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As an increasing number of businesses move online, we have seen an equal increase in the need for businesses to be able 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 you with some general guidance on what is and isn’t acceptable as an electronic signature.

Regulatory Framework

The Commonwealth’s Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2000 covers 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.

What is an electronic signature?

An electronic signature is a term used to describe 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 an 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 which relies on a form of encryption (known as asymmetric cryptography) to authenticate messages. The use of a digital signature usually requires the purchase of a program or software and is typically used in high security/value transactions.

Key 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:

  1. Identification: The electronic signature must identify the person signing the document and their intention to sign the document;
  2. Reliability: The method of electronic signing must be reliable in the circumstances generating the electronic communication, and
  3. Consent: The person receiving the electronic communication must consent to the use of the electronic signature to execute the contract.

Exclusions

There are a number of laws excluding the law of electronic communication from operating. When this is the case, an electronic signature cannot be used in place of a standard original signature on paper.

An example of a law excluding the use of electronic signatures is the entire Corporations Act. Company directors and secretaries must execute paper versions of any document or agreement requiring their signature. Electronic signatures would also be 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 witness the signature.

Common Use

Electronic signatures unquestionably present difficulties and challenges in particular cases, however, there are also 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.

Conclusion

If you are considering moving your business online, you should speak with an experienced online business lawyer about how you can utilise electronic signatures to improve your business processes. LegalVision’s lawyers would be pleased to answer any of your questions!

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