Electronic signature processes are increasingly being used by businesses and financial institutions. They offer convenience and potential cost savings particularly where documents might need to be signed by people in various different locations.
There are a number of digital platforms available but most involve –
- The documents to be signed being uploaded to the cloud;
- The intended signatory being notified by a link to access the document; and
- The intended signatory opening the link and following on line instructions with the end result being that a signature is inserted into the document.
The generally accepted legal view is that legally binding documents can be created and executed in this manner however a recent New South Wales Court of Appeal case highlighted the problems that can arise.
The case concerned a guarantee purportedly signed by a company director via a particular e-signature platform. The guarantee was in favour of a supplier of goods to the company. Ultimately the company defaulted and the supplier sued the director under the guarantee.
The director successfully resisted the claim. He claimed that he had not used the platform to sign the guarantee and had no knowledge of the guarantee. Effectively, he argued that the platform had been used to forge his signature by someone who accessed the platform using his password.
The supplier had no reason to suspect that there was any irregularity with the guarantor’s signature. It argued that a decision against it would throw doubt upon the ability of creditors to rely upon electronic signatures at all but the Court said that was a matter for the legislature to address if it considered there was a sufficient public interest in doing so.
The moral of the tale is that businesses need to be careful in using electronic signature platforms and look for platforms with inbuilt security features that enable signature verification in the event of a dispute about authenticity.
At Everingham Solomons we have the experience to help you with your questions about proper execution of documents because Helping You is Our Business.
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