So...imagine you have spent weeks, maybe even months,
negotiating a ridiculously complicated agreement with a company.
You want to make sure the company keeps its promises (and that you
didn't sacrifice your social life for nothing). The
company's directors want to sign using their electronic
signatures. What does this mean for you?
When a company signs a document in accordance with section 127
of the Corporations Act 2001, each other party has a right
to assume that the document has been duly executed by, and is
therefore binding on and enforceable against, the company. This
right applies despite any fraud or forgery by the company's
officers, unless the other party knew or suspected that something
was fishy at the time.
So, what does section 127 say again? Basically, a company may
sign a document by having:
any 2 directors;
a director and a company secretary; or
a sole director who is also the sole company secretary,
sign the document, or witness the fixing of the company's
common seal to it. "May" is the operative word here, so
this isn't the only way a company can sign stuff and be bound
Section 127 doesn't specify whether a signature must be
handwritten or if an electronic signature will do. An electronic
signature could, for example, be created using a digital pen or by
scanning a handwritten signature into a document. For over a
decade, Australia has recognised the validity of such signatures
under the Electronic Transactions Act 1999 (and similar
state and territory legislation) provided certain requirements are
met. But guess what? These provisions don't apply to the
What does this mean for you? Where a company you're dealing
with signs a document using an electronic signature of a director
or secretary, you might want to reconsider getting too presumptuous
about the company being bound by that document. It might be a good
idea to dig a little deeper to confirm the signatories have
consented to their electronic signatures being applied (and also
that the signatures are not just some Mr Squiggle images copied and
pasted from Google).
But we live in the age of technology you say? We hear you. For
now, the handwritten signature remains the usual method for
companies to sign formal legal documents. But that has to go the
way of the dinosaurs soon.
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quite proud of it really.
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On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
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