Electronic signatures can not always be used legally in documents

In recent years, we have seen a rise in the use of electronic  signatures to execute documents. An electronic signature broadly refers to scanning and inserting a person’s signature onto a document. It also includes email correspondence where the email represents written authorisation in place of a signature. Electronic signatures are different to digital signatures that use encryption software.

Each state and territory has legislation on requirements for electronic signatures and express examples of legal documents where electronic signatures cannot be used. These include wills and powers of attorney. For these documents, execution is only legally binding when a signature has been marked with pen on paper.

Even though an electronic signature is available, that does not mean that it can be legally used in documents. This was highlighted in a recent case in which a company used an electronic signature that was readily accessible on their IT system. The Court found that the electronically executed documents were not binding. This was a costly exercise for the recipient of the documents. In this case there was a lack of evidence to prove that the signature’s owner was the same person to apply the electronic signature to the document. There was also no evidence that the signature’s owner had given permission for anyone else to use their signature. 

This case highlights the need for proper records to be kept at the time that documents are executed by electronic signature. Such records help protect the parties if there is an argument or issue with the enforceability of the document.

Proper supporting records should clearly show that the electronic signature was placed on the document either directly by the signature’s owner or someone else that was expressly authorised to apply the signature to that particular document. 

Records should also be retained showing the owner of the signature understands the obligations and consequences created by the document. Both the giver of the electronic signature and the recipient of the electronically signed document should consent to the use of the electronic signature.

Prior to using or accepting electronic signatures, consideration must be given to the context of the document, the parties involved and any other relevant issues, including the need for witnesses and the legislation underpinning the enforceability of the document.