This article discusses the current state of the law concerning electronic signature and witnessing of documents in Australia including so-called click-wrap contracts, e-signing laws and the specific electronic witnessing regulations arising from the COVID-19 pandemic.
In general, terms, Australian law establishes that most documents can be executed electronically. There are exceptions for ce rtain formal documents. However, in the absence of the temporary COVID-19 Witnessing Regulation discussed below, the position in relation to electronic witnessing of documents is far from clear.
1. Electronic Signature of Document
1.1 Basic contractual requirements
The essential requirements for a binding contract in Australia are derived from ancient English law: (1) there must be a clear offer; (2) there must be acceptance of the offer (3) there must be an intention to create legal relations between the parties; and (4) there must be consideration (benefit) flowing to each party in forming the contract. Documents executed as deeds are an exception to the benefit requirement but have their own issues in relation to execution and witnessing.
The need to show acceptance of the offer potentially raised questions in an e-commerce world. However, it was no great step for Australian law to recognise online acceptance given the gradual evolution of contract law in a world of changing business and technological conditions.
1.2 Oral contracts
Even oral contracts have always been generally capable of enforcement subject to the necessary proof of the contract being available. This general enforceability rule excludes documents with specific statutory requirements for writing such as dealings with real property beginning with the English Statute of Frauds 1677. From a legal perspective, oral contracts are highly undesirable given the challenges in proving that the basic requirements for a contract mentioned above have been met. It can be difficult to prove the terms of the offer, or the terms may not be sufficiently clear – especially in a situation where one of the parties to the alleged contract is likely disputing the terms or that a contract even exists. It can also be difficult to prove that the other party has accepted the terms of the offer, in the absence of clear actions indicating acceptance, such as performing or commencing to perform the contract. Therefore, while theoretically enforceable, oral contracts are obviously undesirable for evidentiary reasons.
1.3 The rise of electronic communication
Long before electronic mail was invented, written electronic communication flourished, beginning with the telegram and the telex and progressing to the facsimile machine. These technologies are now either obsolete or rapidly approaching that point. However, the law adapted easily to these technological developments. Numerous cases have held that an offer accepted by telegram, telex or fax was legally binding – with the necessary intention to create legal relations established by the transmission of the communication. The early Tasmanian decision of the Full Court of the Supreme Court of Tasmania in Dehle v Denham (1899) 1 N & S 128 followed earlier English authority in upholding the validity of a contract formed by the exchange of telegrams. Later cases in relation to telex and fax communications are to the same effect.
1.4 Ticket cases – published terms and acceptance by action
In addition to oral contracts and electronically formed contracts, the courts have long held that a contract can be created where a party indicates acceptance of a contract not by signing it but by conduct. A good example of this is the so-called ticket cases – the carpark owner conspicuously displays access terms at the entrance to the carpark or the car owner receives a printed ticket containing the entry terms at the entry point. By entering the carpark, the car owner is taken to have accepted those terms, without any signature required. It is worth noting that not all cases before the court have upheld the validity of a ticket/conduct based contract. The courts have refused to enforce ticket-based contracts where the terms were only visible after entry to the carpark, if the terms could not be rejected prior to entry or if the contractual terms were onerous and not sufficiently drawn to the customer's attention. Despite this, the courts have generally upheld contracts created in this situation without the need for any signature.
1.5 Shrink-wrap contracts
For decades now, companies such as Microsoft have sold software containing a notice about the licence terms printed on the outside of the plastic (or shrink-wrap) packaging. By opening the packaging, the user is taken to have accepted the licence terms contained inside the package. If the customer does not wish to accept the terms, the customer can return the product for a refund. Again, although with some reluctance due to the lack of full disclosure of the legal terms prior to purchase, the courts have generally upheld the enforceability of shrink-wrap contracts. While the days of shrink-wrap licences are largely over due to the rise in e-commerce and online downloading of software, the general principles of enforceability remain.
1.6 Click-wrap contracts
We have seen above that an oral contract, a contract formed by telegram exchange, a carpark contract accepted by entry and a shrink-wrap contract can be enforceable without any formal signature. It was therefore inevitable that a contract created by someone clicking an OK or Place Order button on a website or even simply proceeding to access the website might be bound by the website or online purchase terms, provided of course that those terms were adequately disclosed. The ubiquitous nature of e-commerce now places the enforceability of such contracts beyond any doubt.
1.7 Electronic Transactions Acts
As demonstrated by the various examples above, general contractual principles were flexible enough to adapt to changing business and community requirements for execution of documents. However, to provide greater certainty, the Australian Federal Government passed the Electronic Transactions Act 1999 generally confirming the validity of electronic transactions and electronic signatures in particular. Beginning with New South Wales and Victoria in 2000, all Australian States and Territories passed corresponding Electronic Transactions Acts. The Acts are broadly the same as the Federal Act but there are certain State-based variations that need to be considered with care.
Each of the Acts specifies three requirements for valid electronic execution of a document. Firstly, there must be a method to identify the person who is signing and to confirm the person's intention to be bound. Secondly, the agreed method of identification must be as reliable as is appropriate taking into account the purpose of the communication (more formal or serious documents require a high level of certainty). Thirdly, the person receiving the signature (generally the other party to the transaction) must consent to the use of the specified electronic means to execute the document and to confirm the signatory's identity.
While most documents can be executed electronically, some of the Acts specify one or more of the following exceptions: documents that need to be witnessed (for example, deeds or statutory declarations), documents requiring personal service, court documents, powers of attorney and wills. Interestingly, the Corporations Act 2001 is specifically excluded from the operation of the Acts. Refer below for further discussion.
It is important to note that these Acts do not replace or over-ride the common law position in relation to contract formation and execution discussed above. They are intended to provide further support for electronic transactions where the requirements of the particular Act are met. So, electronic execution of a particular document may be enforceable at common law in accordance with the general principles and examples set out above even if the particular mode of execution does not meet the Act's requirements, or if the type of document is specifically excluded from the operation of the Act.
1.8 Corporations Act 2001
Section 127 to 129 of the Corporations Act deal with execution of documents by companies. Section 127(1) states that a document is sufficiently executed by a company if signed by two directors, a director and secretary or the sole director/secretary, without the need for the company seal to be affixed. When a document is executed in any of these ways, section 129 specifies that other parties can rely on that execution as binding without the need to undertake further enquiry to confirm that the execution was authorised. This raises an important question about whether electronic signature by these officers meets the requirements.
Interestingly, and somewhat confusingly, the Corporations Act is excluded expressly from the operation of the Electronic Transactions Acts discussed above. The purpose and effect of this exclusion has created conflicting views as to whether other parties can rely on documents executed by company officers electronically. Some argue that the exclusion shows a clear intent by Parliament that company documents should be signed physically (and not electronically). Others argue that the Electronic Transactions Acts only supplement, and do not replace the common law, as they explicitly confirm. Applying this principle, electronic signature by company officers is still permitted because the common law generally permits electronic execution and accordingly section 129 of the Corporations Act is still available for electronically executed documents.
There is no clear legal authority to resolve this issue which suggests that the safest approach is for company officers to physically sign documents. However, in practice, the authors' experience is that the vast majority of documents today are executed and exchanged electronically including where companies are parties. It is very difficult to see a court holding that such a document is not validly executed as this would create commercial chaos.
2. Electronic Witnessing of Documents
Having considered above in some detail the legal effectiveness of the electronic signature of documents in Australia, we now consider the legal effectiveness of the electronic witnessing of documents. Many documents do not require that signatures be witnessed for the document to be effective. The above principles can be readily applied to documents where witnessing is not required. However, certain statutes regulating the execution of particular types of documents do specify that execution of such documents must be witnessed for the document to be legally effective. Examples of documents in this category include deeds, wills, statutory declarations/oaths, powers of attorney and real property (land) related documents. Australian contract law has proved to be very flexible in relation to electronic signature and acceptance of most contracts. However, statute law has proved to be far less flexible in relation to electronic witnessing of documents. The position in relation to electronic witnessing at common law is unclear due to the lack of Australian cases considering the issue. Following recent legislative intervention, electronic witnessing is permitted, at least temporarily, as outlined below.
2.1 Impact of the COVID-19 Pandemic
In addition to enormous personal hardship, the COVID-19 pandemic has caused major business interruptions across the globe and has presented serious challenges to the execution of documents. Social distancing measures, community lockdown rules and the closure of interstate and international borders has redefined the way people including parties negotiating contracts and lawyers and clients are able to interact. Telecommunication applications specialising in video chat and voice calls (e.g. Skype, Zoom, Facetime, etc.) have now become the norm for business interactions during the COVID-19 pandemic. Although these applications have allowed parties to continue many dealings virtually, they are obviously unable to solve the legal requirement for witnesses having to be physically present when witnessing the signing of certain documents. For example, under the Conveyancing Act 1919 (NSW), a person who witnesses the signing of a deed made under the laws of New South Wales must be physically present at the time the deed is signed by the signatory.
2.2 The Regulation
In response to this problem, on 22 April 2020, the New South Wales Government amended the Electronic Transactions Act 2000 by enacting the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (Regulation). The Regulation is set to expire on 20 September 2020 unless extended. It allows a person in New South Wales to witness the signature of certain documents by audio visual link (AVL) provided certain requirements are satisfied. In particular, the Regulation at section 2(1) provides that:
"if the signature of a document is required under an Act or another law to be witnessed, the signature may be witnessed by audio visual link, and arrangements in relation to witnessing signatures and the attestation of documents may be performed by audio visual link" (our emphasis).
The Regulation lists several types of documents that fall under the definition of "document". These include deeds, agreements, affidavits (including annexures and exhibits) and statutory declarations. In addition, the Regulation defines AVL as a "technology that enables continuous and contemporaneous audio and visual communication between persons at different places, including video conferencing".
To assist in understanding and implementing the Regulation, on 22 May 2020, the Law Society of New South Wales issued guidelines entitled "Implications of the Electronic Witnessing Provisions – Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (New South Wales) and its impact on the practice of property, wills and estate practitioners" (Guidelines).
(a) The specific requirements of the Regulation
Witnesses who choose or are required to witness signing of documents by AVL in accordance with the Regulation must:
- "Observe the person signing the document (the signatory) sign the document in real time". Based on the Guidelines, witnesses should ask the signatory to have their camera at an angle that allows witnesses to see concurrently the signatory and their act of signing the document.
- Sign the document or a copy of it to either attest or confirm they witnessed the signing of the document or copy. If a document is being signed as a counterpart, witnesses should sign the counterpart "as soon as practicable after witnessing the signing of the document" or if the signatory scans and sends to the witness the document by electronic means, sign the counterpart "as soon as practicable after witnessing the signing of the document" – see section 2(3) of the Regulation.
- "[B]e reasonably satisfied" that the document they sign is the same document as the document signed by the signatory. Based on the Guidelines, a witness should request the signatory to either read the document aloud or hold the document against the camera to permit the witness to compare the document to be signed by the signatory with the document they have with them. This is obviously quite problematic for long documents.
- Endorse the document by specifying the method used to witness the signatory's signature and that the signatory's signing of the document was witnessed in accordance with the Regulation. Witnesses can endorse the document with a statement that "the document was signed in counterpart and witnessed over audio visual link in accordance with clause 2 of Schedule 1 to the Electronic Transactions Regulation 2017" – see the Note under section 2(2)(d) of the Regulation.
(b) The Guidelines' recommendations to lawyers
In addition to providing recommendations to people witnessing documents generally, the Guidelines provide specific recommendations to lawyers where they are required to witness documents. According to the Guidelines, if a lawyer is witnessing his or her client's signature on a document under the Regulation, they should observe the following:
- Confirm the client's identity – This can be achieved in several ways, including by requesting a copy of the client's identification document, asking the client to hold an identity document that displays his or her face against the camera, or requesting the client to sign a piece of paper so that the signature can be compared with the signature displayed on his or her identity document. Ultimately, a lawyer must be satisfied with the client's identity. It is also recommended that lawyers maintain records of the method used to confirm their client's identity. This issue will obviously be less problematic for regular clients.
- Only take instructions from clients – Lawyers should only take instructions directly from their clients and no one else, regardless of the AVL tool that they use to communicate with clients.
- Clients' mental condition and undue influence – Lawyers should ask clients whether any other person is present in the video call, be attentive to unusual body behaviours from clients suggesting duress, take time in taking clients' instructions, understand that clients may not be familiar with AVL technologies and allow clients to terminate the video call at any time.
- Privacy and confidentiality – Lawyers can achieve this by several means, including by ensuring that they and their clients utilise secure internet connections, hold the video call in a private location, use headsets, delete browser history once the video call has ended and switch off pop-up notifications if the screen on the device being used is being simultaneously shared by the lawyer and the client.
- Document storing – Lawyers should store all documents together if the document was signed in counterparts to demonstrate that their client's act of signing was done in accordance with the Regulation.
- Counterparts – If the document being signed by clients is to be signed in counterparts, lawyers should ensure that the documents expressly reflects this.
- Recording Video Calls – Although lawyers are not obliged to record their video calls with clients, it may be advisable to do so as this can be evidence that they complied with the Regulation. Obviously, recording the video call requires the client's consent. Furthermore, lawyers should ensure that the recording is of good quality as otherwise a court may hold that "there is no way for the Court to know exactly what transpired" between the parties involved in the process of signing the document (see Re Besanko  VSC 170).
- Electronic signature – According to the Guidelines, electronic signature is still permissible. That is, if electronic signature was permissible prior to the introduction of the Regulation it continues to be. This means that electronic signatures are not permissible for affidavits and statutory declarations as these documents are expressly excluded from the operation of the Electronic Transactions Acts.
2.3 The Regulation and its uncertainties
Although the Regulation does provide a temporary solution to the challenges imposed by the COVID-19 pandemic, it has remained silent on several points involved in the process of electronic witnessing under the Regulation. These are:
- "Real time" – although section 2(2)(a) of the Regulation requires witnesses to witness the signatory's act of signing in "real time", the Regulation is silent on what is to be understood by "real time". Potential issues that may arise from this include lawyers and clients who hold video calls at different time zones. Based on the Guidelines, lawyers should understand "real time" as the actual time the witness does in fact witness the signing of the document by the signatory.
- Location of witness and signatory – the Regulation does not indicate where the signatory and witnesses should be located at the time the document is signed. As provided under the Guidelines, this can raise questions of where the document was made. According to the Guidelines, "it may be appropriate to seek judicial guidance or declaratory relief before taking action to implement the instrument".
- Original and copy versions – the Regulation does not determine which document should be considered the original and which should be deemed as a copy. According to the Guidelines, lawyers should "produce or certify all documents" as signed by the signatory and the witness.
- When the document is made – the Regulation fails to address the issue of when the document is made, in particular whether the document should be considered to be made when it is signed by the signatory or by the witness. According to the Guidelines, "the safest approach is to treat the document as not being executed until the witness has signed".
Despite these ambiguities and shortcomings, the Regulation provides a useful means of ensuring documents are properly witnessed when physical proximity between signatory and witness is not feasible.
2.4 Expiry of the Regulation
The Regulation is currently due to expire on 20 September 2020. However, as the New South Wales Parliament has the power to extend the time of its application, we may see the Regulation still being applied for a period of time longer than was originally expected if travel restrictions and lockdowns are extended or re-imposed. In view of this, as the Regulation has left a few uncertainties it is important that transacting parties and their lawyers applying the Regulation ensure that witnesses and signatories adopt measures that minimise the risks of the validity of the document they sign being later questioned for not meeting the requirements of the Regulation. Furthermore, as some social distancing restrictions have been recently lifted across New South Wales, those who wish may still choose to witness the signing of documents in the traditional way.
Electronic execution of most documents is clearly permitted under Australian law and will generally be enforceable provided basic contractual requirements including clear disclosure of the offer terms are met. However, the legal status of electronic witnessing of documents is far less clear. While temporarily useful, the COVID-19 Regulation is obviously a transitory phenomenon linked to the extraordinary effects of the COVID-19 pandemic and will have no operation after its specified expiry date.
No doubt electronic witnessing of documents will be formally recognised by statute in the future but that appears to be some time away yet. For now, its use is limited to the specific circumstances and lifespan of the COVID-19 Regulation. The COVID-19 Regulation and its operation will provide a useful template and learning experience for future more general legislation facilitating electronic witnessing of documents. In our view, that legislation is long overdue.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.