies need to meet.
However, when it comes to documents involving personal relationships such as marriage, adoption, inheritance, documents on the cessation of public utility services such as water supply, heat supply, and gas supply, and other situations stipulated by laws and administrative regulations that do not apply to electronic documents, the parties cannot agree to use electronic signatures to conclude contracts.
What kind of Electronic Signature is reliable?
As stipulated in the law, only a reliable electronic signature can have the same legal effect as a seal or a signature by hand. Hence, confirming the reliability of the electronic signature is one of the most important steps in confirming the validity of the electronically signed contract.
According to the Law of Electronic Signatures, reliable electronic signatures must meet the requirements of exclusivity, controllability and unchangeability.
Exclusivity means that the electronic signature is exclusively owned by the electronic signatory. For example, in a contract case involving electronic signatures between a natural person and a company, the court found that the electronic signatures of both parties were related to their identity information and corporate information. Before signing the electronic signature, the company required the natural person to conduct identity verification, and accordingly submitted a copy of his personal driving license to the court. The court therefore found that the electronic signature in this case met the standard of exclusivity.
Controllability means that the data entered by electronic signature is controlled only by the electronic signatory at the time of signing. In the above case, the contract signed by both parties stipulates that invoking the digital certificate of the electronic signature of the natural person needs to be confirmed by sending a SMS verification code to his mobile phone. The natural person signed and confirmed such agreement, and there was no evidence to prove that the natural person had raised objections to this. Therefore, the court found that the electronic signature in this case met the standard of controllability.
Unchangeability means that any alteration to the contents and form of electronic signatures and electronic data after signing can be detected. As far as unchangeability is concerned, this involves more technical issues, which should be determined in consultation with the third-party platform that provides electronic signature technology and subsequent recording and preservation of electronic data before proceeding with the electronic signature.
It should be noted that although judging the reliability of the electronic signature is an important part of confirming the legal validity of the electronically signed contract, the legal validity of the contract will not be denied simply because of the unreliability of the electronic signature. The judgment of the legal validity of the contract still needs to be comprehensively judged in combination with all the circumstances of the case.
DaWo Law Firm has extensive experience in handling commercial contracts, especially cross-border commercial contracts. If you have any questions, please feel free to contact us!