The use of information technology and digital systems in everyday business practice is becoming ubiquitous. The use of electronic signature (‘e-signature’) technology, however, has been less pervasive, despite recognition of its validity by the Electronic Transactions Act 1999 (Cth).

Nevertheless there has been growth in recent times, driven in no small part by the wide range of solutions now available.  This paper provides an overview of Australian law regarding the legal validity of e-signatures.

In a follow up paper, we will look more closely at the commercial e-signature products on the Australian market and specifically assess their legal validity.

What are ‘electronic communications’ and ‘electronic signatures’?

Generally:

• An ‘electronic communication’ is any transmission of information by electronic means.
• An ‘electronic signature’ is any electronic communication which carries the intention of being a signature.Examples are:
  •  Inserting a scan of a person’s signature into a Word version of a contract;
  • Sending an email which states that the email itself is a person’s signature to a document attached to the email;
  • Typing a name or other mark (for example, ‘X’) in a section of an online form and identifying this as a signature (for example, by making an acknowledgement to this effect); and
  • Using an encrypted digital signature as a process for determining the authenticity of a digital message.

Legal Validity of e-Signatures under Australian Law

Requirements for validity

In Australia, the use of e-signatures is governed by Federal and State legislation. The Electronic Transactions Act 1999 (Cth) is the federal law, while the corresponding State and Territory Acts apply to their respective jurisdictions.

The general rule provided for by the legislation is that:

1. A transaction is ‘not invalid’ because it took place wholly or partly by means of one or more electronic communications^[1]; and
2. If a signature is required by the law of that jurisdiction for effective contract formation, that requirement is taken to have been met by means of one or more electronic communications, provided that^[2]:

          –   Identification: A method is used to identify the person using the e-signature, and to indicate their intention in respect of the information communicated.

          –   Reliability: The identification method used is either as reliable as is appropriate in the circumstances for the purpose for which the electronic communication was generated, or satisfies the Identification Method function in (a) above, either by itself or together with further evidence.

          –   Consent: The counterparty to the transaction consents to the signature requirement being met by the electronic communication method used.  g. by the use of a phrase such as:  ‘I acknowledge that [name of party] will accept this communication as containing my signature for the purposes of the relevant electronic transactions legislation.’

When only good old paper and ink will do…

There is a range of excluded cases where e-signatures cannot be legally used in Australia.

At the Federal level, more than 150 different laws are excluded (some entirely, others in relation to only specific sections) from the provisions permitting e-signatures^[3].  In particular, the entire Corporations Act is excluded from the electronic signatures provisions. As a result:

• E-signatures cannot be used to satisfy the presumption under s127 of the Corporations Act that a document (such as a deed) has been validly signed where signed by two directors or director and secretary.
• E-signatures cannot be used for notifications of appointments when a company appoints a director, where it must notify ASIC within 28 days of the appointment^[4]. The notification must be made by lodging an approved form, signed by a director or secretary of the company, with ASIC.
• It is unclear whether powers of attorney under s 126 are also excluded.

At the State and Territory level, the kinds of transactions that are excluded differ. For example,

• The Victorian legislation excludes wills^[5], whereas NSW does not.
• Although the NSW legislation does not exclude the execution of deeds by individuals, it does not cover requirements under NSW law for a document to be witnessed^[6]. Accordingly, the requirement to have a person witness a signature cannot be satisfied by an electronic communication.

Commercial e-Signature Products

The main commercial e-signature products on the market, such as Docusign, Hellosign and RightSignature, all claim legal validity under Australian law where e-signatures are permitted.

In a follow up paper we will provide an overview of these products from a legal validity and commercial point of view.

Concluding remarks

The introduction of e-signature technology offers real benefits for organisations in streamlining execution processes, particularly where there are large volumes of documents or numerous signatories in multiple locations.

However, an e-signature will only be sufficient to satisfy a legal requirement to sign a document if all of the requirements are satisfied.  That is:

• The requirement is not excluded from the electronic communications laws;
• The signature will be effected by a method that satisfies the “Identification” and “Reliability” requirements; and
• The parties have given clear and unconditional consent to the method used, by an express declaration of consent in the document.

[1] Section 7(1) of the Electronic Transactions Act 2000 (NSW), Electronic Transactions (Victoria) Act 2000 (Vic).

[2] Section 9(1) of the Electronic Transactions Act 2000 (NSW), Electronic Transactions (Victoria) Act 2000 (Vic).

[3] Schedule1 of the Electronic Transactions Regulations 2000 (Cth).

[4] Section 205B of the Corporations Act 2001 (Cth).

[5] Regulation 6 of the Electronic Transactions (Victoria) Regulations 2010 (Vic).

[6] Regulation 5(f) of the Electronic Transactions Regulations 2012 (NSW).

The information above is general in nature. If you would like to learn more about the validity of e-signatures, please contact us below.