As a result of governmental responses to the ongoing COVID-19 pandemic, many companies still have their employees working from home. This combined with social distancing measures makes it difficult for businesses to execute transactions with so called 'wet ink' signatures. In these uncertain times, it is worth considering how these can be executed electronically.
This article briefly considers how Australian law governs the entering into and the electronic execution of contracts at a time when parties may not be together (or have printers) .
Most transactions can be entered into electronically – indeed many tech transactions already are.
There is no statutory requirement that a contract needs to be in writing or feature parties’ signatures. It is (and always has been) possible to enter into a binding agreement without a signature provided that the agreement meets the required elements of contract: offer, acceptance, consideration and an intention to create legal relations. For example, we enter into a contract when we buy items from a shop without a written or signed contract. These basic and well-understood principles extend to agreements that are entered electronically.
In many instances, however, parties have historically elected to execute transaction documents using signatures. This is useful as a method of recording the final version of an agreement as well as avoiding any argument that it was in fact entered into. This is often the case in relation to high value or complex agreements in which increased certainty and proof of the transaction are critical.
In other cases, the law requires that parties enter a written contract (e.g. an exclusive licence under the Copyright Act 1968 (Cth).
When a contract must be in writing it is usually possible to rely upon the Electronic Transactions Act 1999 (Cth) (ETA) and its corresponding state statutes to execute the contract electronically. Under the ETAs, an electronic signature will have the same effect as a ‘wet ink’ signature provided that the following requirements are met:
These requirements can be satisfied in many ways, perhaps most reliably by using one of the various online execution platforms to affix electronic signatures.
It is important to note that the ETAs do not universally enable the use of electronic signatures. In normal circumstances it is necessary to provide a 'wet ink' signature on some types of documents, including deeds in all jurisdictions except New South Wales (NSW). However, emergency legislation enacted in response to COVID-19 has had the effect of substantially broadening the types of documents on which electronic signatures may validly be used. In particular, companies should note that it is temporarily possible to execute documents under s 127 of the Corporations Act 2001 (Cth) electronically.
A witness' signature is often desirable for evidentiary reasons and sometimes (some deeds) required. However, the COVID-19 pandemic has created significant barriers for a signatory to have their signature witnessed in-person. Emergency legislation has introduced a temporary work around, with audio-visual link technology now a valid means of witnessing signatures for the execution of contracts, agreements and various other legal documents in New South Wales, Victoria, Queensland and the ACT. Under these laws, companies may utilise the video conferencing software that they use as part of their daily operations to facilitate remote witnessing.
Noting that the laws are not identical in each jurisdiction, it is important to be aware of the specific requirements that will ensure that an agreement is validly witnessed. For example, in NSW it’s important that the person witnessing the signature via video link:
Caution should be exercised where witnessing is required in a contract that is under the law of a jurisdiction that has not introduced remote witnessing. It is possible that courts would accept an electronic signature from a witness on the condition that the witness was physically present to observe the signatory inserted their signature. However, given that the current intention of electronic execution is to avoid person-to-person contact, this requirement for a physically present witness may be problematic. In such cases, parties might consider removing the need for a witness (if executing a contract) or executing a deed which requires witness as a contract instead.
Both Federal and state governments have passed emergency legislation that will allow for the modification of the rules that govern electronic transactions. While these powers have already been used to make (temporary) changes in several jurisdictions, we expect that more legislation will be introduced to further clarify uncertainties that remain. As we move towards an increasingly paperless world, it is also possible that some of the emergency legislation noted above may become more permanent.