How Do Electronic Signatures Work?

In order for a contract to be valid and enforceable, a number of requirements need to be fulfilled. Above all, a key requirement is a signature by the involved parties. Have you signed an electronic contract and are now wondering about your rights and the enforceability of the contract? Are you unsure about whether electronic signatures operate in the same way that pen-to-paper signatures work?  It is important that you know your contractual rights when entering into contracts electronically and whether or not your electronic signature is binding. Therefore, this article goes through: 

• electronic signatures in Australia;  
• how they operate; and 
• whether they operate differently from other means of entering into a contract. 

What is an Electronic Signature?

An electronic signature can be defined as a signature that is used on an electronic document and is intended to be a signature. For example, this may be a scan of a person’s signature into a contract or text on an email.

An ‘electronic signature’ is a broader concept than that of a ‘digital signature’, which is a mathematical process for determining the authenticity of a digital message. Keep in mind, however, that a digital signature is a type of electronic signature.

What Are the Applicable Laws?

The Electronic Transactions Act was enforced in 1999 and established electronic signatures in Australia. As a result, under Australian law, contracts are held to be enforceable if the parties: 

• make them verbally;
• have physically signed the document with a wet-ink; or
• use electronic signatures.

There are different laws in each state and territory that govern electronic signatures:

Validity of Electronic Signatures

You must satisfy three standard criteria in all Australian states and territories to ensure the validity of an electronic signature. These include:

1. the recipient must consent to receive information electronically;
2. the signing method must identify the person sending the information and indicate that the content of the electronic document that has been signed is approved by them; and
3. having regard to all of the transaction’s circumstances, the signing method is as reliable as is appropriate for the purpose for which the electronic document was created. Alternatively, evidence of the signor’s identity and their approval of the electronic document’s contents must be explicit in the document or otherwise available in some other manner.

However, if for whatever reason, the recipient does not consent, the electronic signature will not be effective. As a result, this will likely require some prior familiarity and an agreed process between the parties to the document.

Exceptions to Validity and Use of Electronic Signatures

In each state and territory, different exceptions apply to the validity and use of electronic signatures. However, the six main categories of exceptions exist that might be applicable in different states and territories include:

• documents that are required to be witnessed;
• documents to be personally served;
• court documents;
• deeds, 
• powers of attorney; and
• wills.

For instance, the Courts have determined that deeds must be executed on paper and signed by hand. This is because deeds are a unique class of document capable of assigning obligations without consideration. Additionally, deeds must be witnessed in order to be executed. Whether or not a witness can sign electronically is a matter of debate in the legal field. Traditionally, the courts also require deeds to be printed on: 

• paper;
• parchment; or
• vellum. 

Key Takeaways

Electronic signatures are becoming more common in today’s day and age. Therefore, you should know your contractual rights when entering into electronic contracts and whether your electronic signature is binding. Therefore, if you are entering into a contract electronically and would like assistance, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions