As an increasing number of businesses move online, we have seen an equal increase in the need for businesses to transact quickly and efficiently online. A commonly asked question is whether a business can accept an electronic signature. We aim to answer this question and provide some general guidance on what is and is not acceptable as an electronic signature.
Regulatory Framework
The Commonwealth’s Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2000 cover the use of electronic signatures. There is also equivalent state legislation such as the Electronic Transactions Act 2000 (NSW). These Acts recognise that a transaction is not invalid because it took place using one or more electronic communications.
Recently, Federal and certain State governments have passed legislation to permanently allow for the electronic execution of company documents. This includes the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (CA Act) and Electronic Transactions Amendment (Remote Witnessing) Act 2021 (NSW) in New South Wales.
What is an Electronic Signature?
An electronic signature refers to any electronic means that have the purpose of being a personal signature.
This can include:
- typing a name;
- ticking a box;
- inserting a scan of a person’s signature into a document; or
- stating in electronic communication that the communication itself is to be taken as the signature.
Electronic signatures can also include a digital signature. A digital signature is a type of electronic signature that relies on encryption (known as asymmetric cryptography) to authenticate messages. A digital signature usually requires the purchase of a program or software and is typically used in high-security and high-value transactions.
Continue reading this article below the formKey Principle
The general rule is that an electronic signature does not invalidate a transaction. Importantly, an electronic signature must fulfil certain requirements to be valid. These include the following.
Identification
The electronic signature must identify the person signing the document and their intention to sign the document.
Reliability
The method of electronic signing must be reliable in the circumstances generating the electronic communication.
Consent
The person receiving the electronic communication must consent to the use of the electronic signature to execute the contract.
Note that for documents under section 110A(2) of the CA Act, consent is no longer strictly required. Importantly, you must ensure to identify parties and do so reliably.
Exclusions
There are several laws excluding the law of electronic communication from operating. If this applies, you cannot use an electronic signature instead of a standard original signature on paper.
For example, the Corporations Act excludes the use of electronic signatures. Company directors and secretaries must execute paper versions of any document or agreement requiring their signature. Electronic signatures are also impracticable where a person’s signature requires a witness. While there is no issue with a person electronically signing the document, electronic communication cannot satisfy the requirement that a person witnesses the signature.
Common Use
With the changing landscape due to COVID-19, the presence and use of electronic signatures have allowed businesses to continue to operate. There are numerous practical examples of electronic signatures improving a business’ efficiency in its day-to-day operations. Consumers and businesses use electronic signatures to enter into supply and service agreements. For example, purchasing groceries, legal services or doing their banking online.
It’s now easier than ever to start a business online. But growing and sustaining an online business requires a great deal of attention and planning.
This How to Start an Online Business Manual covers all the essential topics you need to know about starting your online business.
The publication also includes eight case studies featuring leading Australian businesses and online influencers.
Key Takeaways
Electronic signatures are increasingly common, especially since COVID-19. Accordingly, as a business owner, you must ensure you are aware of the current regulations. For example, you may only use electronic signatures on certain documents. Failure to adhere to the signature requirements can affect the validity of your contract. Thus, your business must take this into account when determining whether to accept an electronic signature.
If you need help with utilising electronic signatures, our experienced e-commerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
It is any electronic means that serves the same purpose as a personal signature. This includes typing a name, ticking a box or a digital signature.
In Australia, there is generally no distinction between ‘wet ink’ signatures and ‘e-signatures’. You can use an e-signature to sign agreements as long as you can identify the other party, the method of electronic signing is reliable, and you have the consent of both parties to allow for online execution is obtained.
We appreciate your feedback – your submission has been successfully received.
