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In a decade where electronic communications increasingly facilitate business transactions, there are opportunities to sell your business to an individual located a fair distance away. If you are entering into a sale of business agreement, you may be wondering whether you can sign electronically. A transaction that you make and sign electronically will be valid if your signature meets certain requirements. This article explains the legal requirements for signing a sale of business agreement electronically.

What Is An Electronic Transaction?

A business deal involves an electronic transaction when you exchange digital communications with the other party through the medium of either:

  • data;
  • images;
  • speech; or
  • text.

Some common examples of digital communication include:

  • facsimile; and
  • emails.

What Is An Electronic Signature?

Australian law does not provide a list of approved ‘signature technology’ for use in electronic transactions. This means that you have some flexibility when determining the most appropriate method of signing your contract.

Popular methods of signing documents electronically include:

  • using a link that enables you to enter your name and click to sign;
  • inserting your signature into the document via JPEG;
  • signing via e-signing software (i.e. DocuSign); or
  • using an encrypted digital signature accessed via a pin or USB.

What Is Required for Signing a Contract Electronically?

The Electronic Transactions Act 1999 (Cth) (the Act) sets out how you may exchange information and sign your contract for an electronic signature to be valid. When signing a contract electronically, you need to ensure your signature:

  • clearly identifies your intention and role in the agreement;
  • has used a reliable method of signature; and
  • has been consented to as an appropriate method of signing.

Additionally, your consent and identity may be proved if you have:

  • signed off on an email with your name;
  • provided your signature via DocuSign or similar JPEG format; or
  • returned a signed facsimile of the contract.

How Does The Law Apply?

Each state in Australia has laws regarding electronic transactions. 

For example, the requirements for an electronic signature to be valid under Queensland state law are set out in the Electronic Transactions (Queensland) Act 2001.

In most cases, you do not need to make and sign a contract in writing. However, you must sign certain types of contracts in writing. The law is unclear about whether you can validly sign certain other kinds of documents, like deeds, electronically.

For an electronic signature to be valid in Queensland, it must meet certain requirements, including that the:

  • signature must be in writing;
  • method of signing must be reliable; and
  • intention of each party must be clear.

For example, if a written electronic signature is provided by email, the signer’s intention could be shown through previous email correspondence. The person who signed the email would be easily identifiable by their email signature and email address.

What Are the Risks of Signing a Contract Electronically?

If you sign a contract electronically, your earlier correspondence may indicate that you consent to the agreement.

For example, if you are negotiating the terms of a sale with your purchaser via email, signing off with ‘Sounds good. Regards, [Your name] may be considered acceptance of the terms and an electronic signature.

The risk of this, of course, is that you may not have intended to agree to terms without a formal contract. Alternatively, you may have intended to agree to one specific point and negotiate other points further.

Providing your signature electronically may present a security risk. To protect yourself, you should protect your electronic signature with a strong password or encryption. Password protection also reduces the risk of identity fraud if you need to log into a browser to access a page which requires your electronic signature. You can also install software that asks for multi-factor authentication each time you access a protected page or document.

Key Takeaways

When buying or selling a business anywhere in Australia, it may be possible to sign your contract electronically. However, signing a contract without putting pen to paper carries certain risks. Before you decide to sign an important document electronically, you should carefully consider the risks associated with this method of signing. If you have any questions about signing contracts electronically, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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