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The changing nature of commerce has influenced how people have entered into and signed contractual agreements. Less than a century ago, parties who entered into contractual agreements would have always signed a physical contractual document. This is called a ‘wet signature’ or a physical signature, referring to the wet ink used by both parties to bind themselves to a contract. However, with technology simplifying everyday business transactions, you should consider whether using a wet signature is necessary for your business, as well as how it affects cost and time efficiency. This article highlights some key points to consider when you are deciding on using a wet signature.

Legal Necessity

There are some instances where it is legally necessary to use a wet signature when creating binding agreements. For example, the company directors who execute a document must generally use a wet signature. However, this has been subject to numerous changes during the COVID-19 pandemic

Whether you are legally required to use a wet signature can also depend on which state or territory you are based in. This is because different jurisdictions have different requirements by law. 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.

Ultimately, if you are do not know whether you must use paper documents or a wet signature, you should consult a lawyer. A lawyer can help clear up your position and identify any weak spots in the execution of your company documents. This advice can be critical to the outcome of your business transaction, especially if it involves an important commercial agreement. 

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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 when 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 gives 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

It is not always necessary to use a handwritten signature every time you enter into 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.

However, when using electronic signatures in NSW, there are three requirements you must meet:

  1. there must be some way to correctly identify the person entering into the contract and indicate that this person approves of the contract;
  2. the method used to identify the person and indicate their approval was reliable and appropriate for electronic communication; and
  3. both you and the other person must agree to use said method. 

If you are unclear about whether your company has satisfied these requirements, you should seek the advice of a lawyer. Ultimately, a lawyer can provide you with greater certainty when dealing with electronic transactions and alert you to any possible errors in the execution of certain documents.

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 are several instances and jurisdictions where the law requires you to use wet signatures. One example is when signing a deed. If you choose between using hard copy and electronic documents, you should consider the time delays and costs involved with the former. If you need advice on how you should be using a wet signature, LegalVision’s experienced contract lawyers can help. Call us on 1300 544 755 or complete the form on this page.

Frequently Asked Questions 

I signed a contract but did not read its terms in full. Is the contract binding?

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. 

What can I include as an e-signature? 

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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