RISK WATCH
Going electric a sign of the times MERCEDES EYERS-WHITE, PROFESSIONAL INDEMNITY INSURANCE RISK MANAGEMENT COORDINATOR
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hilst “the new normal” may have become a hackneyed phrase, it is undeniable that the advantages of electronic communications and tools in this age of physical distancing have really come to the fore. Business, including the business of law, has only increased its use of technologies during this time and whilst all should be alive to the increased risk of cyber-based fraud, it is perhaps timely for practitioners to revisit the current state of the law when it comes to electronic signatures and the execution of agreements. No one wants to be embroiled in an argument about valid execution, let alone caught out by an unenforceable agreement.
WHAT IS AN ELECTRONIC SIGNATURE? A working definition of an electronic signature is that it is a visible representation of a person’s name or mark, placed by a person on a document or in a communication by electronic and/ or mechanical means, to identify the person and indicate that they have put their mind to adopting the document or communication. Some commonplace examples include typing your name in an email or word document, pasting a digitised image of your physical signature, signing an electronic document with a stylus or finger on a touchscreen, or using a digital signing platform (e.g. DocuSign). The Electronic Communications Act 2000
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(SA), as in most states, essentially mirrors the provisions in the Electronic Transactions Act 1999 (Cth), although practitioners should take care to note that the law is not uniform throughout the country. Some jurisdictions exclude particular transactions from the operation of the Act, for example where a document is required to be attested by a witness or where documents must be served personally. Under the SA Act an electronic signature will be deemed effective under s9 if it meets three conditions, namely: • it identifies the signatory and indicates their intention to sign the document; • the method of signing is either as reliable as appropriate for the purpose of the document or transaction, or is proven in fact (by itself or with other evidence) to identify the signatory and their intention to sign; and • the person to whom the signature is provided consents to the method of signing. The use of electronic signatures is not without risk, particularly if it is a matter of cutting and pasting a digitised image of a signature. Where such a method is employed by someone other than the signatory, it will require obtaining and retaining the authority from the signatory to affix their signature to a particular document. Section 9 requires there be some method employed to verify the identity
of the signatory, which is where digital signing platforms are particularly useful. In general terms an electronic signature is just as enforceable and admissible as the traditional “wet ink” signature, but there are important exceptions and jurisdictional subtleties. Where the document is to be registered, it is also prudent to consider whether there are registration requirements that impact whether an electronic signature is appropriate.
WHAT ABOUT COMPANIES? As most would be aware, s127 of the Corporations Act 2001 (Cth) provides that a company may execute a document without using a common seal if the document is signed by two directors or a director and a company secretary (or where a sole director is also the sole company secretary – by that director). Where a document appears to have been signed in accordance with s127, a counterparty is entitled under s129 to assume that all internal requirements have been met and the document is binding on the company, unless it has actual knowledge, or suspects that assumption is incorrect. The Act also provides that a company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with those signing procedures. However, the Corporations Act is excluded from the operation of the
