Paper Example on Electronic Transactions Ordinance

Published: 2021-07-29
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University of Richmond
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The enactment of Electronic Transactions Ordinance (ETO) done in January 200, targeted on the provision of the legal infrastructure which is fundamental, when it comes to the facilitation of the electronic commerce in Hong Kong. When the Model Law on Electronic Commerce as applied by the United Nations Commission on International Trade Law (UNCITRAL) in 1996 is put in perspective, it can be asserted that the implementation of ETO was to provide a legal acknowledgement of the electronic records or signal signatures, just like it is the case with paper-based records. The legislation of the ETO paved the way to a widespread implementation and utilization of the digital signature which was earmarked to be the future development and advancement of the e-commerce, not only in Hong Kong but globally. It can, therefore, be contended that with the enactment of the enactment of ETO (Hong Kong Statutes, Cap. 553), it is no longer necessary to consider the common law rules relating to the formation of contracts when a contract is made through email.

Formation of a Contract

Under the common law, the establishment of a contract revolves around particular rules which include: offer and acceptance, consideration, intention or reasons to enter into a legal binding and formalities. An agreement or offer ensures that all parties are willing to join a given contractual relationship. These components of the common law for the formation of a contract provides a framework through which individuals entering an agreement can conduct themselves in a given manner as bounded by the contract. The element of formalities provides governance or standards that the involved parties need to follow to facilitate the formation of a legally sound contract. The rules of the common law are designed to alleviate incidences of fraud or illegal transactions in a commerce context.

Sending and Receiving of Electronic Documents

Regardless of the technological advancement (e-commerce), electronic transactions are still relying on the basic principles of contract law, which is vital when adjudicating upon a dispute. Formation of a contract via email adheres to the common law rules, but the whole process is completed electronically, as opposed to manual procedures. However, offer and acceptance, which are vital components of the common law, pose some concerns when formulating a contract through an email. Section 19 of ETO provides the standards that need to be observed when it comes to sending and receiving electronic records, which is the critical area in the validation of a contract formulated electronically.

Receiving of an offer via the email makes some components of the common law to be unnecessary. For example, an email can either be instantaneous non-instantaneous, making it impossible to apply the postal acceptance rule. Transmission of the email involves different steps which are in line with the provisions of section 19 of ETO. It starts with composing of the intended message on an electronic device, then sends with the aid of a given Internet service provider (ISP). When the recipient logs into his email account, he or she will receive the message highlighting the offer made by one party to the contract.

According to the ordinary rule, the contract cannot be made if one party declines to accept an offer. The contract can only be validated once there is an acceptance of the offer has been communicated to the parties involved. This is an indication that the instance at which acceptance is made is a significant element of contract formation. However, the implementation of section 19 of ETO seems to be in contradiction with this clause of the common law. When it comes to the formation of a contract via email, there exceptions or adaptations regarding the time at which the actual communication is made to confirm that acceptance of the offer has occurred. Such modifications imply that a contract formed through the email leads to disregarding of some rules outlined in the common law, thus rendering them unnecessary.

According to the regulations of ETO, if the address (originator of the message) does not depict a place of business, then automatically the place of the business will be the region where the address resides typically. In the scenario where the originator and the addressee are residing in different time zones, this ordinance stipulates that the Universal Standard Time should be utilized. It is also apparent that transmission of the electronic content through email does not have a direct flow from the originator to the recipient due to the involvement of the third party computers (servers) as determined by Internet service provider (ISP). This is in contrary to common law regarding the flow of information between the parties that are intending to enter a contractual relationship.

It follows that section 19 of ETO is distinguishing the purported place of transmission (or receipt) and the actual place where the message is indeed composed, dispatched or received. This provision addressed the scenarios where information system of the originator or addressee sends or receives the data message. Under this circumstance, it is apparent that ETO has not provided clarity on place of business or principal place where the message is received or addressee.' It can also be asserted that ETO does not deliver a conclusion on whether the place of receiving an email is the place where the contract is formed or not. Such gaps indicate that the rules contained in the common law are not necessary when forming a contract via the email.

Authentication of the Send Electronic Documents

It is apparent that the legislation of the ETO aimed at provision of a clear legal structure that allows electronic records, transactions and digital and digital signatures to be legally recognized, just like it is the case with paper-based transactions and records. The implementation of the ETO also focused on the establishment of voluntary frameworks that validates certification authorities (CAs) which was then operating in Hong Kong. The enactment of ETO has led to the inception of different e-businesses and services. For example, the introduction of the Electronic Service Delivery was achieved through the application of the ETO concepts. Through the legislation of the ETO, there has been an issuance and recognition of the commercial CA which provides digital certificates that enable individuals to conduct electronic transactions, which are secure and legal. This implies that some of the common law rules are becoming irrelevant under the implementation of the ETO (Hong Kong Statutes, Cap. 553).

According to the common law rules of the formation of a contract, a contract is considered to be legally sound if there is the compliance of a set of legal elements or requirements. A signature is one the legal components that make a contract legally binding as outlined under the common law rules regarding the formulation of a contract. However, it is revealed that the fundamental requirements of a signature do not hold a high relevance in the application of the ETO. Irrespective of a significant role played by a signature in the authentication of commercial documents, such clauses have been overlooked, or their importance lessened in the implementation of the ETO.

Examination of the relevant ordinances and case law leads to critical observations regarding the fundamental requirements of the for a signature when validating a commercial document. According to the definition of the signature under ETO, there should be an inclusion of the executed or adopted symbols or methods applied by an individual with the intention of authenticating a given record. This implies that an essential function of a signature is the indication of the approval of signatory of the document to be signed (authorization requirement). The signature is also supposed to demonstrate that the signatory has acknowledged the contents included in the entire document. This is element is considered to be approval clause and facilitates the authentication of the signed document. The use of digital signatures when it comes to formalizing a contract formed through an email is an indication that common law rules are no longer a necessity when formulating a contract.


Formation of a contract under the common law requires that the parties involved adhering to a given set of rules and regulations. It is observed that enactment of section 19 of ETO has led to disregarding of some elements of the common law. This is depicted in the formation of a contract through an email, where components of a contract such as an offer and acceptance slightly differ with the provisions stipulated under the common law.


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The Inland Revenue (Amendment)(No. 2) Bill 2001 has been introduced into the Legislative Council which, inter alia, provides that a password can be used for authentication and fulfillment of signature requirement for tax returns filed to the Inland Revenue Department under the Inland Revenue Ordinance (Cap. 112).



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