Going digital – When is an electronic land contract ‘signed’?

When the concept of electronic contracting was first conceived, there was some uncertainty about whether they would be suitable for land sale contracts.  This was due to the requirement in the Property Law Act 1974 that, to be enforceable, a contact for the sale of land has to be:

1. in writing; and
2. signed by the relevant party or a person authorised to sign.[1]

Through a combination of the Electronic Transactions (Queensland) Act 2001 (ETQA) and subsequent judicial decisions, many of the early perceived risks about the legal validity of an electronic contract have been settled, with Australian courts consistently concluding that an electronic contract has the same legal effect as a paper based equivalent.

Settled rules and principles

1. Writing:  An electronic contract (not in the form of a deed) will meet a requirement for writing if the contract is reproduced using any mode where the words are in a visible form. Words are reproduced in a visible form in the case of email, documents on a computer screen or words on a mobile device.[2] However words stored in a device in oral form such as voice mail are not.
2. Signing:  An electronic signature is capable of satisfying the requirement for a land contract to be signed.  In most cases Australian courts have relied upon the relevant Electronic Transactions legislation (ETA) to conclude that the use of an electronic signature met the requirement for the contract to be signed. Compliance with the ETA requires a court to be satisfied that:
   1. The electronic signature identified the signer and their intention to be bound to the contract; and
   2. The parties have consented to the use of the particular signature method.[3]

A typed name, a facsimile of a signature and a DocuSign signature will all on their face identify the signer. A court may also accept additional evidence about the identity of the signer in the event of a dispute.

Consent to the use of an electronic signature may be expressly given prior to contract, implied from the conduct of the parties or included as a term of the contract.The cases indicate where both parties have signed a contract electronically, consent will be readily inferred.

On the basis of this settled approach an electronic signature may be used by a person to sign a land contract and any pre-contractual disclosure statements required by statute.

Electronic signing – shades of grey

Although an electronic signature is clearly acceptable as a legal signature there are still some areas where caution is warranted.

Electronic signing by companies

A company can sign documents using any method approved by the company. Consequently, there is no barrier to a company using an electronic signature to sign a document.  This means a contract signed electronically by a director or agent who has been properly authorised by the company will be valid and enforceable against the company.  The issue for e-contracts is establishing the authority of the signer to bind the company because of doubts about the ability to rely on the usual assumptions in the Corporations Act 2001 when entering into a contract with a company.[4]

Practically, for small family companies where all of the directors have signed the contract, the risk of the company denying the signatories were properly authorised is low.  In addition, the directors will typically provide guarantees which would give the seller rights against them personally if the contract failed.  However, in some circumstances, it is appropriate to obtain evidence from the company of the signers’ authority.

Signing Deeds and Guarantees electronically

Under the current law, in Queensland a deed cannot be validly created using an electronic signature.  This is because under the Property Law Act 1974 a deed is required to be in paper (not just writing) and the signatures of the parties must be witnessed.[5] This is particularly relevant for personal guarantees which are often in the form of a deed.  Personal guarantees in off the plan contracts should therefore be drafted to take effect as an agreement supported by consideration.

Guarantees are otherwise subject to similar requirements for writing and signing as apply to a land contracts.  A guarantee produced in a visible electronic form and signed electronically in compliance with the ETQA will therefore be valid.

Fraudulent/unauthorised use of electronic signatures

Just as issues can arise about whether a wet signature was placed on a document by a party, e-contracts are potentially subject to claims that a document was signed electronically without a party’s knowledge or consent.

An example is the case of Williams Group Australia Pty Ltd v Crocker[6] where Mr Crocker was held not to be liable under a personal guarantee which had been signed by affixing an electronic signature to a supplier’s credit application form.  The evidence showed that the electronic signature had been affixed by someone at his company’s office in Murwillumbah but that he was not in Murwillumbah at the relevant time.  The Court accepted that Mr Crocker had not authorised anyone to affix his electronic signature.  The fact that he was aware his password was known to others in the office but had not changed it did not amount to authorisation.  Subsequent use of the electronic signing software by Mr Crocker did not amount to ratification of the signature because he had no knowledge of the existence of the guarantee.

Importantly, it is implicit in the decision that had Mr Crocker authorised someone else to affix his signature to the document, he would have been bound by it. It should also be noted that had Mr Crocker affixed his signature to the document, there would have been a permanent electronic record of that.  There are therefore potential evidential benefits in using electronic signing tools.

In the context of land sale contracts, the usual correspondence between the parties’ solicitors and the payment of a substantial deposit by the buyer would generally make it difficult for all of the buyers to deny knowledge of the existence of a contract.  Practically, the main risk appears to be one buyer affixing the signature of the other without their knowledge. Sellers can mitigate this risk by ensuring an electronic contract is issued to a known and verified email address and that dual factor authentication to the buyer’s mobile phone is used.  Where there are multiple buyers it is important that separate email addresses and/or mobile phone numbers are used.

[1] Property Law Act 1974, s 59.  Equivalent provisions exist in all Australian States and Territories.

[2] Hanna v Gippsreal Ltd [2008] QSC 106; Supangat v Byrnes [2010] QCA 176; Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119

[3] Electronic Transactions (Queensland) Act 2001, s 14

[4] With a paper contract, where ‘wet’ signatures are used, a seller dealing with a company is able to rely on section 129 of the Corporations Act 2001.  This essentially provides that, if a document is signed by 2 directors or a director and secretary (or, where applicable, the sole director and secretary), the company is bound by the document and the party dealing with the company is not required to establish that the signatories have been properly appointed or that the transaction has been properly authorised.  However there is uncertainty about whether an electronic signature is a signature for the purpose of s129 because the Electronic Transactions Act 1999 (Cth) which deems a document signed electronically to be signed does not apply to the Corporations Act 2001.

[5] The position in New South Wales has been altered by legislation and electronic deeds, governed by the law of NSW will be legally enforceable.

[6] [2016] NSWCA 265