“Did you see me sign it?” – Electronic Signatures in Contracts and Deeds in South Australia


30 April 2020


In these challenging times of COVID-19, social distancing and working from home, the use of electronic signatures in contracts and deeds is likely to be more prevalent than ever.

It is important for businesses to be aware of both the practicalities and legalities around use of electronic signatures to ensure their contracts and deeds are binding and enforceable.

 

Key takeaways

  • As a general rule, contracts may be executed by electronic signature. Deeds are more problematic and should be approached with caution.
  • If executing by electronic signature, it is good practice to implement protocols reflecting, and follow, the process set out in the Electronic Transactions Act with respect to identification, reliability and consent.
  • If executing a deed electronically and the deed must be witnessed, the witness should be physically present and see the signatory affix their electronic signature to that deed. The witness should then affix their electronic signature to the same version of the document at the same time.
  • If a deed is to be executed by a company under section 127 of the Corporations Act, the electronic signatures of the signing officers should be affixed personally or authenticated by the officers in writing. Split execution (ie execution of different versions of the deed by the signing officers) may not be legally binding and should be avoided.
  • Of course, if a party wishes to put beyond doubt the issue of valid execution, the deed should be printed on paper and signed using ‘wet-ink’ signatures.

 

What are electronic signatures?

An electronic signature is a visible representation of a person’s name, initials or associated mark, which is placed on a document by electronic means.  Examples include:

  • typing a name into an electronic document;
  • pasting an image of a signature into an electronic document;
  • drawing a signature on an electronic document using a mouse, touch screen or stylus; or
  • using a digital signing platform (for example, DocuSign).

 

Are electronic signatures legally binding?

Unfortunately, the law has not always kept up with modern technology and business practice when it comes to the use of electronic signatures in contracts and deeds.

To answer the question requires consideration of:

  • whether the electronic transactions legislation applies;
  • what type of document is to be signed; and
  • whether the document is to be signed by an individual or a company.

 

Does the electronic transactions legislation apply?

The Electronic Transactions Act 1999 (Cth), and state and territory equivalents, contain provisions that provide that a transaction is not invalid merely because it took place wholly or partly by means of electronic communications.  For example, online shopping transactions are not invalid merely because they take place by electronic means.

The legislation also states that if a person’s signature is required by a relevant law, that requirement is taken to have been met in relation to an electronic document if the following conditions are satisfied:

    1. a method is used to identify the person signing and their intention to accept or adopt the document;
    2. the method was as reliable as appropriate for the purpose of the document, in light of all the circumstances; and
    3. the receiving party consents to the use of an electronic signature.

These processes (identification, reliability and consent) are likely to be practical and relevant in any situation involving an electronic signature (regardless of whether the Electronic Transactions Act applies or not).

Notably, the legislation does not apply to:

  • transactions under the Corporations Act 2001 (Cth) (Corporations Act); or
  • under the South Australian Electronic Communications Act 2000 (SA), transactions under a law of the state requiring a document be witnessed or attested under signature of a person other than the author of the document (with some potential exceptions).

 

What type of document is to be signed?

When using electronic signatures, it is relevant to consider what type of document is being executed.  Particular care needs to be taken when executing deeds (see description below).

In addition, if a document needs to be filed with a government authority after execution (eg a court or lands titles office or state revenue office), it is relevant to consider whether that authority will accept the document if it has been executed using electronic signatures.

 

Signing contracts

Under the general law[i], a contract can be verbal or written and so the rules governing whether a contract is legally binding or not do not typically focus on whether the contract has been validly executed or not.  Rather, the rules focus on matters such as:

  • whether an offer has been made and accepted;
  • whether the parties have shown an intention to be legally bound (eg by executing a written contract or by subsequent conduct); and
  • whether there is consideration for the agreement struck (ie whether one party has made a promise in exchange for the other party’s promise).

Accordingly, individuals and companies have some flexibility when it comes to signing contracts using electronic signatures.

 

Signing deeds

Deeds are documents setting out promises made by one party in favour of another.  These promises become legally binding upon execution of the document.  Examples include trust deeds, amending deeds, security deeds and deeds of guarantee.

Because the binding nature of a deed relies upon execution of the document, the formal execution requirements for deeds are more strict than they are for contracts.  Also, the requirements differ depending on whether the deed is to be executed by an individual or a company, and in which state or territory the deed is to be executed.

 

Individuals

In South Australia, the rules governing execution and attestation of deeds are set out under section 41 of the Law of Property Act 1936 (SA) (LPA).  Under the LPA, if an individual executes a deed, they must sign in front of a witness who is not a party to the deed.

The witnessing of electronic signatures is a somewhat grey area of the law.  However, best practice suggests the witness should follow a similar process to that observed when using ‘wet ink’ signatures.  That is, the witness should:

  • be physically present and see what document is being signed, and then see the signatory affix their electronic signature in the document in question;
  • electronically sign the same document, not a separate copy of it; and
  • sign at the same time that the witness sees the document being signed by the signatory.

In light of the above, currently there is likely little (if any) practical advantage to signing by electronic signature where a deed is required to be witnessed (compared with printing the deed and using ‘wet ink’ signatures).

The COVID-19 Emergency Response Act 2020 (SA) enables modification of witnessing requirements in response to COVID-19.  It remains to be seen whether regulations will be passed to temporarily allow witnessing of documents by audio-visual link (as is the case in New South Wales, pursuant to the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (NSW)).

 

Companies

In South Australia, the LPA requires that a company execute a deed by affixing its common seal to the deed in accordance with the company’s governing rules (constitution) or by an attorney under a power of attorney.  However, section 127 of the Corporations Act provides an alternative, which is commonly used.  Under that section, a company may execute a document as a deed (with or without a common seal) if the document is expressed to be executed as a deed and the document is signed by two directors or a director and secretary of the company, or by a person who is the sole director and secretary of the company.

If a company executes a document under section 127 of the Corporations Act, other people are entitled to assume the document has been duly executed by the company (section 129(5) of the Corporations Act).

Some issues to note when using electronic signatures under section 127 of the Corporations Act include:

  • Authorisation of use of electronic signature – use of an electronic signature should be personally authenticated by the relevant director or secretary. If the officer is not personally affixing his or her electronic signature, then there should be some evidence the officer has authorised his or her electronic signature to be affixed to the document (for example, by way of an email sent by the officer to the person affixing the signature to the document or by the signatory authorising the use of his or her electronic signature by entry of a secret PIN).[ii]
  • Split execution – where more than one signature is required, the duly authorised electronic signatures should be affixed to the same version of the electronic document. Split execution by a company (ie where electronic – or ‘wet ink’ – signatures of the signing officers are affixed to different versions of a document) may not be valid under section 127.[iii]

 

[i]    However, legislation requires certain classes of contract to be in writing.  Contracts for the sale and purchaser of land are an example.

[ii]    See Bendigo and Adelaide Bank Ltd v DY Logistics Pty Ltd [2018] VSC 558.

[iii]   See Bendigo and Adelaide Bank Ltd v Pickard [2019] SASC 123, at [70] (per Stanley J).

 

This article provides general commentary only.  It does not purport to be legal advice.  We recommend that you seek professional advice having regard to your own particular circumstances.

 

Author:

Tasha Naige, Senior Associate in our Transactions Team

Contact
Email:  tnaige@dmawlawyers.com.au
Direct Telephone:  +61 8 8210 2244

 

The author would like to thank Ryan Parker for his assistance in preparing this summary.