To e-sign or not to e-sign? An update on e-signature requirements on documents in the wake of COVID-19

Electronic signatures (or e-signatures) are increasingly being adopted in commercial practice due to the ease and efficiency for individuals and businesses to engage in transactions. However, the law is not always clear on whether e-signatures can be used to sign certain documents, and if used incorrectly, e-signatures can expose the parties to validity issues down the track.

 

In the wake of the current COVID-19 climate of social distancing requirements and increased cybersecurity risks as raised in our previous article, we provide an update on what type of document can and cannot be electronically signed.

The legal position with respect to electronic signatures

In the State of New South Wales, under section 9 of the Electronic Transactions Act 2000 (NSW) (the Act), a signature on an electronic communication will meet the standard required by law of a signature if:
  1. A method is used to identify the person and to indicate their intention in respect of the information communicated;
  2. The method used is either "as reliable as appropriate for the purpose for which the electronic communication was generated", or has in fact fulfilled the functions mentioned in paragraph (1) above; and
  3. The person whose signature is required has given their consent to the use of the method mentioned in paragraph (1) above.
Accordingly, if the above statutory conditions are satisfied, an electronic signature will be a lawful signature on the relevant document.

However, it must be kept in mind that the Act is permissive rather than prescriptive – and generally will not invalidate documents that do not conform. Further, certain types of documents are listed as an express exception pursuant to Regulation 5 of the Electronic Transactions Regulation 2017 (NSW) (the Regulation).

At common law, the Courts have seemingly taken a broad approach as to whether a document has been validly signed by electronic means and have upheld, for example; that (1) a printed or typed name (Parkesinclair Chemicals (Aust) Pty Ltd v Asia Associates Inc [2000] VSC 362) and (2) a mark, stamp or seal with the authority of the person signing (Bendigo and Adelaide Bank v Laszczuk [2018] VSC 388) were valid signatures.

So, what type of documents can and cannot be electronically signed?

 

Recent McCabe Curwood articles on the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020:

Summary

In the event you are considering using an e-signature and your document falls within one of the categories acceptable for e-signature as outlined above, we would recommend ensuring that the requirements pursuant to section 9 of the Act have been met and to check whether any COVID-19 exceptions have been introduced by NSW Parliament (such as the recently introduced Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020).

Given the expected increase in fraud during this period, we would particularly advise exercising a cautious approach when utilising electronic communications and e-signatures and to seek legal advice on transactions which may expose significant risk in the event that the relevant document is not executed correctly.

McCabe Curwood's Litigation and Dispute Resolution team and Corporate team have extensive experience in advising individuals and businesses on their commercial and corporate needs, including representing and assisting clients in contractual disputes. Please get in touch with us today if you require any assistance with the matters covered in this article.

Contributors

Nathan Jones Special Counsel
Jennifer Bradley Lawyer