The question of whether, and if so when, a contract is formed involves complex issues under the governing law of the contract. In circumstances where a contract is executed by a company, it also involves complex issues under the law of the jurisdiction in which the company is incorporated.
For example, the governing law may impose a requirement for a contract to be in writing before it will be valid. In addition, the law of the jurisdiction in which a company is incorporated will determine corporate capacity and the ways in which a company may bind itself to a contract and incur enforceable obligations. Under Chinese law, for example, a company may execute a contract through affixing its chop on the contract, or through the signature of the legal representative.
The question as to whether a valid contract has been formed is an important one for both commercial parties and their lawyers, who are often required to issue a legal opinion to confirm that the contract “constitutes legal, valid, binding and enforceable obligations” of the relevant parties under the governing law (for a discussion about the language of legal opinions, see China Business Law Journal volume 4 issue 3: Binding and enforceable).
This article considers the requirements under the governing law of the contract in circumstances that involve a “virtual signing”. It first defines the concept of a “virtual signing” and then considers the position under English law and Chinese law.
What is a virtual signing?
In today’s world, people are heavily dependent on technology for the purpose of communications. Physical, or face-to-face, meetings are much less common than they used to be and parties increasingly communicate by email and a range of other electronic devices. These modern practices have extended to the way in which parties sign contracts. Instead of attending meetings in person to sign contracts, parties are increasingly signing contracts electronically, where no “wet ink” signature is placed on a paper document.
In addition, parties are also signing contracts remotely, where a paper document is signed in another location and then scanned and emailed (or faxed) to the lawyers or the other parties for the purpose of closing a business deal. A practice has also arisen in many jurisdictions where the commercial parties pre-sign the signature page of a draft contract and then provide it to their lawyer for attachment to the final version of the contract once it has been agreed. These practices are often referred to as “remote signings” or “virtual signings”, and are now very common in business transactions, particularly cross-border transactions.
In some jurisdictions, such as the US, the law supports such practices, which have been around for many years and are also commonly adopted in purely domestic transactions. In other jurisdictions, these practices are less common and there is some uncertainty as to whether they are legally effective. Differences exist not just between civil law jurisdictions and common law jurisdictions, but also between common law jurisdictions themselves, such as England, Hong Kong and Australia. This highlights the need for lawyers to be aware of the issues, particularly when they are involved in cross-border transactions where the legal position in the relevant jurisdictions may diverge.
You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.
For group subscribers, please click here to access.
Interested in group subscription? Please contact us.
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at law.asia.