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Are Electronic Signatures Legally Valid?

By 27 February 2020 General News
Electronic Signatures

Once upon a time affixing your written signature to a document was all the proof needed to make it legally valid and enforceable. But now we live in a digital age, where legal documents such as contracts and other agreements are regularly sent between the parties by electronic means such as email.

This development has raised the question as to the status of electronic signatures. Does electronically signing a document such as a contract ensure that it is valid and can be enforced in court if there is a later disagreement about the terms of the agreement? How can the authenticity of a signature be verified?  Could an electronic document have been altered after it has been electronically signed?

First, let’s be clear about what an electronic signature is: a visible mark representing a person’s name placed electronically on a document or in a communication, which identifies the person and also clearly indicates their intention in relation to the information communicated in the document.

Electronic signatures might include a person typing their name in an email or word document, pasting a digitised image of their written signature into a document, selecting an option in e-signing software, signing a soft copy of a document with a stylus or finger on a touchscreen, or using some other form of biometric identification.

A distinction needs to be made between an electronic signature, such as those examples above, and a digital signature, which is a means of encrypting someone’s signature using authentication technology.

The law on electronic transactions in Queensland

Each state and territory in Australia has legislation dealing with electronic transactions. In Queensland the relevant legislation is the Electronic Transactions (Queensland) Act 2001.

The main principle of the legislation is stated in section 8 as follows:

“A transaction is not invalid under a State law merely because it took place wholly or partly by 1 or more electronic communications.”

Section 14 of the Act sets out the requirements for a valid electronic signature as follows:

  • Identity: a method is used to identify the person and to indicate the person’s intention in relation to the information communicated.
  • Reliability: the method of communication was as reliable as appropriate for the purpose of the communication (having regard to all the circumstances).
  • Consent: The person to whom the signature is given consents to the use of electronic communication to fulfil the requirement for a signature.

The legislation also permits (subject to certain requirements) each of the following to be done by electronic means:

  1. the giving of information;
  2. the production of documents;
  3. the recording and keeping of information; and
  4. the keeping of written documents.

When Caution is Needed

There are some situations where more careful consideration is needed in relation to whether electronic signatures are sufficient to give legal effect to a document.

Deeds

At common law, a deed must be in writing, signed by the parties and delivered in order to be effective.  A deed also requires a witness to sign.  The Electronic Transactions (Queensland) Act does not apply to witnessing requirements and does not displace the common law requirement that a Deed be on paper.  As such, a Deed must still be a signed and witnessed paper document.

Signing by companies

Under section 127(1) of the Corporations Act 2001 (Cth), a company may execute a document by having two directors’ (or a director and secretary) of the company sign the document. However, the provisions of the Commonwealth Electronic Transactions Act do not apply to the Corporations Act and so cannot be relied upon to meet the requirement for a signature.

However, not all contracts are required to be in writing or signed, and many are made verbally or by exchange of correspondence or forms such as purchase orders and invoices.

Where there is a contract which is required to be signed by a company (for example, a contract to buy real property) or a contract which is significant value, most parties will insist on a company signing by the more cautious approach of a ‘wet’ signature on a hard copy.

Physically signed, hard copies, rather than electronically signed documents, are also generally required by the land titles offices (for contracts of sale in property matters, for example), stamp duty documents, and forms and documents required to be lodged with the Australian Securities Information Commission (ASIC) or Australian Stock Exchange (ASX).

The increased use of digital signatures

Concerns about the authenticity of an electronic signature on a document, as well as the possibility of an electronic document being altered after it has been signed, mean the additional security of a digital signature is increasingly preferred by people remotely negotiating a contract or agreement.

Digital signatures generate a unique electronic ‘identity’ which provides extra security in verifying the author of a document. Digital signature software products are becoming more and more sophisticated by adding security features such as biometric authentication, timestamps, email and IP address tracking in order to make verifying the signature of a party to a document easier and more certain.

Consult a legal professional

Lawyers deal in the electronic transmission of important legal documents every day and have expertise in the use of electronic signatures to ensure those documents meet the criteria of validity and enforceability. Be sure to contact us regarding the legal position of electronic signatures on any legal documents or forms you have signed or intend to sign.