Commercial Deeds and Contracts Signing by electronic signature

In this age of emails, web conferencing, electronic communications and documents, we are often asked to advise on how a legal document can be validly signed. A degree of caution is required to ensure the document is binding as intended by the parties.

Changes have been made to the Justice Legislation (Covid 19 Emergency Response-Wills and Enduring powers of attorney Documents) Amendment Regulation 2020 (Qld) last week to extend the operation of these new rules for signing of Deeds. This opens a new way to getting these documents completed given the difficulties experienced, but it is only during the pandemic at this stage.

There have been a series of cases about signing electronic versions of documents, including Bendigo and Adelaide Bank, which has sought to recover loans to investors in failed Great Southern Group investment schemes. See Bendigo and Adelaide Bank Limited v Pickard [2019] SASC 123. This case considered the validity of signing of a deed of guarantee (special requirements exist for signing of deeds). The deed was “signed” by attaching the electronic signatures of officers of a company. Bendigo argued that this was in accordance with s 127(1) of the Corporations Act 2001, which allows two directors or a director and secretary of the company to sign for a company.

The company claimed the deed was signed after they obtained resolutions of its board generally approving the loan. However, there were no resolutions or authorisations from the officers to place their electronic signatures on the deed. The Supreme Court of South Australia ruled that this form of signing was invalid.

The Court also ruled that s 127(1) of the Corporations Act contemplates a document being executed by two officers signing it and so a single document must be signed by both officers. It is insufficient that two signatures appear on different counterparts or copies of the same document because no one counterpart or copy would be properly executed by the company. However, the Court also accepted that, if done properly, electronic signatures could be valid under s 127(1) of the Corporations Act.

Having failed on the validity of the execution of the deed, Bendigo argued that the contents of the deed were nevertheless a contract, and it sought to prove the existence of the contract. Bendigo failed in this also, because the Court ruled that there was no consideration, one of the essential requirements for a binding contract.

A document, including a deed, can be signed validly with an electronic signature, if the person personally authenticates his other signature on the document and contractually binds themselves to the procedure for signing (for example DocuSign).

A deed signed by a company under s 127(1) of the Corporations Act must be signed physically by both company officers on the same page or it is possible to be signed with electronic signatures with correct authority by special resolution and application of signatures on the one document.

Caution is required with electronic signatures and in cases of doubt, it is best to require physically signed “wet signed” documents.

Individuals (as distinct from companies) who are parties to a deed, must have their signatures correctly witnessed, by the person being present and seeing the signature. This requires great care and caution if it is to be done properly using an agreed electronic signature platform.

Note of caution, contracts that do not have to be deeds can be made valid, despite irregularities in signing. Note the reminder there must be a consideration for a valid contract to be made. Where there is no consideration, or the consideration is doubtful, the document should be signed as a deed. It is perfectly valid for different parties to a document to sign different counterparts of the same document if allowed by the document.

Ask us now how to get it right!