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Electronic Contracts

Electronic-Signature

 

Many business owners are now choosing to use electronic contracts. Many of these systems are simple to use and enable you to sign the contacts electronically on whatever device you are using.

The two main types of electronic contract are as follows:

Click-Wrap Agreement

This type of agreement states the terms and terms and conditions, followed by an ‘I agree’ button. These contracts are usually enforceable, but their enforceability depends on several issues such as when the contract is formed and the legality of the terms and conditions stated.

Browse-Wrap Agreement

A browse-wrap agreement is an agreement where the terms and conditions and the ‘I agree’ button are NOT on the same page. Usually, the terms and conditions can be accessed through a hyperlink. This means that the customer does not have to actually access the terms and conditions before hitting ‘I agree’. These types of agreements are more difficult to enforce.

For both click-wrap and browse- wrap agreements, it is important that the ‘I agree’ box is not pre-selected. The customer needs to be taking positive action to agree to the contract.

New Signing Technologies

More recently, new signing technologies have been introduced to create a more definitive agreement between the parties to an electronic contract. These technologies allow you to sign your signature on an electronic device such as smart phone or tablet. Alternatively, you can physically sign a piece of paper and then scan this onto an electronic device. The increased use of these new signing technologies can be attributed to their environmentally friendly, time, distance and cost cutting nature.

The difficulty in using an electronic signature becomes apparent when you are faced with the task of finding a way to prove the identity of the signor in a setting where the signature isn’t witnessed by another person.

A “digital signature” is a term used by some to describe a type of electronic signature.  Digital signatures utilise technology that associates the signature with hidden data which can be used in an electronic communication.  The main difference between an “electronic” and a “digital” signature is:

  1. A digital signature is linked to certain information and can be verified;
  2. A electronic signature may just be text on an email.

Digital signatures are therefore unique electronic “identities” which make them a more trusted and secure way of verifying the author of a document.

Many, if not all, digital signatures rely on public key cryptography as their identity verification core – including popular products like Adobe EchoSign, and DocuSign.   The importance is not just the signature but validating the identity of the person. .

Is a digital signature legally binding?

The law needs to keep up with these technological developments. The Electronic Transactions Act 1999 (Cth) states “…a transaction is not invalid because it took place wholly or partly by means of one of more electronic communications.” While this section only covers electronic communications within Australia’s commonwealth government, it does provide a guideline on how electronic communications would be regarded in private cases. New South Wales has the Electronic Transactions Act 2000 (NSW). This legislation highly regards the consent given by parties if they do use electronic communications to sign a contract. It states that if e-signatures are used, they are only effective if the parties to the contract have consented to the use of e-signatures and the method used to sign is sufficiently reliable.

Whilst technology may allow the quick and easy signing of documents remember the importance is whether the document is enforceable, not how quickly it is signed.  There is also international legal questions about whether the technology is able to be used for oversea contracts.


About the Author

Katherine new picWith over 20 years’ legal and business experience, Katherine Hawes is the founder and principle solicitor of Aquarius Lawyers.  To find out more about her fixed rate small business packages, please see www.newagelegalsolutions.com.au or phone 02 9615 9635.