We all knew that the internet would cause profound change in so many areas of our lives. Signing electronically is just one of those many changes with yet more to come.
There is a difference between a digital signature and an electronic signature. An electronic signature is often nothing more than a digital image of a hand written signature. We have all seen them, every time you are asked to accept delivery of a package or with an online application for finance you are often asked to provide am electronic signature.
A digital signature on the other hand is more like an encrypted “fingerprint”. There is no doubt that the digital signature ensures a much greater level of security and authenticity.
The question is: What is legal and what is not? In Australia, it is the case that a contract cannot be set aside or found to be unenforceable merely because the parties signed electronically. A valid contract can be reached as long as the parties are of sound mind and reach an agreement whether they do that by signing a piece of a paper, by agreeing verbally or by entering into a transaction that is carried out electronically (for example by email).
There are many instances where an electronic signature can be used to create a binding contract for example:
- Commercial Agreements;
- Employment Agreements;
- Terms and Conditions of Sale;
- Certain Real Estate documents;
Likewise, there are some documents where electronic signatures cannot be used and they include:
- Certain Australian Government documents, e.g. a Passport;
- Powers of Attorney in some States;
- Statutory Declarations;
- Certain documents pursuant to laws that govern Health Insurance, General Insurance and Life Insurance.
There is no doubt that e-signatures will continue on their merry way. Our advice would be that if you are considering moving to that form of contract that you investigate not e-signatures but digital signatures.
What that means is that an independent third party can then provide you with recognised technology where documents can only be read and signed by particular users. Audit trails can be put in place and a complete document history can be provided.
- Digital signatures will greatly lesson the incidence of those annoying claims of “it’s not my signature” when you are on the verge of bankrupting a wayward debtor;
- There is something to be said for having a person physically sign a document. Do not underestimate the impact of an actual signature. By signing, a person gives their solemn bond that they will be bound. Direct mail marketers will tell you that if a person physically interacts with a marketing piece (for example get a person to scratch a token to see if they have won a prize) there is a far greater chance of that person complying with what you want them to do.
Maybe the best answer in the short term lies in both – contracts signed using digital signatures with a backup contract signed by the parties.
For more information, contact Natalie Ledlin, Lawyer & Practice Director
Direct Line: 02-8488-3383