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Legal Framework under Electronic Transactions Ordinance (Cap.553)

The Electronic Transactions Ordinance was passed into laws on 7th January 2000 as part of the major works of the HKSAR Government to promote the cause of electronic commerce, including the delivery of public services through the electronic channel.

provides legal status to electronic records and digital signatures in the conduct of electronic transactions as that of their paper-based counterparts; and

The development of secure e-business framework is one of the main tasks of the Digital 21 IT Strategy of the Hong Kong Government. The Government has adopted the use of the Public Key Infrastructure (PKI) as being the technological framework for the furtherance of secured trading on the electronic framework.

The passage of the Electronic Transactions Ordinance (ETO) has made this become possible as legal recognition is given to the status of the PKI as a certification technology. The ETO is basically modelled upon the United Nations Commission on International Trade Law Model Law on E-commerce (UNCITRAL MODEL LAW ON E-COMMERCE). The ETO provides that digital signatures (as defined by the ETO) and electronic records have the same legal status as that of their paper-based counterparts.

The ETO has at the same time given a legal framework for the establishment of recognised Certification Authority (RCA) to support the conduct of secure electronic transactions. By virtue of the ETO, the Postmaster General is an RCA of Hong Kong and has since its set up begun to accept applications for grant of digital certificates to citizens and organisations in Hong Kong. The certificate is generally known as 'e-Cert'.

Reference Web-site: http://www.info.gov.hk/itbb/english/new/etcontent.htm

HKSARG 'Electronic Submission of Forms' (e-Form)

The "Electronic Submission of Forms" (e-Form) was launched on 25 May 2001.

E-Form is a Government initiative to facilitate the public to make electronic submissions to Government and provide more public services on-line. The service attempts to make use of the ubiquitous nature of the Internet and hence enabling citizens to fill-in and submit forms to Government electronically anytime and anywhere for government services. Such service would basically require the use of digital signature issued by a recognised certification authority e.g. Hong Kong Post although individual government departments make adopt other means of authenticating the user's identity.

The Government promotes the use of e-Form by referring to the benefits of using it. They are:

1. Efficient : you can fill in and submit Government forms electronically on an anytime anywhere basis;

2. Secure : you can encrypt the e-Form to protect the confidentiality of the information submitted;

3. Authentication : you can use a digital certificate to sign the e-Form;

4. User-friendly : there are step-by-step guidelines to help you complete the e-Form.

Reference web-site: http://www.igsd.gov.hk/eform/

How the Security Issues in E-Commerce are tackled?

The security issues in e-commerce are resolved by the setting up of the Public Key Infrastructure (PKI) supported by a legal framework through legislations on its effect and meaning.

With regard to the so-called brick and mortal traditional commerce, transactions are paper-based. Papers such as quotation, purchase order, contracts, invoices, cheques and receipts are used. The papers serve evidential and communication purposes between the parties. As to security measures adopted in traditional commerce, it is done by use of signature and countersignature. The persons signing the documents are identified to be the parties involved in the transaction.

However, electronic transactions are carried out differently. If you ordered a book online through a web-site, orders and receipts are made electronically and through electronic communication such as emails. To authenticate a person's identity, web-sites do so by supply of personal data, credit card data and registration. Registration will give you a user account and password enabling you to be identified by the web-site who you are. However, the authentication is not done by a means enjoying trust, it is not a reasonably reliable way to authenticate a person's identity. That is why digital signature and certification authority are promoted.

Risks of Electronic Communication

The following are the most apparent risks or elements of concern when making electronic communications:

1. crimes

2. theft of valuable confidential information or trade secrets

3. unauthorised access and use of resources

4. fraud e.g. forged identity

5. trust

6. loss of customer confidence or respect to electronic communication loss

7. financial loss owing to fraud

Means of authentication

A party's identity is a critical element when contracting online.

In the context of digital means of identification, the following are the summarised manner. Online identification can be by one of the following methods or it can of a combination:

1. user name, password and PIN

2. biometrics: retina, palm, finger prints

3. Token: e.g. smart card

Electronic Service Delivery Scheme

The Electronic Service Delivery (“ESD”) Scheme is a key initiative under the “Digital 21” Information Technology Strategy. ESD is intended to be an innovative way for the delivery of public services to the community through the Internet and other electronic means. The 1st phase of the ESD scheme was launched in late 2000.

Reference web-site: http://www.esdlife.com

What is the Digital 21 Strategy?

The strategy aims:

1. To set out our vision, initiatives and targets of how Government, business, industry and the academia can work together to make Hong Kong a leading digital city in a globally connected world.

2. enable safe and secure electronic transactions by providing a framework for ensuring the integrity of information exchanged and for authenticating the identity of participants in such transactions

Initiative by HKSAR Government

In 1997 the HKSARG Chief Executive, Mr. TUNG Chee Hwa has set a vision for Hong Kong to be "a leader and not a follower in the information world of tomorrow", and to use information technology (IT) to retain our competitive edge and to drive overall economic expansion.

In the Policy Addres by Chief Executive in 1998, the Chief Executive has again revealed its intention to “use information technology to help HK retain its competitive edge and to drive its overall economic expansion”. As a result, the HKSAR Government released its technology development plan known as the “Digital 21 Strategy”.

The Information Technology and Broadcasting Bureau (ITBB) was set up in 1998 for the furtherance of that vision. From then onward, the HKSARG began to formulate policies regarding telecommunications, IT and broadcasting altogether through ITBB. This approach is considered to be pragmatic in the light of imminent convergence of telecommunication, computer and broadcasting. Such convergence is made happened owing the globalisation of telecommunication network, the emergence of the Internet and the digitisation of communications and broadcast.

The 1998 Digital 21 Strategy is orchestrated by and its execution by ITBB. According to ITBB, "the primary focus of the 1998 Digital 21 Strategy was to build capabilities and infrastructure to support a thriving information economy, and to create a strong foundation for growth in the use of IT. The strategy included a visionary programme of initiatives that were designed to create an environment for the information economy to thrive by encouraging businesses and consumers to participate, and to exploit opportunities, in this new information economy. The objective is to develop Hong Kong into a leading digital city in the globally connected world. "

Reference web-site: http://www.info.gov.hk/digital21/e_index.html

Mistake as a vitiating factor

If an online merchant make an offer by mistake on his web-site and a lot of orders are made by online customers amounting to acceptance.

For instances, the sale of vehicles at the mistakenly posted price of $1,000.00 in stead of $100,000.00. He can only rely on the doctrine of mistake to vitiate the contract. Mistake as a vitiating factor under the law of contract is provided by the common law whether the defence can be established depends on the court's find that the online customer knew that a mistake had occurred.

However, case laws are not definite as to whether the mistake must actually be known to the customer or whether it is enough if it is proven that the mistake ought to have been apparent to any reasonable man Centrovincial Estates plc v Merchant Investors Assurance Co. Ltd [1983] Com LR 158 held that the objective test of “reasonable man should apply. However, Agip SpA v Navigazine Italia SpA [1984] 1 L’Loyd's Rep 353 held that equity would require actual knowledge for rectification.

Binding and Enforceable Nature of a Contract

A contract is an agreement binding on the parties. It creates a legal obligation on the parties to perform their obligation.

The law of contract bases itself on the common law. Case laws differ how a contract is formed and become legally binding on the parties.

An contract is enforceable against the party at fault or party in breach. Enforceability means that the innocent or injured party can sue the party at fault for legal remedies such as damages and specific performance.

There are 4 elements to contract formation. They are offer, acceptance, consideration and intention to create legal relation, capacity of the parties to contract and legality of the contract are also frequent concerns.

Only a very few types of contract regime writing e.g. sale of real properties, contracts can generally be made orally. However, whether writing is required or not, if there is a written contract, the parol evidence rule operates to exclude outside or extrinsic evidence.