Article 10 of the Contract Law stipulates that “parties may use written, oral or other forms in entering into a contract”. Article 11 further stipulates that “written form refers to a form such as a written contractual agreement, letter, electronic data text (including a telegram, telex, fax, electronic data exchange and e-mail) that can tangibly express the contents contained therein”.
According to these two provisions, signing a contract by means of electronic data text is one of the “written forms”, among which an e-mail is often used when parties reach an agreement. When signing a contract via e-mail, one party first signs and seals the paper contract, and then sends it to the other party by e-mail.
Since the parties are not in the same time and space at the time of signing, the actual contracting process may be inappropriate in operation – after signing and sealing, one party just scans the paper contract instead of sending the original copy back to the other party. In cases where one party denies the authenticity of its signature, the inappropriate contracting process may lead to negative legal effects.
The China International Economic and Trade Arbitration Commission’s (CIETAC) South China Sub-Commission accepted a case on a capital increase agreement where one of the respondents (respondent A) claimed that he did not sign a disputed agreement. The applicant was a new shareholder participating in the capital increase. The respondents consisted of a target company and multiple shareholders, who were natural persons.
The disputed agreement contained matters related to the capital increase and terms of repurchase that, if the valuation adjustment mechanism was invoked, the natural-person shareholders would be obliged to repurchase.
The applicant signed the agreement, and then sent it to the target company via e-mail. The target company contacted its natural-person shareholders and let them sign the agreement. After they all signed, the respondents sent the contract back to the applicant.
During the arbitral proceedings, respondent A raised an objection to jurisdiction, and applied for authentication of the signature purported to be signed by him on the disputed agreement.
Respondent A stated that he had neither signed the agreement nor authorised any other person to sign the agreement. He further claimed that the signature on the agreement was forged by others, and not a declaration of his own will. Therefore, he applied to the tribunal for authentication of the signature.
Authentication of signature failed because the original copy was missing
So far, whether Respondent A had signed the disputed agreement became the primary fact to be investigated. To find out whether the signature was forged, the original copy was very important.
During the trial, the applicant stated that the agreement was sent via email, and he did not have the original copy. The target company stated that the original copy was lost because it was not properly kept, and a long time had passed since the signing. Neither party could provide the original copy.
However, Respondent A applied for authentication of the signature to prove: (1) that the signature on the agreement was not his handwriting; and (2) that even if the signature was his handwriting, it may be forged by someone else, and Respondent A himself did not sign it.
According to a third-party institution, in the absence of the original copy, authentication could only help to find out whether the signature was a person’s handwriting. It could not be known whether the signature was written by that person or someone else. Therefore, the tribunal did not approve Respondent A’s application for authentication.
Determination of responsibility by allocation of burden of proof when authentication is impossible
If authenticity of the signature cannot be ascertained through authentication, allocation of burden of proof helps to find out the facts. According to the doctrine, semper necessitas probandi incumbit ei qui agit, the parties shall bear the burden of proof for what they claim.
The applicant stated that Respondent A should bear the burden of proof for his claim that he did not sign the agreement. However, Respondent A stated that the applicant was the party who initiated the arbitration, and should provide the original copy of the disputed agreement. Furthermore, it is also worth considering whether the target company should be responsible for its failure to properly keep the disputed agreement.
Finally, the tribunal determined that it was the applicant’s obligation to provide the original copies of evidence when applying for arbitration. Therefore, the applicant should submit the original copy of the evidence provided by him. Regarding whether the target company should be responsible for impossibility of authentication due to its failure to keep the original copy, the tribunal held that preservation of the original copy was a commercial custom, rather than a contractual or legal obligation.
If a party should be responsible for impossibility of authentication simply because it failed to provide the original copy, it would result in an imbalance of rights and obligations. Moreover, Respondent A claimed that he had not signed the agreement, and he could not prove what he did not do. It was illogical to require Respondent A to bear the burden of proof.
Thus, given the allocation of the burden of proof, the tribunal found that the applicant should provide further evidence to prove the authenticity of Respondent A’s signature. If the applicant failed to prove so, the applicant should bear the legal consequences of his failure to prove. Therefore, the tribunal could only make inferences unfavourable to the applicant, and decided that the authenticity of Respondent A’s signature was not confirmed.
Conclusion and suggestions
The most direct way to ascertain the authenticity of a signature on an electronically signed contract is authentication. However, absence of the original copy will result in impossibility of authentication. In such cases, it is necessary to rely on allocation of burden of proof to determine the responsibility. In view of this, the parties should send each other the signed and sealed paper contract after they electronically signed the contract. Moreover, the parties should make good use of the rules on burden of proof to defend themselves in litigation and arbitration.
Zheng Lucai is a case manager at CIETAC South China Sub-Commission