Technology is advancing at a rapid pace. The way we contact and interact with one another today is completely different than the way businesses and people interacted twenty years ago. More and more people are looking to find faster and more efficient and effective ways to do business. There has been a significant surge in the use of electronic signatures when signing and executing documents. It is projected that over 100 million electronic signature transactions will be made annually in Australia by 2020, but a recent study has shown that less than 20% of Australian businesses are currently prepared for this.
What is an electronic signature?
An electronic signature is a visible representation of a person’s name or mark, placed by a person on a document or in a communication, by electronic or mechanical means, to identify the person and indicate that they put their mind to adopting the document or communication.
Common examples of electronic signatures include; a person typing their name in an email or word document; pasting a digitised image of their physical signature; selecting an option in e-signing software; signing a copy of a document with a stylus or finder on a touch screen; or using another form of biometric identification.
Conversely, what is a digital signature?
Digital signatures are a type of electronic signature which use cryptographic authentication technology. E-signing software can create audit trails that trace each step of the signature process which can be used in Court to help prove who signed the document and also, importantly, when it was signed. Digital signatures are arguably safer than other forms of signatures due to the technical skill and knowledge required to bypass their security features.
Electronic signatures in Australia and their execution
Australian law recognises that a transaction can be executed through electronic means. There is practically uniform electronic transaction legislation (ET Legislation) across the country. The ET Legislation facilitates electronic transactions rather than imposing any additional burden.
Generally speaking, a legal requirement for an ‘electronic signature’ is met under the ET Legislation if the following three requirements are met:
- the person must use a method to identify themselves and indicate their intention;
- the method of identification must be as reliable as possible considering the purpose of the communication; and
- the person to whom the signature is given must be given consent to the use of electronic communication to fulfil the requirement for a signature and to the method of identification.
Exclusions from electronic signing
There are certain documents which are excluded from the operation for the ET Legislation. Wills, Powers of Attorney and documents relating to dealings with land are some examples of documents which are excluded from the operation of the ET Legislation. It is important to check your local jurisdiction before using an electronic signature to execute documents.
It’s always good practice to insert a clause into the agreement stating that the parties intend to sign electronically and will be bound by their electronic signatures. It can also be a good idea to have an internal policy setting out which agreements can be signed electronically and which agreements must be signed in written form.
Organisations around the world are revolutionising their businesses by replacing manual, paper-based processes with innovative electronic alternatives that increase efficiency, reduce costs and provide a competitive advantage. Australian law is designed to encourage this change into utilising electronic signatures.
It is recommended you carefully consider and document your methods for proving signer identity, reliability and consent because these are key factors in ensuring a successful outcome should you ever be challenged in Court.
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Published: 17 October 2019