Legal Insights

COVID-19 A refresher on signing contracts electronically for Victorian government

By James Smart, Michelle McCorkell & Xinyu Zhang

• 24 April 2020 • 7 min read

The COVID-19 pandemic has had a profound effect on all our lives. The requirement to practise social distancing and the restriction on public gatherings mean we are no longer able to hold face to face meetings in the usual way. Many people are working from home and may not have access to printed documents. Others may prefer to avoid exchanging hard copy documentation in person as part of a responsible social distancing regime.

At the same time, governments and businesses must continue to enter into contracts to ensure the continued supply of essential goods and services. Electronic signing of contracts is the most appropriate way to do this at this time because it is consistent with ongoing public health restrictions and supports government messaging to stay home where possible. This alternative to ‘wet ink’ signature is therefore to be encouraged where practicable and possible with little or no legal risk.

This article provides a brief refresher on requirements for signing contracts electronically for Victorian government departments and agencies.

Key terms

We use the following key terms in this update.

Term

Meaning

Wet ink signature

A handwritten signature.

Electronic signature

An electronic representation of a person’s handwritten signature.
Examples:
A scanned image of a person’s wet ink signature.
A hand signature created on a tablet device.
A typed name.

Digital signature

A type of electronic signature that uses encryption technology to authenticate the person electronically signing. A digital signature is considered to be the most secure (and therefore reliable) type of electronic signature.

The law in Victoria

The Electronic Transactions (Victoria) Act 2000 (Vic) (Act) allows electronic transactions in the public and private sectors in Victoria. While the Act does not override existing legal requirements for signing documents it does provide a framework to minimise the risks involved in relying on electronic signatures. The fundamental principle underpinning the Act is that a transaction in Victoria will not be invalid simply because it was an electronic transaction. Part 2 of the Act contains specific provisions relating to the formation and performance of contracts.

The Victorian government has also published the Electronic Approval Standard (click here) which defines rules for electronic approval processes (including electronic and digital signatures). Compliance with the Standard is mandatory for all Victorian government departments and Victoria Police and can be adopted by other Victorian government agencies.

Key requirements

The main requirements in the Act to validate electronic and digital signatures used to form a contract are:

  1. a reliable method must be used to identify the person signing electronically and indicate that the person intended to communicate the information that is in the document; and
  2. the person receiving the electronic signature must consent to the requirements being met by that method.

Provided that these two requirements are satisfied, many of the contracts commonly entered into by Victorian government departments and agencies can be signed using an electronic signature.

Tips to remember when using electronic signatures in Victoria

Assuming that electronic contracting will be a necessary part of government and commercial life for some time, our key tips for minimising the risks involved for Victorian government are as follows:

  • Specify that the law governing the contract is the law applying in the State of Victoria.
  • Use secure technology to obtain a digital signature where possible. There are a number of online solutions currently available which could be used for this purpose.
  • Draft the signature block to include the following:
    • The name of the person signing (and, if relevant, the fact that they are an authorised representative, delegate or attorney of the party to be bound by the contract); and
    • A statement to[ the effect that the signing person consents to entering into the contract using the method chosen and acknowledges that, on signing using that method, the contracting party that the person is signing on behalf of will be bound by the contract.
  • Where an electronic signature other than a digital signature is being used, ask for written confirmation from other party to confirm that the signature was either applied personally by the signatory or applied by someone else with their authority.
  • Undertake due diligence (such as conducting a company search or asking for evidence of authority) to confirm that the person signing is authorised to do so on behalf of the contracting party.

Limits on using electronic signatures in Victoria

As the law currently stands, it is not advisable to use an electronic contract, electronic signatures or digital signatures in any one of the following circumstances:

  • if the document being signed is a deed;
  • if the document being signed must be witnessed (whether it is an agreement or a deed); or
  • if the counterparty is an Australian company executing under section 127 of the Corporations Act 2001 (Cth) (Corporations Act). This does not prevent an Australian company from entering into a contract using an electronic signature, however it means that it cannot do so under section 127 (and therefore that the Victorian government department or agency cannot rely on the assumption in section 129(5) of the Corporations Act that the document has been duly executed). We also note that, if the document to be signed is an agreement, and the company has ‘wet ink’ executed a power of attorney beforehand, then the attorney may electronically sign the agreement.

For high value / high risk contracts, consider requiring a wet ink signature or a digital signature.

Ready reckoner

In the table below, we identify examples of documents that are generally appropriate to be executed with an electronic signature with the other party’s consent, and other examples where electronic signatures should not be used. Individual circumstances should always be considered.

Document

Electronic signature may be used

Electronic signature should not be used

Supply contracts

e..g goods and services agreements, outsourcing agreements, consultancy agreements


Exception: Note above regarding electronic execution by companies under section 127 of the Corporations Act 2001 (Cth).

Confidentiality agreements


Exception: Note above regarding electronic execution by companies under section 127 of the Corporations Act 2001 (Cth).

Deeds

e.g. confidentiality deeds, deed of variation, settlement deed


* The conservative view is that the common law requirement for a deed to be on ‘paper, parchment or vellum’ requires a wet ink signature.

If you would like any assistance to review or discuss your contract signing processes or to draft clauses in your template documents to facilitate the use of electronic signatures, please get in touch.

COVID-19 changes to the Act

We note that the COVID-19 Omnibus (Emergency Measures) Bill 2020 passed both Houses of Parliament on 23 April 2020 and received Royal Assent on 24 April 2020. The new legislation includes a provision that will allow the Governor in Council, on recommendation of the Attorney-General, to make regulations to disapply, or modify the application of, certain laws including the Act in respect of the witnessing, signing or execution of legal documents such as contracts, agreements or deeds. We will monitor any future regulations made under this legislation and update you with any relevant changes.

Maddocks has produced guides to a range of legal issues raised by COVID-19. You can access these guides here.

Looking for assistance with your contract signing processes?

Get in touch with the Procurement & Contracting team.

By James Smart, Michelle McCorkell & Xinyu Zhang

  • Share

Related articles

Online Access