Today, many businesses use documents in electronic format. Consequently, customers need to sign documents through electronic signatures or e-signatures. This has accelerated throughout the COVID-19 pandemic, greatly changing the business landscape.
Given how common e-signatures have become, this raises multiple issues. One of the key things to consider is whether e-signatures are legally valid and enforceable. In this article, we will explore the validity and enforceability of these signatures and other common questions about e-signatures.
What is an Electronic Signature?
An electronic signature, also known as an e-signature, is where an individual signs a letter, an agreement or any other document using an electronic mark as opposed to putting pen to paper. Examples include:
- inserting a scan of a person’s signature into a document;
- typing a name;
- or a digital signature.
Why Do Businesses Use E-Signatures?
E-signatures are a practical and time-efficient way for businesses to sign new contracts. People reviewing contracts on a computer can often sign easier documents more easily electronically. Furthermore, printing hundreds of contract pages is not environmentally friendly and can be very costly, especially if your business is just starting.
Continue reading this article below the formWhat Do Our Laws Say?
Australia’s Electronic Transactions Act 1999 (Cth) provides the basis for electronic transactions and specifies that “…a transaction is not invalid because it took place wholly or partly by means of one of more electronic communications.” However, this only covers electronic communications with the Commonwealth Government.
Other states have their own laws. For example, New South Wales now follows the Electronic Transactions Act 2000 (NSW) (NSW ETA). However, no law compels a party to use electronic communications. If parties choose to use electronic communications, the e-signatures will only be effective if:
- the parties involved consent to its use; and
- the method used is appropriately reliable.
The Federal Government has recently passed the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (CA Act). This allows parties to electronically execute and remotely witness documents. Similarly, in NSW, temporary measures of remote witnessing of signatures and attestation of documents by audio-visual link are now made permanent by the Electronic Transactions Amendment (Remote Witnessing) Act 2021 (NSW).
Despite the recent changes, you should not assume that you can electronically execute a document. Occasionally, a different requirement may apply to you depending on where you are based. Furthermore, you should still consider state and territory legislation before relying on the federal law amendments. If you are unsure if you can execute a document electronically, we recommend speaking to a lawyer.
Are E-Signatures Valid and Enforceable?
The law allows e-signatures as evidence of a legally binding agreement. Where a person’s signature is required, NSW will accept the e-signature if:
- the e-signature can identify the person signing the document and indicate the person’s intention concerning the electronic communications;
- the method of the e-signature is appropriate for the purpose of the electronic communications; and
- the person signing the document has consented to the use of an e-signature.
Note that consent is no longer strictly required for documents under section 110A(2) of the CA Act. Importantly, you must be able to identify the signatory and observe reliability during the process.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
Are They Enforceable For All Contracts?
Not all documents can use electronic signatures. Some transactions require a traditional pen to paper signature.
Key Takeaways
With advancing technologies, the pressures of COVID-19 and new regulations, many standard contracts and documents can now be signed electronically. However, when utilising e-signatures, you must ensure you are observing the relevant law.
If you are unsure about whether your business can use an e-signature, LegalVision’s experienced online business lawyers can help. 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
Yes, e-signatures are legally binding. Especially with the introduction of the Corporations Amendment (Meetings and Documents) Act 2022 (Cth). This has widened the scope of documents that parties can electronically execute.
E-signatures are a practical and time-efficient way for a business to sign new contracts. It can also be cost-effective and environmentally friendly when a long contract is signed digitally instead of printing it out.
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