Sign on the dotted line

Is the pen mightier than the keyboard?

In an age of rapid changes in commerce, almost every norm of business processes has been challenged. But the handwritten signature for executing legal documents seems to be somewhat immune from progress. While becoming more common, electronic signatures do not represent a majority of signatures overall and the handwritten signature remains the preferred method of execution in many jurisdictions. It is increasingly common for electronic signatures to be legally binding in developed countries. Below are brief references to some examples of this trend.

1. United States

In the United States, basic rules for electronic signatures are found in section 7 of the Uniform Electronic Act 1999. Section 7 allows electronic signatures to carry the same weight and legal effect as traditional hand written signatures on legal documents. Under this provision, a legal document cannot be denied legal effect in the United States solely because the signature is in electronic form.

2. United Kingdom

The Electronic Communications Act 2000 in the United Kingdom sets out certain general requirements for electronic signatures to be enforceable. These requirements include a method to identify the person and to indicate that the person consents to the contents of the document. The method of identification must be reliable and appropriate for the purpose of the communication.

3. Australia

Electronic Transactions Act

In Australia, the Electronic Transactions Act 1999 (Cth) (Electronic Transactions Act) (which is mirrored at State and Territory level) has the dual aims of:

generally confirming the effectiveness of a transaction that has been undertaken electronically; and
specifying the requirements for an electronic communication to act as a signature when a law requires the signature of a person.

The use of a digital pen or use of scanned signature has been recognised under the Electronic Transactions Act, provided certain requirements are met:

the communication identifies the signatory and indicates the persons intent in respect of the communication;
the communication method must be reliable; and
the parties consent to the signatory method used.

Pursuant to the Electronic Transactions Act, electronic signatures will only be acceptable as a means to sign a legal document if the law of the particular jurisdiction applies to the transaction and all of the above requirements have been satisfied.

Corporations Act

The Corporations Act 2001 (Cth) (Corporations Act) lists certain requirements to execute documents. Of note is section 127(1) of the Corporations Act which states that a company may execute a document without using a common seal 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.

However, ‘signature’ is not a defined term in the Corporations Act, nor is it specified what format a signature must take (hand written, electronic, digital or otherwise) to be valid. Furthermore, the legislature has gone so far as to exclude the entire Corporations Act from the electronic signature provisions of the Electronic Transactions Act¹. Accordingly, directors and secretaries must hand sign paper documents to ensure compliance with the Corporations Act, as electronic signatures do not satisfy the requirement for directors or secretaries to sign a document under section 127(1) of the Corporations Act.

Revert to type

Despite the existence of electronic communication laws, the ink of the handwritten signature remains firmly imprinted in standard business practices. Given the online trends, this is fast looking like an anachronism, and individuals and businesses are likely to demand broader adoption of electronic signatures. The broader acceptance of electronic signatures in law seems inevitable.

¹Schedule 1, item 30 of the Electronic Transactions Regulations 2000 (Cth)

Courts ‘like’ serving documents via social media