E-signatures, enforceable? That is the question
By Jack Evans• 16 June 2016 • 3 min read
Many large organisations have been relatively reluctant to adopt policies allowing for contracts to be signed electronically
Today’s technologically hungry society is known to adopt new tech more quickly than ever before. Despite this, many large organisations have been relatively reluctant to adopt policies allowing for contracts to be signed electronically.
For many years, the Australian legislative framework has contemplated the use of electronic signatures. The Electronic Transactions Act 1999 (Cth) and various corresponding State and Territory Acts provide, as a general rule, that contracts are not necessarily invalid solely by virtue of the fact that they are executed electronically.
The Commonwealth Act specifically provides a number of criterion, all of which need to be satisfied for an e-signature to be found to be valid for the purposes of Commonwealth law, as follows:
- There must be a method of identification and intention of the signatory – in some instances courts have been known to apply this requirement broadly. For example in one case the typed signature, ‘Regards, Angus’ was found to be sufficient (Faulks v Cameron (2004) 32 Fam LR 417);
- The method must be reliable – as with hard copy contracts, signatures must be reliable in order to be enforceable. This will involve an assessment of whether the method is reliable in light of the surrounding circumstances and is perhaps the most difficult criterion to prove; and
- Consent must be given by the other party for the method to be used - if parties to an agreement intend to use e-signatures, then they should expressly consent to their use.
Relying on the above requirements being satisfied for a particular transaction is however not without risk.
Notwithstanding technology in place today (including secure cryptography, such as DocuSign) there remains a risk that the identity of the person providing an e-signature is not accurate, or at least not immune to legal challenge. It may, for example, be difficult to prove that an e-signature was actually made by the person to whom the e-signature belongs, rather than some other third party. This would be comparable to a situation where a handwritten signature is required and a person fraudulently purports to be the intended signor and signs the contract.
Many standard execution blocks in hard-copy contracts require the signature to be witnessed, which provides an additional layer of protection for hard-copy contracts. Currently, there is no practical way to verify the signor’s identity with one hundred percent certainty using e-signature tools.
There is also a prevailing view that e-signatures cannot be used to rely on due execution assumptions that are otherwise available when documents are signed in accordance with section 127 of the Corporations Act 2001 (Cth).
The answer may be ultimately be for organisations to fully inform themselves of the relevant risks and then to implement policies that allow e-signatures for low value and low risk agreements, but require other agreements to be executed in the ‘old fashioned’ way, by putting pen to paper.
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