Signing documents electronically and digitally
Our interactions are becoming more digital every day. Many of our business transactions are now taking place digitally too. We make orders online for products from our suppliers, we buy houses through online systems and we sell goods and services to our customers through websites.
A majority of these business transactions involve creating a legal relationship by entering into a written agreement. For a legal relationship to be binding, one of the key aspects is proof that both parties intend to agree to the terms of the legal relationship outlined in the agreement. For this to be as obvious as possible we usually sign documents.
Many of our clients have been asking us whether the new wave of digital and electronic signatures are safe and legally compliant. There are safe ways to sign documents electronically and digitally and enter into a contract with another party. The law is catching up with the digital age – slowly but surely!
Digital vs. electronic signatures
Digital signatures and electronic signatures are different. Confusing, I know.
But essentially, a digital signature is one that requires a specific type of platform or software that ensures that the signature is verified, most often through cryptographic authentication technology.
Digital signatures are a really secure way to sign a document because the software or platform has a series of security checks and processes in place to ensure that the signature is kept secure and unique to the signer. The platforms that do this abide by a protocol called Public Key Infrastructure (PKI) to ensure this standard of safety is met. The most common example of a platform that uses PKI is DocuSign.
If you’re ever in doubt about whether your signature is safely being used in executing a document you can look up online whether the platform you’re using is based on PKI.
Electronic signatures are a lot more simple (in a way!). An electronic signature is where you sign a document electronically, in a way that satisfies the law. The relevant legislation here is the Electronic Transactions Act 1999 (Cth) and its State/Territory counterparts.
The following broad conditions must be satisfied:
Identification – the recipient of the document should be able to identify the person signing, and confirm that they intended to be bound by the information communicated.
Reliability – the method used should be reliable. Reliability looks at the context of the signing, and whether the method used is appropriate.
Consent – the recipient of the document has to consent to using electronic signatures.
Typing your name in an electronic format or scanning and inserting a physical signature into an electronic document or clicking ‘I accept’ are all examples of electronic signatures.
When to use digital, electronic signatures or physical signatures?
This part is a little more complex and demonstrates that the law is still catching up. Each type of document has its own rules, and each state and territory also have their own rules that are constantly changing, especially in our current environment. To set all the details out in one blog post is going to be impossible. But, here is a summary:
Correspondence, basic contracts and memorandums of understanding – these can usually be executed through electronic or digital signatures, but digital signatures give the high level of security described above.
Land documents requiring registration – apart from certain exceptions, these are primarily executed through an Electronic Lodgement Network (ELN) a specialised platform for land documents.
Deeds – this varies from state to state, but in NSW, Victoria and Queensland deeds can usually be signed electronically and in other states there are more complex requirements. We recommend always checking with a lawyer before executing a deed because of how complex the law is around this.
Documents requiring a witness – each state and territory have different rules around the types of documents that can be witnessed electronically, or those that have to be witnessed via an audio-visual link. Again, we recommend checking with a lawyer about this.
Documents signed on behalf of a Corporations Act company – The Corporations Act 2001 (Cth) has recently been changed to allow for the electronic execution and witnessing of documents if certain requirements are met. Again, this depends on the situation and we recommend checking with a lawyer.
Hopefully, this provides some clarification and reassurance for you. If you are ever in doubt about the safety of signing important documents online, or if you need assistance with signing documents or contracts in general, we’re here to help.
Another small business resource that may prove very helpful to you is our Legal Advice for Small Business | Ultimate Guide.
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