The COVID-19 pandemic led to large numbers of businesses working remotely and has limited the opportunity for people to meet face to face. As a result, companies need to consider how they can sign contracts that otherwise may have been dealt with by printing and signing paper documents. This article will unpack how electronic signatures (e-signatures) work and provide guidance on how to manage your contracts during this uncertain time.

What Are E-Signatures?

E-signatures are a form of signatures that are digital. This is in contrast to the traditional form of using a pen, known as ‘wet ink’ signatures. You can provide an e-signature in several ways, including:

  • pasting a digital version of a physical signature into a document;
  • using e-signing software such as DocuSign, or AdobeSign, or similar;
  • signing a soft copy of a document on a touchscreen (using a stylus or finger); or
  • typing a name in an email.

When Can I Use An E-Signature?

In Australia, there is generally no distinction between ‘wet ink’ signatures and e-signatures under the law. As such, you can use e-signatures when signing regular agreements. There are three requirements for a validly executed agreement:

1. Identification

For a contract to be valid, you must be able to identify: 

  • the person entering into the contract; and 
  • their wish to be bound by the contract.

While no formal verification of identity is required, you need to ensure you can identify who the person signing the contract is. 

For example, if you were expecting a contract to be signed by a director of a company, and someone else in their office had access to their email and executed the contract without their knowledge, the contract would be invalid. 

You can put steps in place to minimise the risk of this, such as:

  • confirmation by email or phone; or
  • including clauses in the contract where each party promises that no other party has access to applying the e-signature.

2. Reliability

The method you use to obtain the e-signature must be reliable in light of the circumstances. This includes the type of document that you are signing also being reliable

Digital signing platforms are generally considered to be reliable.

3. Consent

Both parties of the contract must consent to the signing of the document with an e-signature. You can simply indicate your consent by signing the document electronically.

You can also make this consent very clear by including a clause within the contract stating that the contract may be executed electronically.

What About Witnessing a Signature Electronically?

As social-distancing has made contract signing and witnessing difficult, the NSW Government has rapidly passed a regulation to allow for the witnessing of documents remotely during the pandemic. The new regulation is known as the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020.

If a signature on a document must be witnessed, witnessing the signature or attestation of the documents can now occur via an audio-visual link.

For example, it could occur on Zoom, FaceTime, Microsoft Teams or Skype.

There are a few requirements to ensure the witnessing is done correctly via audio-visual link. These include that the witness:

  • must observe the signatory sign the document in real-time;
  • must confirm they witnessed the signature by either signing the same document or a copy of the document;
  • is satisfied that the document they sign is the same document the signatory signs; and
  • must endorse the document, or otherwise include a statement on the document that includes both the method they used to witness the signature and that the witnessing was in accordance with the Regulations.

An example statement for witnessing a signature is:
This document was signed in counterpart and witnessed over audiovisual link in accordance with clause 2 of Schedule 1 to the Electronic Transactions Regulation 2017”

If you are witnessing a document, you should make all efforts to confirm that the document you sign is the same document the signatory has signed. The most practical method is to sign a copy of the original signed document and ensure that you can accurately see the signatory sign the document through whichever audiovisual platform you use.

Keep in mind that this electronic witnessing of signatures is only temporary and may be repealed by parliament at any time, or if not repealed earlier, the amendments will expire on 22 October 2020.

Limitations On E-Signatures

There are certain types of documents that cannot be executed electronically. These include:

  • deeds, as there is a requirement that they must be signed on paper and witnessed by another person who is not a party to the deed;
  • court documents and powers of attorney; and
  • certain registration documents, such as documents lodged with the Australian Securities & Investments Commission (ASIC), the Australian Securities Exchange (ASX) and land titles offices.

Some bodies and regulators are flexible with their processes during this pandemic. So, if you are unsure if you can sign a document electronically, it is best to contact them directly to see if they have updated their requirements.

There are several types of contracts where there remains debate about the enforceability of e-signatures. These include:

  • contracts to be executed by a company without a common seal; and
  • in some areas of law, where there are specific regulations regarding e-signatures on a state by state basis

Some states, such as NSW, have passed emergency legislation allowing for regulations to change in respect of signatures and witnesses. However, no regulations regarding e-signatures have been implemented yet.

Key Considerations During COVID-19

For the most part, businesses should be able to use e-signatures for many standard contracts during the COVID-10 pandemic and beyond. However, you will need to consider types of contracts where it is a grey area.

Deeds

As explained, it may be difficult to execute a deed with an e-signature. Therefore, only use a deed if it is absolutely necessary. You can often turn deeds into agreements, which would make it easier for you to execute it remotely.

Contracts Without a Common Seal

If your company wishes to execute company documents without a common seal, you need to meet a number of requirements that may be difficult to meet during quarantine. Here, you may wish to have authorised representatives sign it instead, as there is little advantage to executing the document without a common seal in the current climate. This would be sensible if you have a long-standing relationship with the other party or if it is a low-risk contract. 

For more high-risk contracts, you may be concerned about not being able to rely on the presumption that the other party has validly executed it. Here, you could undertake some due diligence by asking to see a copy of their company constitution or other internal documents to ensure the correct person is executing the contract.

If All Else Fails

If there is no practical method of properly executing a contract during this crisis, the parties could exchange scanned copies of their signed version of the contract with an agreement to exchange counterparts at a later date.

Key Takeaways

Despite government limitations on social interactions, you can still sign many standard contracts electronically. This should help businesses to continue their day to day operations during the COVID-19 pandemic. So that electronically executed contracts are valid, you must ensure that:

  • the method of signature allows you to identify each party;
  • it is reliable; and
  • both parties consent to use an e-signature

For some contracts, there is more uncertainty around how to execute them electronically, particularly where it is practically very difficult to do so. If you have any concerns about executing contracts electronically, contact LegalVision’s COVID-19 legal team on 1300 544 755 or fill out the form on this page. 

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

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Lauren McKee
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