Are electronic signatures legally binding in Australia? Before we begin, we need to define what is meant by an electronic signature. An electronic signature demonstrates a person’s intention to be bound by the terms of online relevant agreements. There are different ways to sign an online document.
Firstly, a person needs to apply the image of the signor’s signature to a document. Second is by using an email signature. Digital signatures signs with public key infrastructure. This method involves the use of a cryptography platform in verifying the signor’s digital identity.
A “public key” secures a document. These electronic signature faces The Enforceable Signature Rule. As a result, it appears that electronically signed commercial agreements have legal validity.
When talking about are electronic signatures legally binding in Australia, there are some notable outliers. These limitations vary by jurisdiction in Australia, and they might make it difficult for enterprises to enforce commercial agreements.
Are Electronic Signatures Legally Binding In Australia? A Basic Review
The electronic signature legislation in Australia created the Electronic Transactions Act of 1999. E-signatures can be used to sign nearly any document, according to the legislation.
Simply said, are electronic signatures legally binding in Australia? Yes! As long as it meets the minimum standards, then it is highly enforceable.
Navigating the Australian legal landscape can be difficult for firms that operate in many states and territories. Businesses must strike the right balance between legal risk and commercial interests.
This is especially necessary when it comes to high-volume, high-risk commercial agreements like credit applications with personal guarantees.
Organisations try to use new technology in situations where the technology is lawful in some but not all jurisdictions. As a result, the multi-jurisdictional complexity becomes even more noticeable. There are two instances of how the law differs in Australia:
- Electronic signatures in credit applications (a type of contract) and;
- Personal guarantees (a type of deed).
Nonetheless, it’s astonishing how few firms enquire about ‘are electronic signatures legally binding in Australia?’
Are Electronic Signatures Legally Binding In Australia? How It Works
Thanks to technological advancements, email negotiation of business deals and financial agreements are becoming increasingly common. Today, parties located all over the world can quickly sign documents. Instead of the standard paper and pen, Australia uses electronic signatures to sign documents.
The parties (signatories) to a contract, deed or other agreement can decide whether electronic signatures are suitable. The electronic signature must:
- Represent the person’s name
- Represent the person’s agreement to the terms in the document
- Be in the appropriate place in the document
- Also function like a signature written on pen and paper
- Properly identify the person signing
- Show intention to enter into the agreement
- Agree to use electronic signatures
Many financial institutions now allow customers to open accounts and sign other agreements. Therefore, customers don’t need to visit a bank branch or office in order to attract new business.
This is also a good approach to cut down on running costs. It also provides signatories with their own electronic copy of the contract via email.
A Case Involving Electronic Signatures
Are electronic signatures legally binding in Australia? Yes! Unless a person fills out all mandatory fields, electronic signatures may reduce errors. However, there are pitfalls like in the case of Bendigo and Adelaide Bank (2019).
Bendigo and Adelaide agreed to loan $500,000 to a company and the company failed to provide loan repayments. The company’s director then agreed to guarantee the loan. This means they would repay the money if the company defaulted on the loan. The bank also required the directors to repay the defaulted loan amount.
Things then got complicated as the directors appointed a finance company under a power of attorney to make their guarantee on their behalf. The finance company then guaranteed the loan with an electronic version of the loan deed. The finance company signed the deed by using the electronic signatures of two of its officers.
What Happened Next?
The bank then wanted the loan repayment and because of the power of attorney, the directors said the finance company should pay. Legal proceedings followed regardless of the deed being valid or not. The directors claimed that the finance firm had signed the deed incorrectly because one officer signed it before the other. Instead of signing a single paper, they had signed duplicate copies.
The directors also argued that electronic signatures did not comply with the traditional legal requirements. The eSignatures required signing, sealing, and delivering.
The bank also claimed that the deed may be recognised as a single document under the same laws. This is the case even if one party had two signings. As a result, the Judge ruled that the loan arrangement was void. This is because the deed was a copy of a single document.
Even if the loan was void as a deed, the validity of the loan as a contract was questioned. The judge ruled that there was no contract because there was no consideration. This occurred because the loan was issued before the deed was signed.
Signing Documents With Legal Advice
For many businesses, the benefits of electronic signatures exceed the disadvantages. This encourages Australia to be open to new technology and to use electronic signatures sparingly, with only a few limitations.
Hundreds of proposals, quotations, and contracts are signed every day using electronic signatures, resulting in successful business processes and environments. Now that we know the answer to our question, ‘are electronic signatures legally binding in Australia?’, it’s important to know that electronic signatures have grown in popularity in the legal sector in Australia and around the world.
However, signing with wet ink with the good old-fashioned pen and paper is the advisable way in signing documents. The law may take some time to catch up with technology so it is also wise to choose security.
Here at JB Solicitors, our experienced solicitors can assist you in choosing the best way to properly sign your documents. Whether it’s electronically or traditionally, we will make sure to advise you with the proper legal approaches.