The changing nature of commerce has influenced how people have entered into and signed contractual agreements. Less than a century ago, parties entering into contractual agreements needed to sign a physical document. This is called a ‘wet signature’ or a physical signature, referring to the wet ink used. However, with technology simplifying everyday business transactions, you should consider whether using a wet signature is necessary for your business and how it affects cost and time efficiency. This article highlights some key points to consider when deciding to use a wet signature.
Legal Necessity
There are some instances where it is legally necessary to use a wet signature when creating binding agreements.
Whether you are legally required to use a wet signature depends on your state or territory. This is because different states have different legal requirements. These are some of the general categories where the law in your state or territory might differ:
- documents where you are required to have a witness;
- documents that you must personally serve;
- various court documents;
- certain deeds; and
- testamentary wills.
The complexities around social distancing requirements arising from COVID-19 have led the Federal and certain State Governments to pass new regulations to allow for the electronic execution of company documents. This includes the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (CA Act) and Electronic Transactions Amendment (Remote Witnessing) Act 2021 (NSW) in New South Wales.
With the new federal regulations passed, deeds executed by a company under the Corporations Act 2001 (Cth) can be done so electronically. Note that changes are now in place to accept the electronic execution of deeds in certain states. It is, therefore, prudent not to assume that you can electronically execute a document, as a different requirement might apply to you depending on where you are based. You should consider state and territory legislation before relying on the amendments.
If you are unsure whether to use paper documents or a wet signature, you should consult a lawyer. A lawyer can clarify uncertainties and identify weak spots in executing your company documents. This advice can be critical to the outcome of your business transaction, especially if it involves an important commercial agreement.
Limits to Using Wet Ink Signatures
However, if you can choose between a wet signature or an e-signature, you should consider the following limits on using hard copy forms.
Time Efficiency
Nowadays, people are making important business decisions at lightning speed. Therefore, e-signatures can help to remove a lot of time lags. On the other hand, companies that use wet signatures are prone to delays within the confines of a business day, particularly considering the time it takes to transport documents.
In addition, you must time-stamp and file away paper documents upon receipt. In contrast, using e-signatures and electronic documents can make processing and storing your company’s contracts much easier.
Associated Costs
When using physical documents, there are also different costs you must consider, particularly with delivery. Any delays in the delivery of sale contracts give your potential client time to explore other options. On the other hand, signing documents electronically can cut delivery costs.
This cost-cutting can also help with your company’s social responsibility targets. Many companies that prioritise environmental sustainability choose to avoid paper waste where possible. In this sense, using electronic signing can widely benefit your company.
Using a Digital Signature
Using a handwritten signature is not always necessary every time you enter a contractual arrangement. Instead, you can use a digital signature in most cases. The law currently recognises that business transactions are not invalid because they are written in electronic documents or contain electronic signatures. Especially with the rollout of new laws, there is now greater flexibility in the types of documents that you can execute electronically.
Ultimately, if you are unsure of when to use a digital signature, seek advice from a lawyer. They can provide you with greater certainty when dealing with electronic transactions and alert you to any possible errors in executing certain documents.
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Key Takeaways
A wet signature is a handwritten signature on a hard copy document. Whilst e-signatures are widely used in day-to-day business transactions, there remain several instances where you will need a wet signature. One example is signing a deed not executed under the Corporations Act 2001 (Cth). If you choose between hard copies and electronic documents, you should consider the time delays and costs involved with the former.
If you need help with determining which signature to use for your commercial documents, our experienced contract lawyers can assist as part of our LegalVision membership. 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
In most cases, the contract will be binding. There are, however, some exceptions to this general rule, such as where you entered into the contract under duress caused by the other contracting party.
An e-signature can be a digitised image of your physical signature or signing a soft copy of a document on a touchscreen device.
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