Electronic document execution

Posted on Jul 25, 2019 by Sam Lewis   |   Categories: Commercial & Business Law

An e-signature takes form as any copy & pasted image of a name on a document. These can be placed on almost any electronic communication and are difficult to enforce.

A digital signature uses encrypted technology to track when and where the signature was made, verifying a document’s authenticity. Digital signatures are better aimed toward compliance with legislation and capable of creating a binding agreement. Digital signatures require specific software usually purchased from a service provider; more and more of these services are becoming available. A simple google search “digital signature service” is proof.

E-signing and digital signature software is relatively new to the law which tends to stay reactive rather than proactive. To keep up with technology, Parliament introduced a uniform Electronic Transactions Act which was adopted by each state at the turn of the millennium.

The Electronic Transactions Act 2000 (NSW) at s.9 outlines the criteria under which electronically signed documents can be valid. These are:
i. there is a method used to both identify the person signing and to indicate the person’s intention to be bound by the transaction;
ii. in light of all the circumstances, the method is as reliable and is appropriate for the purposes of the electronic communication (best practice); and
iii. the recipient consents to the method of the electronic communication.

The requirements set out under s.9 of the Act are intentionally non-specific and have blatant pitfalls allowing for any method of electronic signature to be legally challenged. The Explanatory Memorandum to the Act states that the intention of Parliament in leaving shortfalls in the legislation was to limit the need for constant revision due to advancing technology and change.

In addition, the legislation is now two decades old. Although the above may appear cut and dry, the limited amount of Court decision on electronic signatures has left a grey area to be filled. General law is slowly developing to crystallise norms around electronic signing and the threshold for a digital/electronic signature to be valid is becoming lower however, wet signatures are still legally recognised as the safer option to execute a document. The Uniform Electronic Transactions Acts also do not apply to document execution under the Corporations Act 2001 s.127 and the assumptions provided by s.129(5).