Using Electronic Signatures in Deeds
Deeds are a unique type of document, where a solemn and binding promise or commitment is made that one or more parties to the deed will do something. Deeds create binding obligations on one or more parties without the need for consideration to be made, differing them from more conventional contractual arrangements. Further, deeds are immediately binding on a person as soon as they are ‘signed, sealed and delivered’ by that person, even before the others parties to the deed have signed.
The legality of using electronic signatures to execute deeds is a complicated one, due in part to the lack of uniform laws across Australia on the issue, the changing legislative landscape as a result of the COVID-19 pandemic and requirements for remote execution alternatives, and the different requirements for signing depending on if the signatory is an individual or a company.
At the national level in Australia the validity of electronic signatures are governed by the Electronic Transactions Act 1999 (Cth) and at the state level in New South Wales with the Electronic Transactions Act 2000 (NSW). These laws outline the requirements for valid electronic signatures, consent, and retention of documents. Under both these laws, an electronic signature is legal and enforceable if it meets the following three requirements:
- a method is used to identify the person and to indicate the person’s intention to approve the contract;
- the method of signing is reliable as appropriate for the purpose for the communication; and
- both parties consent to the use of electronic signatures.
In terms of the validity of electronic signatures, courts in Australia have tended to focus on the existence of clear and sufficient evidence of the agreed upon terms and conditions, and of an intention by both parties to be contractually bound, as well as an absence of fraud.
Further, under sections 38 and 38A of the Conveyancing Act 1919 (NSW) deeds may be created in electronic form and electronically signed and attested in accordance with the Act.
Different rules around the signing and witnessing of documents apply depending on if the signatory is an individual (natural) person or a person signing on behalf of a company as per section 127 of the Corporations Act 2001 (Cth).
An individual signing a deed must have their signature witnessed in real time. Ordinarily, this takes place in person, where a deed would otherwise need to be witnessed in the physical presence of a signatory. There are, however, temporary laws in place which allow signatures to be witnessed via audio-visual link due to restrictions surrounding the COVID-19 pandemic.
For remote witnessing/attestation to be valid, there are four requirements which must be complied with:
- the witness must observe the person signing the document in real time; and
- the witness must attest or confirm the signature was witnessed by signing the document or a copy of the document; and
- be ‘reasonably satisfied’ that the document being signed by the witness is the same document or copy of the document signed by the signatory; and
- provide a statement that specifies the method used to witness the signing and a statement that the document was witnessed in accordance with section 14G of the NSW Electronic Transactions Act.
At present, the laws allowing remote witnessing of documents will expire after 1 January 2022. It is unclear whether these laws will be extended or made permanent after this time.
Matters are made more complicated when a company is required to execute a deed. Section 127 of the Corporations Act 2001 (Cth) governs how a company may execute documents including deeds. Most commonly a company will execute a document under s 127(1), where, without a common seal, a company may execute a document if the document is signed by:
- 2 directors of the company; or
- a director and a company secretary of the company; or
- for a proprietary company that has a sole director who is also the sole company secretary – that director.
Prior to the COVID-19 pandemic, s 127 did not allow for the electronic execution of documents by companies. However, the Federal Government has introduced several temporary legislative measures which have allowed the execution of documents in electronic form, as well as allowing for company officers to electronically execute documents in counterpart. The current act allowing for these changes is the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth), which is due to lapse on 31 March 2022. However, the Federal Government have foreshadowed that more permanent reforms to this effect will be made prior to that date.
These welcome amendments also require thoughtful and careful engagement of technological platforms. If you have questions about meeting your obligations, including those surrounding using electronic signatures in deeds, speak with one of our experienced business lawyers by calling us at (02) 4929 7002, emailing us or completing an enquiry form.