Many businesses these days have documents in electronic format and it follows that documents can now be signed by way of electronic signatures (“e-signatures”).
Rapid technological developments have raised many questions in regarding the validity of electronic transactions and communications. With an overriding question being – are e-signatures legally valid and enforceable? In this article, we’ll answer some of the most 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, by using an electronic mark as opposed to putting pen to paper.
These e-signatures are usually created by an individual signing a piece of paper and scanning this into the computer as an image. This image can then be used for multiple documents as an e-signature.
Why do businesses use e-signatures?
E-signatures are becoming a practical and time-efficient way for businesses to sign new contracts. When contracts are reviewed on a computer it is often easier to sign electronically. Printing out hundreds of pages of a contract is not environmentally friendly and can be very costly, especially if your business is only just starting up.
What do our laws say?
As technology continues to develop, the law must keep up with these developments. Australia’s Electronic Transactions Act 1999 (Cth) sets up the regulatory framework for electronic transactions and section 8 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 enacted their own legislation. For example, New South Wales now follows the Electronic Transactions Act 2000 (NSW) (“NSW ETA”). Under commonwealth and state legislation, no parties are forced to use electronic communications. If electronic communications are used, e-signatures will only be effective if the parties involved have consented to its use and if the method being use is appropriately reliable.
Are e-signatures valid and enforceable?
The law allows e-signatures to be used as evidence of a legally binding agreement. Where the signature of a person is required, the requirement is taken to have been met, if, pursuant to section 9 of the NSW ETA:
- the e-signature can be used to identify the person signing the document and to indicate the person’s intention in relation to the electronic communications;
- the method of an 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.
Does this mean e-signatures are enforceable for all contracts?
Not all documents can use electronic signatures and some transactions require a traditional pen to paper signature.
If you are unsure about whether your business can use an e-signature contact LegalVision for a free fixed-fee quote on 1300 544 755!