With pretty much everything moving online from meetings to coffee catch ups thanks to Coronavirus, can you validly enter into contracts electronically when working remotely?
The answer is generally yes, with an exception to the rule, but it must be done correctly.
The exception is any document in the form of a deed. That must be signed in paper form in good, old fashioned ink (Bendigo & Adelaide Bank Ltd v Kenneth Ross Pickard  SASC 123 (Pickard)). So, you must be clear on whether or not the document you are signing is in fact a deed. Many common documents are in the form of a deed such as guarantees, deeds of assignment, non-disclosure deeds and trust deeds.
So, if it’s not a deed, it’s easy right? Wrong. You still need to take proper steps to have a contract signed in such a way as to be legally binding.
What do you need to do to get it right?
- Have a proper, clear e-signature
When we talk about an electronic signature, we’re talking about a visible representation of a person’s name or mark, placed by them on a document or in a communication by electronic means to identify the person and indicate that they put their mind to adopting the document. This includes typing your name in an email or Word document, pasting a digitised image of your signature, selecting an option in e-signing software, signing a soft copy of a document with a stylus, or using another form of biometric identification.
- No split executions
Where a party to the contract is a company, the Pickard case has cast doubt about whether that company can validly execute a document electronically under section 127 of the Corporations Act 2001 (Cth). What is clear from Pickard is that split executions – where two signatories for one party themselves execute separate counterparts of the agreement – is not acceptable. So, where a company has two directors, they cannot electronically sign separate copies of the same contract. They should print out and sign the same copy and then email that to the other side.
If a document requires witnessing, the witness needs to be physically present with the person signing, even if it’s to see the physical act of electronic execution before attesting that they have witnessed the signing of the document.
- Proper Authority
It is clear that a general board authority to allow a delegate to put directors’ electronic signatures on a certain type of document is not good enough. The person whose signature appears on the document should authenticate their signature on that document themselves. This is what got Bendigo Bank in trouble in Pickard and made a guarantee unenforceable. It also helps to check the authority used by the other party signing a contract. Don’t just assume!
Obviously, if you’ve signed up to a contract you want it to be binding. Without dotting the i’s and crossing the t’s, you might find yourself with an invalid contract that could cost you serious money. And right now, that’s not what you want to see disappearing.
If you need help, contact Andrea Michaels on 7111 2995 or at [email protected].