Electronic signatures have been rapidly replacing manual processes in recent years, with their use becoming even more widespread following the onset of the coronavirus pandemic. The massive global shift to remote working in 2020 has demanded that workers overcome practical challenges of not working side-by-side in an office space, and that includes document signing.
Many organisations have embraced the ‘paperless office’ movement, finding it more efficient, convenient, reliable and environmentally friendly to manage their contracts entirely electronically, and rightly so. “45% of paper printed in offices ends up trashed by the end of the day,” according to the US Environmental Protection Agency, and “each four-drawer file cabinet holds an average of 10,000 to 12,000 documents, takes up to 9 sq. ft. of floor space and costs [USD]$1,500 per year.”
So despite the trend towards digital record keeping, many companies have clearly not yet taken the plunge when it comes to incorporating technology into legal documents, particularly in relation to their execution. While Australian law has evolved to allow most documents to be signed using an electronic signature, some uncertainty seems to still exist about their enforceability and, perhaps unfairly, to the efficiencies they bring.
During COVID-19, governments in each Australian jurisdiction introduced temporary legislation and regulations to address the challenges in signing and witnessing certain types of documents – facilitating the use of electronic documents and signatures, for example, the remote witnessing and attestation, and the making of oaths and statutory declarations without the need to be physically present.
While the majority of the measures are expressed as being temporary, it’s possible that some or all may be adopted in a more permanent fashion. So as a business owner or manager, it would be worthwhile understanding at what electronic signatures are and how they relate to your business.
What is an electronic signature?
A signature is a legal concept. Essentially it is a visual representation indicating the person’s intention that the document they are signing binds them. An electronic signature can take a number of forms, including a person typing their name in an email; using a stylus to sign a screen; pasting a digital version of their signature into a document; or using electronic signature software such as DocuSign, AdobeSign, or PleaseSign.
This broad category of electronically signed documents also encompasses digital signatures which have a more specific technical meaning and require cryptographic authentication technology. A digital signature is a mathematically generated code attached to an electronically transmitted document to verify both the sender’s identity and the authenticity and integrity of the document’s contents at the time it is dispatched.
For the purposes of this blog, we have used the more general definition of electronic signatures described above.
Are electronic signatures legal in Australia?
For the most part, electronic signatures are a legally valid method of signing a document in Australia under the general law. The type of instrument used to sign a document is not normally significant – that is, a pen is considered just as good as typing or pasting. Clicking a button to accept the terms of an online form can also amount to a signature.
The Electronic Transactions Act 1999 (Cth) (ETA), as well as similar legislation in all states and territories of Australia, validates the use of electronic signatures provided that the following requirements are met:
- the person must be able to be identified from the method of signature;
- the signature must indicate the person’s intention in respect of the document;
- the method of signature must be reliable in the circumstances (including in respect of the type of document the person is signing) – a text message, for example, may not meet this test; and
- the other person must consent to the person signing electronically – this is usually satisfied by the other person also signing the document.
However, the ETA does not cover all types of documents. For example, deeds (as there is a requirement that they must be signed on paper and witnessed by another person who is not a party to the deed); and documents that you need to lodge or register with a government agency or regulatory body (e.g. ASIC or the ASX).
So it’s important to check the requirements before setting up your systems and processes around electronic signing.
What are the benefits of using electronic signatures?
Peripheral Blue clients have experienced and reported a wide range of benefits from using electronic rather than wet-ink signatures. From an efficiency perspective, using electronic signatures removes the time taken to print, fax, mail, copy and scan documents in hardcopy formats. For clients whose businesses are national or global, it can also mean increased security as signed documents are less likely to be lost or destroyed in the post once signed.
Environmentally, the use of electronic signatures significantly reduces the volume of printed paper and the need to use postage services. It also saves on physical filing space, not to mention postage and storage costs.
When companies use an electronic signing platform, we’ve found that documents are also less likely to be incorrectly executed. These systems make it clear whether a signature, a tick/box check, or a date is required.
How about the risks?
In the same way that it’s important to have a clear process or policy governing how your company will execute contracts and other documents (e.g. who has authority to sign particular categories of documents on behalf of the company), the same should apply to electronic signatures. You should ensure that there is a requirement that records are kept to show that the people signing the documents were the ones who affixed the signatures (rather than a member of your administrative staff), or the documents might be unenforceable and ineffective.
Even if your business is not yet ready to become paperless, make sure you consider the circumstances where you will and will not accept electronic signatures from the businesses that you deal with – your suppliers, distributors, agents etc – and document this.
If you would like any assistance with changing your practices to embrace electronic signatures as a method of signing contracts, the PB team would be happy to help in providing specific advice or creating a process or policy for your business. Call 1300 774 788 or email firstname.lastname@example.org today.
Updated 1 Nov, 2020: Treasury has announced that it proposes to ‘make permanent and expand upon’ temporary changes to the Corporations Act 2001 (Cth) (Corporations Act) in relation to virtual meetings and electronic document execution. More details at https://www.legislation.gov.au/Details/C2017C00328.
1300 774 788
Suite 17, 116-120 Melbourne St, Nth Adelaide, SA 5006
1300 774 788
Suite 17, 116-120 Melbourne St, Nth Adelaide, SA 5006