Electronic Signature

3 things to consider when using electronic signature

Can I sign commercial contracts using an electronic signature?

You’ve spent weeks, maybe months, negotiating an agreement. But how do you sign it when everyone is working remotely, and social distancing is the new norm?  

There are several ways to execute an agreement. The ‘gold standard’ is signing a document in line with section 127 of the Corporations Act 2001,  which includes any of the following methods in signing the document:

  • any 2 directors;  
  • a director and a company secretary; or  
  • a sole director who is also the sole company secretary.  

There are other ways, of course, but when a document is signed this way, each party has the right to assume that the document has been duly executed and is therefore binding on and enforceable against the other company.  This applies even in the event of fraud or forgery by the company’s officers (unless, of course, one party knew or suspected something was off at the time).

Using Electronic Signature For Contracts

For the most part, an electronically-signed commercial contract will be valid if it is properly drafted and someone with the right level of authority from the other party has signed or accepted your contract. Software programs such as DocuSign, PandaDoc, and Adobe can help facilitate the process.

electronic signature

We appreciate that in these unusual times, business needs to continue and commercial contracts need to be signed so here are some things to think about:

Verifiable signatories

Before electronically signing a document, make sure to verify the identity of the other signatory/signatories.  If a signatory is not someone you’re familiar with, you could use SMS and email to verify the identity of the person. You can do this by checking with the representative of the other party and asking for the contact details of the person.

No matter how much trust you put in the people you communicate with for business, it is still best that you recognise the weight of your electronic signature, especially in legally binding documents. Before giving out your electronic signature, make sure you know the people you are dealing with, and you have verified their identities.

Clear intentions and parameters of the document

You gain several responsibilities when you place your electronic signature in a document—and one of these is the possibility of that document to be legally used against you in the future. For this very reason, you must ensure that the intentions of an agreement or document are clear to you before signing. You should also be able to clearly identify the intentions of the parties involved. It is important that all parties involved in the document are on the same page and have the same understanding of its parameters before anyone places his/her electronic signature. Any sort of changes in the document will be considered a new contract offer and should not be injected into the previously signed documents. The number of signatories for the document must also be completed before considering the document signed.

Proper keeping of electronically signed documents

Does your responsibility end after all signatories sign the document? The answer is no. It continues to be your job to check with the parties involved that the document has been properly kept and that no tampering or changes are done after it has been signed. To add security to your electronic signature, you can use one that is based on Public Key Infrastructure (PKI). Through an asymmetric encryption pair, the document gets hashed and signed making its integrity protected since a slight change in the format of the agreement (e.g. space, comma, etc.) alters the hash value. Hash values are widely-used for encryption algorithms, and a difference in it will reveal a change in the document signed.

Always be careful in using your electronic signature to sign documents. If you feel unsure about electronically signing a document, Lodestar Legal is here to help you. You may call us to get assisted personally.

Don’t hesitate to give us a call if you need legal assistance services on electronically signing documents.

94 thoughts on “3 things to consider when using electronic signature”

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