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Electronic contracts in China are legally binding if done correctly

In the digital era, legal contracts in China have undergone a transformative shift, moving from traditional paper-based agreements to electronic formats. The Chinese legal system has embraced a digital transformation, allowing contracts to be formed electronically and considering them legally binding, based on certain criteria.  


According to the Electronic Signature Law of the People's Republic of China, electronic signatures are valid if they can identify the signatory and indicate their intention to be bound by the contract. 

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Article 469 of the Civil Code states that the parties may conclude a contract in writing, orally or in some other form. Any electronic data that can show, in material form, the contents that it specifies through electronic data exchange or email and can be accessed for reference and used at any time shall be regarded as a written form.  


Where the parties conclude a contract in the form of electronic data and subject to the execution of a letter of confirmation, the contract shall be established at the time of execution of the letter of confirmation.  


Where the information of any commodity or service released by one party via the internet or


any other information network meets the conditions of offer, the contract shall be established when the other party selects such commodity or service and submits the order successfully, unless otherwise agreed by the parties. 


While digital contracts are generally accepted, certain contracts may still require traditional paper documentation. Real estate transactions, wills, and contracts involving personal rights or obligations that cannot be performed electronically may fall into this category. It's essential to be aware of these exceptions when engaging in digital contracting. 


Documents related to personal relationships (marriage, adoption and succession) cannot be concluded electronically. 


A click-to-accept process can be adopted if the contract is an online sales contract. As long as the online contract does not violate the provisions on validity of contract under Chinese law and is deemed a legally valid contract, the contract can be enforced in China.  


Governing laws 


Chinese law generally allows parties to choose the governing law, language, and forum for dispute resolution in their contracts. However, there are some restrictions in place.  


In certain industries, such as finance, the choice of governing law may be subject to regulatory requirements. Additionally, in business-to-consumer contracts, there may be more stringent regulations to protect consumers, impacting the choice of governing law and language. 


Chinese law recognizes distinctions between business-to-consumer (B2C) and business-to-business (B2B) contracts. B2C contracts often have additional consumer protection measures, and the choice of governing law may be more restricted to safeguard consumer rights. B2B contracts, on the other hand, may provide more flexibility for parties to negotiate terms. 



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The E-Commerce Law is the main legislation in China that regulates conduct of online business activities, including electronic contracts. The Electronic Signature Law is also applicable for online contracting, and it recognizes that, under prescribed circumstances, electronic data messages can have the same legal effect as an original document or a written document. 


The Process Specification for Online Conclusion of Electronic Contracts, a mandatory national standard approved and issued by the Ministry of Commerce in 2013, stipulates general process guidelines for e-commerce parties to follow when concluding electronic contracts via the internet in China. 


Digital Signatures 


The Electronic Signature Law of China provides a comprehensive framework for the recognition and definition of digital signatures. Digital signatures must meet specific technical requirements to be considered valid. They should be linked to the signatory uniquely, capable of identifying any alteration to the signed data, and created using secure signature creation devices. 


Parties involved in civil activities may agree to use, or not to use, electronic signature and data telex for contracts or other documents and instruments. ‘Data telex’ means information generated, sent, received or stored by electronic, optical, magnetic or similar items. 


Electronic signature usually refers to data incorporated into or associated with any electronic form, which may be used to identify the signatory and indicate the signatory’s approval of the information contained in the data telex.  


Electronic signatures have the same legal validity as wet-inked signatures or affixation of seal, provided that the electronic signature has satisfied the conditions provided by law.  


Documents for which the parties involved agree to the use of electronic signature or data telex shall not be denied of legal validity on the ground of electronic signature or data telex being used. 


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Digital signatures can be applied to a wide range of digital information, including contracts, agreements, and other electronic documents. The signing process typically involves the use of cryptographic algorithms to generate a unique digital signature linked to the signatory.  


However, e-signatures cannot be used in documents or instruments related to personal relationships, conveyance of real estate and stay of public services. 


Currently, Chinese laws only regulate the form, function, and effect of electronic signatures without specifying the specific technical means. Therefore, there is no unique format for electronic signature. 


Breach of Digital Contracts 


In cases of breach of digital contracts, parties can resort to traditional dispute resolution mechanisms, such as litigation or arbitration. China has established online dispute resolution platforms for e-commerce disputes, providing a specialized forum for resolving issues arising from digital transactions. 


Navigating the landscape of digital contracts in China requires a comprehensive understanding of the legal framework governing their formation, exceptions, and enforcement. While the country has embraced electronic signatures and digital contracting, it's essential for businesses and individuals to stay informed about evolving regulations and best practices in this dynamic legal environment. 


 

 

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Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

 

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