Five things to consider before using electronic signatures in your business
Butlers Business and Law
Electronic signatures provide a quick, cheap and easy way tosign documents and receive signed documents. They can also be useful when signatories are separated by a large distance.
Currently, there is very little legislation governing electronic signatures. Despite their convenience for businesses, there are a range of legal risks connected with using electronic signatures for business contracts.
There are five key things to consider before using electronic signatures in your business:
1. Ensure that only people authorised to electronically sign documents can do so
Electronic signatures are recognised under Australian law as having the same effect as handwritten signatures. As a result, it is crucial to ensure only authorised persons can use the signature.
This will involve reviewing your systems, controls and procedures.
Only authorised users should know the necessary passwords and log-in details.
2. Make sure that the system used for electronic signatures is secure
Following this, make sure that the system used for your electronic signature is secure. One of the best ways to do this is to require ‘dual authentication,’ which involves the use of both an online password and security code. Popular products for this include Adobe EchoSign, and DocuSign.
3. Act with caution when the other party to a document has signed electronically
For the signature to be valid, the person who affixed the signature must have had the actual or ostensible authorisation of the signatory. In many cases, this is impossible to check. However, it is good practice to send a follow-up email to the signatory seeking confirmation that they authorised for their electronic signature to be affixed to the document.
4. Consider global compatibility for international transactions
How frequently you have dealings with other countries may affect whether you decide to use digital signature technology to sign important documents. While the UN Electronic Communications Convention dictates that electronic signatures are to be treated in the same way as handwritten signatures, not all countries have ratified the Convention, thus some international parties may still require handwritten signatures before being satisfied that a transaction is valid.
5. Consider witnessing requirements relating to the execution of deeds by individuals
The Electronic Transactions Act 1999 (Cth) outlines a list of documents that cannot be signed electronically, including a document that is required to be signed by a witness. The witnessing requirements relating to the execution of deeds by individuals set out in the Conveyancing Act 1919 (NSW) preclude the electronic execution of trust deeds by individual trustees. This must be considered when electronically signing a deed.
Considering the needs of your business
Electronic signatures are a fast and efficient way to conduct business, especially with connections on the other side of the world. However, it is important to be mindful that you may need to prove the validity of a digital signature should it be challenged. If you’re unsure on the validity of a document that has been electronically signed, it is critical to seek legal advice.