Is electronic signature legal in Australia? Before we can begin, let's define what an electronic signature means.
An electronic signature signifies that a person intends to adhere to the terms of any online agreements. You can sign an online document in many ways.
First, one must apply the signature image to a document. The second is to use an email signature. Sign with public key infrastructure to digitally sign.
This method uses a cryptography platform to verify the digital identity of the signor.
A "public key secures a document." This electronic signature is subject to The Enforceable Signage Rule. It appears that electronically signed commercial contracts have legal validity.
There are notable exceptions regarding electronic signatures being legally binding in Australia. These limitations can vary from one jurisdiction to another in Australia and could make it more difficult for businesses to enforce commercial agreements.
What is an Electronic Signature?
Legal documents like contracts and deeds used to be signed in ink and paper. This is called a "wet ink signature."
Electronic signatures are becoming more popular because they can reduce costs and increase efficiency. An electronic signature includes the following:
- Clicking the 'click to agree' button or checking a box
- Entering a name
- Pasting an image of your signature
- Using a stylus or hand on a touchpad, you can draw a name or initial.
- Sign electronically using a free esignature app like eSignly ESignature
The three eIDAS e-signature levels of assurance
The 2016 European Union (EU) eIDAS regulation was enacted. To establish a common framework and foundation for secure esignatures, regulators and lawmakers worked together to create eIDAS.
The EU regulation defines three categories of electronic signatures:
- For general use, Basic or Basic Electronic Signs
- Advanced Electronic Signatures are backed by digital authentication by a trusted third party.
- Qualified electronic signatures authenticated by an authority third-party by the EU.
These three levels of e-signatures indicate the trustworthiness and reliability of signed agreements.
Many signature regulations vary depending on where you live, what industry regulations you follow, and what details you have about the document.
The three types of eSignatures described in eIDAS offer greater security, assurance, and transparency.
Basic Electronic Signatures
The simplest electronic signature type is the simple one.
The eIDAS regulation defines an electronic signature as "data in the digital form attached to or logically linked with other data in an electronic format and which is used to sign."
While basic electronic signatures can be legally binding in most cases, some entities may require higher levels of authenticity to accept an electronic signature.
You can create a basic eSignature by scanning a picture of your signature or simply checking a box to consent to terms and similar language on the website.
Advanced Electronic Signature
An "electronic signature" is attached to advanced electronic signatures (AES). They are sent via an electronic registered delivery system (ERDS) for additional verification.
Certificate Authorities (CA) often issue certificates that authenticate advanced electronic signatures.
AES signatures must be qualified under eIDAS.
They must:
- Uniquely linked to the signatory (the individual with authority to sign the document).
- Correctly identify the signatory
- Created using e-signature data. The signatory can use the data under their sole control with high levels of confidence
- Signatories can monitor subsequent changes by linking to data in a document.
AES uses a Public Key Infrastructure technology (PKI), also known as asymmetric encryption, to meet these requirements.
A digital certificate is used to verify digital signatures.
This differs from a symmetric key algorithm, which relies on one key to encrypt or decrypt data.
A digital certificate is similar to a driver's license or passport in that a third-party CA has verified it. Each digital certificate is unique and almost impossible to replicate.
The signatory still holds the private key and is responsible for applying the signature. Both parties can be confident that the other signer(s) is who they claim to be.
The PKI software checks documents for changes as part of signature verification. All parties are notified if a document is edited, and the process starts over.
AES is generally considered valid by the legal community as valid as traditional wet ink signatures. AES is often used by attorneys in court proceedings as evidence of reliability because of the verification process.
Qualified electronic Signatures
A qualified Electronic Signature (or QES) is an Advanced Electronic Signature with higher security and assurance.
They are verified using a multi-step process that uses encrypted keys and double-factor authentication. A third party is responsible for verifying the signatures before they can issue a qualified electronic signature.
It is important to note that a higher security level does not necessarily make it better. It meets a higher level of security requirements than its AES counterpart.
AES and QES signatures provide industry-accepted high standards of assurance and trust.
Each one assigns a unique key for each user. This key is directly tied to the signer's identification. This allows a court to determine who signed the document.
This is unambiguous.
A QES is different because you must go through more hoops to obtain a qualification certificate authority to verify your identity.
This can, quite frankly, be a hassle and is completely unnecessary if your AES has one.
When Electronic Signatures Enforceable?
The type of document signed can affect the enforceability of an electronic sign.
A contract must meet the following five elements to be legally binding in Australia.
- Agreement between the Parties (offer and Acceptance): The offer of a good or service to one party is accepted by the second party.
- Consideration: A value exchange occurs, whether money or something else.
- Capacity refers to the parties' legal capacity (age, sound head). This is required for corporations.
- Intention to establish legal relations
- Certainty: A contract must be clear and certain enough to allow the parties to understand their rights.
All of these elements must be met to create a legally binding contract, regardless of whether it is written. The same principles apply to electronic contracts.
The practice of writing contracts is common and highly recommended. It often demonstrates these elements and can greatly assist in enforcing the contract. In some cases, however, the law may require certain contracts to be written.
Most Australian courts enforce electronic contracts and signatures, provided all contract elements have been met.
Electronic transactions in Australia are also governed by the Electronic Transactions Act 1999 (Cth) and various State legislation.
These statutes recognize the validity of electronic transactions and allow for electronic signatures if the parties have consented to it.
Notably, the ETA exempts a variety of citizenship and migration documents.
Circumstances in which validity is uncertain
Deeds
It is not possible to use electronic signatures in deeds. Deeds can be described as a specific type of legal document.
The main difference between a contract and a deed is that deeds don't require consideration (the second contract element).
Common law has specific requirements for deeds. They must be written on parchment, vellum, or paper. Common law has had difficulties with electronic signatures.
It is unclear if the ETAs (both state and federal) will override the paper requirement.
Except for certain NSW deeds, electronic deeds or electronic signatures on documents are currently not enforceable in Australia.
The Conveyancing Act 1919 (NSW) allows certain deeds to be signed electronically by individuals, not corporations. It is not clear how electronic signings are witnessed. The Conveyancing Bill does not provide any clarification.
Therefore, to ensure that a deed is enforceable in Australia, it is best to sign it using a wet signature.
Companies
If electronically signed, it is unclear if documents created under section 127 of the Corporations Act 2001 (Cth) are legally binding.
A corporation may execute documents, including deeds, under section 127 if it has 2 directors or 1 director and the company secretary or the sole director who is also the secretary of a proprietary firm.
It is unclear whether a section 127 document must be hardcopy with a wet signature. Parties must verify that a document was signed correctly, which can create uncertainty and add costs. It is not clear whether courts would enforce an electronic section 127 document.
Temporary Covid-19 Changes in Electronic Signature Industry
Covid-19 has resulted in various temporary legislative amendments to lower uncertainty about the validity of free esign solutions and facilitate working remotely.
Companies
The Corporations (Coronavirus Economics Response) Determination (No. 1) 2020 (Cth) was made in May 2020 (the May Determination).
The Corporations (Coronavirus Economics Response) Determination (No. 3) 2020 (Cth) was registered. It replaced the substantively identical May Determination ('the September Determination').
It states that the Corporations Act covers companies:
- Electronic signatures are available for company officers.
- Electronic documents are possible.
- Split execution is allowed when more than one signatory is required. This means that the officers can execute identical versions of the same document.
The September Determination was dissolved on 22 March 2021.
Deeds
Individuals can electronically execute deeds or agreements in NSW, Victoria, and Queensland. Deeds in NSW can be witnessed via an audio-visual link.
In Queensland and Victoria, deeds do not require witnesses.
It is not yet possible to electronically execute deeds in the ACT, South Australia or Western Australia. Electronic execution is possible, however.
Witnessing
Many changes were made to allow certain documents to be seen via an audio-visual link. These changes vary depending on the jurisdiction.
An audio-visual link can be used in NSW to witness a will or power of attorney.
Expiration
Federal, state, and territory changes expire at different times and can be renewed. To ensure that your document is legal and enforceable, you should review the validity of electronic documents, signatures, and audio-visual witnessing within your jurisdiction during the Covid-19 period.
Documents That can be Signed Electronically
These transaction types are generally eligible for electronicically signing documents using free esignature applications.
- HR
- Procurement
- NDAs are acceptable (provided that it is an agreement and not a deed).
- Software licensing
- Healthcare
- Insurance
- Education
- Life Sciences
- Technology sector
- It depends on the location of the documents that will be recorded. Not only that, but the ETA and Local ETA both have specific requirements for record keeping.
Additional Guidance
Although electronic signatures are not prohibited in the following transactions types, it is important to exercise caution before using electronic signatures in the following transactions:
- Corporate Resolutions
- Banking
- Lending
- Chattel Paper
- Consumer Transactions
- Government Filings
- Real Estate; and
- Notarization of documents
Some practical considerations can be made to increase the enforceability and validity of electronic documents signed electronically.
- Documents not required to take the form of deeds can be converted to agreements by reviewing the text and requiring consideration.
- Require consent from the parties (and keep records of that consent).
- Electronic communication is used to comply with information disclosure laws.
- Electronic signatures are used to execute contracts.
- Inserting into an agreement if any party is a corporation
- The signer warrants that they are authorized to sign the contract electronically;
- If required, the condition that proof of authority to execute the contract be provided within a specified period.
Case Law
The majority of Australian courts accept electronic signatures to be valid. However, no case outlines the courts' position on electronic signatures.
Instead, courts emphasize the evidentiary weight for the validity of signatures in the same way that they would look at the validity of documents if they were executed in "wet Ink" and were alleged to be forged or signed without the proper authority.
Are Electronic Signatures Legally Binding in Australia?
Electronic signature legislation created the electronic Transactions Act of 1999 in Australia. According to the legislation, E-signatures can be used to sign almost any document.
Simply put, electronic signatures are legally binding in Australia. Yes! Yes, as long as it meets minimum standards.
Firms that have offices in multiple states or territories may find navigating the Australian legal system difficult.
Businesses need to strike the right balance between commercial and legal risks.
This is particularly important when dealing with high-volume, high-risk commercial agreements such as credit applications with a personal guarantee.
Organizations attempt to use new technology when it is legal in certain jurisdictions. This creates a multi-jurisdictional complexity that is even more apparent.
Two examples of the differences in law in Australia are:
- Electronic signatures for credit applications (a type of contract)
- Personal guarantees (a type of deed)
It's surprising, however, how few companies inquire about "are electronic signatures legally binding in Australia?"
How it Works?
Email negotiation of financial and business agreements is becoming more common thanks to technological advances.
Parties located anywhere in the world can now quickly sign documents. Australia now uses electronic signatures instead of pen and paper to sign documents.
Electronic signatures can be used by the parties (signatories) to a contract or deed. The electronic signature must be:
- Represent, the name of the person
- Represent the person's acceptance of the terms in this document
- Place yourself in the right place in the document
- It can also be used as a signature on paper and pen.
- Properly identify the signer
- Intent to sign the agreement
- Accept electronic signatures
Customers can now open accounts at many financial institutions and sign other agreements. Customers don't have to visit banks to open accounts or sign other agreements to get new business.
This is a great way to reduce running costs. The contract is also available electronically to signatories via email.
The Commonwealth Corporations Act
The Corporations Act 2001 is exempted in full from the Commonwealth ET Act. Any provisions of the Corporations Act that require signatures can only be fulfilled using a traditional, wet signature.
A person cannot use section 129(5) statutory presumption of the Corporations Act to assume that a document has been electronically signed.
This section allows a person to assume that a company has executed a document. It applies when the document appears signed by two directors, a director and a secretary of the company or the sole director of a proprietary business.
This presumption is only valid if the document was signed with a wet signature.
Australian Territorial and State Law
The following legislation is applicable in every Australian State or Territory:
- Victoria: Electronic Transactions Act 2000
- New South Wales: Electronic Transactions Act2000
- Queensland: Electronic Transactions Act 2001
- Western Australia: Electronic Transactions Act 2011.
- South Australia: Electronic Communications Act2000
- Northern Territory: Electronic Transactions Act 2000 (Northern Territory);
- Tasmania: Electronic Transactions Act2000
- Electronic Transactions Act 2001.
Like the Commonwealth ET Act in Australia, regulations are made by some States and Territories that determine which transactions and laws are exempted from electronic transactions legislation.
Each State and Territory has its exemptions.
These are the main regulations:
- Victoria: Electronic Transactions Regulations 2010
- New South Wales: Electronic Transactions Regulation 2017,
- Western Australia: Electronic Transactions Regulations 2012.
- South Australia: Electronic Transactions Regulations 2017,
- Northern Territory: Electronic Transactions in the Northern Territory (Northern Territory Regulations 2001.
- Tasmania: Electronic Transactions Regulations 2011.
Use Cases that Generally Require an Electronic Signature
Each jurisdiction has its exemptions. There are generally five types of transactions that are exempt.
Legal Proceedings
The Commonwealth ET Act is invalid for validating electronic signatures with practice and procedure in a court or tribunal.
This includes all matters that may be related to the rules of the court.
The New South Wales Regulations stipulate that electronic signatures and executions are not allowed for documents that are required or permitted to be filed, filed, signed, or produced with legal proceedings.
The Queensland Regulations state that electronic signatures and executions are not permitted for documents that must or are allowed to be filed, signed, or produced with a court, tribunal, or proceeding.
Personal Service
Documents required or permitted to be served by mail or personally in New South Wales, or Queensland cannot be signed electronically.
South Australia prohibits electronic signatures or executions of documents required or permitted to be served personally.
This exception does not apply to certain legal proceedings. These are the procedures that must be taken in connection:
- Indictable or summary offenses under the Summary Procedure Act 1921 (SA);
- Enforcement of a sentence for an offense;
- Enforcement and recovery of fines
- The recovery and issue of expiation fees
- Court orders of a restrictive nature issued under the Summary Procedure Act 1921 (SA);
- Court orders under the Intervention Orders Prevention of Abuse Act 2009 (SA)
Transactions in Victoria must be executed by personal service. Documents that need to be personally served cannot be signed or executed electronically.
Transactions in Western Australia must be executed by personal service. Information or documents that need to be personally served cannot be signed or executed electronically.
Information and documents must be delivered in person to the Northern Territory. They cannot be signed electronically.
Transactions in Tasmania must be done personally. Information or documents that need to be served personally cannot be signed or executed electronically.
Powers of Attorney
Transactions, requirements, or permissions regarding the creation of an instrument appointing an enduring power or an attorney to manage someone's affairs in Western Australia cannot be signed or executed electronically.
Transactions relating to the creation or execution of an instrument to appoint an enduring guardian or an attorney to manage an individual's affairs in Tasmania cannot be executed or signed electronically.
Electronic signatures and executions of requests or authorizations for enduring guardians or powers cannot be done.
Transactions relating to the creation or cancellation of a power-of-attorney cannot be executed or signed electronically, according to the Northern Territory Regulations.
Electronic execution is not permitted for laws that require, permit, or permit a person to give, record, or retain information in written form with the creation, revocation, or production or signing of an instrument creating, revoking, a power-of-attorney.
Wills
Transactions, requirements, or permissions relating to the creation, execution, or revocation of a will, codicil, or another testamentary instrument in Victoria cannot be executed or signed electronically.
Electronic execution and signature of requirements or permits in Western Australia regarding the creation, execution, or revocation, of a will, codicil, or other testamentary instrument is not permitted.
Transactions, requirements, or permissions relating to the execution or revocation of a will, codicil, or another testamentary instrument in Tasmania cannot be executed or signed electronically.
Transactions relating to the disposition of property or the revocation or cancellation of a will are not possible electronically.
Electronic execution is impossible for laws requiring or permitting someone to give, record, or keep information in writing regarding a testament or revocation.
Witness
Electronic signatures and executions are prohibited in South Australia or New South Wales. This exception does not apply to transactions relating to the disposition or interest in land in South Australia.
These prescribed legal proceedings will be discussed in greater detail below.
Documents that are required or permitted to be authenticated, verified, witnessed, or attested by Queenslanders cannot be signed electronically.
Transactions or requirements involving documents in Western Australia must be authenticated, witnessed, signed, and attested under the signature of a person who is not the author.
The Key Takeaway
The rules and regulations for esignature Australia are accepted under common law and the ETA for contract signing.
Except for certain NSW deeds, electronic signatures are not valid in Australia. It is difficult for corporations to sign section 127 documents electronically, and there are risks of invalidity. Covid-19 saw changes by the Federal, State, and Territory governments to allow greater use of electronic signatures and documents.
