06 April 2020

An update: More practical tips on signing contracts electronically

This article was written by Helena Busljeta.

In our recent alert on COVID-19: Practical tips on how to sign contracts electronically, we set out high level guidance on how contracts can be signed in a COVID-19 world when signatories may be working remotely and may not be able to print documents.

This alert sets out further tips on how to navigate execution requirements for deeds and s127.

The grey areas – deeds and s127

As outlined in our earlier alert, law and market practice in the area of electronic contracts and electronic signatures is complex and evolving.  In particular, there is uncertainty over whether a deed can be in electronic form and signed electronically, and whether an agreement and deed in electronic form and signed electronically can satisfy s127 of the Corporations Act 2001 (Cth) (“Corporations Act”).  It is for these reasons we recommend that if a counterparty wants to be certain that a deed has been validly executed, and that s127 has been satisfied, a paper document should be signed with wet-ink signatures (or via modified split execution).

If you have no choice but to sign a document electronically

Under current work from home arrangements, it may not be possible for signatories to sign documents in wet-ink (or via modified split execution) — an electronic signature may be the only way the document can be signed.

Where this is the case, you should bear the following in mind.

  • Various arguments can be made that a deed can be in electronic form and signed electronically, and that both an agreement and deed in electronic form and signed electronically satisfy s127 of the Corporations Act. For example, an argument can be made that where a signature appears on a print-out of a document which was executed electronically, this satisfies the requirement that a deed must be in paper and that a document executed in accordance with s127 must be in paper.  This argument is based on cases which have held that a facsimile signature attached to a document with the signatory’s authority is to be treated as the signatory’s signature.  There are no cases which apply this rule to deeds or s127 so there is a risk a Court may decide the rule does not apply.  However, an argument can still be made to support electronic signatures and electronic contracts.
  • In banking and finance transactions, lawyers acting for a financier and giving an opinion that a borrower or guarantor has duly executed the documents, may qualify the legal opinion to reflect the uncertainty in the legal position. In the case of s127, they may require evidence of actual authority of the borrower or guarantor.
  • Even if a deed has been electronically executed, another party to the deed may have grounds to argue that the party is bound by the deed depending on the circumstances. For example, if the clause states that the deed is “signed, sealed and delivered”, this provides a basis to argue that the signatory should be estopped from denying that a deed was made.
  • If a document is expressed to be a deed but does not take effect as a deed because of electronic execution, the document may take effect as an agreement if consideration has been provided. Where the document does not need to be in the form of a deed, this may cause no detriment to the parties.
  • Emergency legislation has been passed by the Commonwealth and some States which enables modification of electronic execution requirements in response to COVID-19. It is possible that legislative instruments and regulations will be passed to facilitate the electronic execution of deeds and electronic execution of deeds and agreements under s127.  This may enable ratification of any electronic execution to date if there are concerns about due execution.

Emergency legislation may be the solution

As at 6 April 2020:

  • in the Commonwealth, NSW and Tasmania, enabling legislation is in force but further regulations or instruments making modifications have not been made yet;
  • in Victoria, the Law Institute of Victoria (“LIV”) has stated that it expects that enabling legislation similar to NSW will be passed, but no bill has been proposed yet; and
  • in ACT, NT, Queensland, SA and WA, no bill has been proposed yet.

The legislation is summarised below.

Jurisdiction

Legislation

Commonwealth

The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) gives the Minister the power to exempt classes of persons from specified provisions of the Corporations Act (or regulations) or modify the operation of specified provisions of the Corporations Act due to circumstances relating to COVID-19 by legislative instrument.  The instrument will be in force for a maximum of 6 months.

NSW

The COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) provides that regulations may be made under various specified acts for alternative arrangements for signing and witnessing documents for the purposes of responding to COVID-19. The regulations will be in force for a maximum of 6 months.

Special provisions for COVID-19 pandemic provisions have also been inserted into the Electronic Transactions Act 2000 (NSW).  These provisions give the Minister power to recommend that regulations under various Acts be made to may provide altered arrangements for the signatures of documents, witnessing signatures and the attestation of documents for the purposes of responding to COVID-19.  These provisions will be in force for a maximum of 6 months (or a later day which is no more than 12 months later than prescribed by the regulations).

Tasmania

The COVID-19 Disease Emergency (Miscellaneous Provisions) Act 2020 (Tas) gives the Minister the power to make notices that, despite any relevant legislative instrument (including an Act), any action that is required to be taken by means of a signature, or is required to be evidenced in a document that is not an electronic document, may be taken or evidenced by electronic means specified in the notice.

A notice was issued on 3 April 2020 by Gazette permitting electronic signatures and electronic documents under certain provisions of the Local Government Act 1993 (Tas) and its regulations. The notice provides that despite any of provisions specified in the notice, any action required to be taken by means of a physical action such as a signature or personal service, or evidenced in a document that is not an electronic document, under those provisions, may be taken or evidenced by means of an electronic signature or signatures, or an electronic document. 

Please contact us if you have any questions or would like to discuss. 

Key contacts

COVID-19: Implications for Business

The spread of Coronavirus (COVID-19) has forced us to think and act differently. Beyond the human response, now is the time to think about what the consequences may be on your business, and how best you can prepare for those.

Share on LinkedIn Share on Facebook Share on Twitter
    You might also be interested in

    On Friday 25 September 2020 the Treasurer Mr Josh Frydenberg announced significant reforms to the responsible lending obligations in the National Consumer Credit Protection Act 2009.

    25 September 2020

    In a year like no other, KWM’s Directions team took corporate Australia’s pulse through a COVID-19 focussed survey of directors and senior leaders.

    23 September 2020

    We hear from our KWM people about how the Community Impact programme resonates with them.

    22 September 2020

    Kate is a change-maker in the legal assistance sector. Read below for Kate's take on technology and innovation in enabling access to justice.

    22 September 2020

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.