Technology is advancing at a rapid pace and more and more people are looking for faster and more efficient ways to do business. Conveyancing is not immune to progress and communication between representatives such as estate agents, lawyers and conveyancers is now consistently undertaken electronically. Recently there has been the emergency of electronic execution tools for Contracts of Sale.
For a contract to be validly formed the following elements must be satisfied:
- agreement which normally consists of an offer and acceptance of that offer;
- consideration is the price that is asked in exchange for the promise;
- the parties intend to create a legal relationship;
- each party must have capacity to enter into the contract, and
- where the agreement relates to land, the parties enter into a contract.
Generally, a purchaser will offer a price to the vendor to purchase the vendors land. The vendor will accept the price offered and the parties will enter into a Contract of Sale that provides for the terms and conditions of the sale of the land. The Contract of Sale is written and signed by each of the parties to the transaction. Having each party sign the Contract is intended to:
- to ensure the availability of admissible and reliable evidence;
- to encourage deliberation and reflection before action, flagging that the record and the act of attesting to it have significant legal consequences and forcing the party to consider whether they really wish to be legally bound;
- to imposed a warranty of veracity of contents of a record or of their adoption by the signer for the purpose of protecting the recipient or reader of a record in relying on those contents or their adoption by the signer;
- to mark a clear line between intent to act in a legally significant way and intent to act otherwise, and
- for execution of government regulations.
So, the question is, whether a Contract of Sale that has been signed and exchanged electronically is enforceable and complies with contract law.
Section 1a of the Electronic Transactions (Victoria) Act 2000 (Vic) (“ETVA”) states that transaction is not invalid merely because it is carried out electronically. However, the ETVA specifically excludes certain classes of transaction from being electronic documents or being signed electronically. For example, a Will and enduring Power of Attorney cannot be electronic documents or signed by electronic methods. These transactions must still be signed by a handwritten signature (“Wet Signature”). There is no prohibition on Contracts of Sale in the ETVA.
Pursuant to section 9 of the ETVA, if the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if:
- a method is used to identify the person and to indicate the person’s intention in respect of the information communicated;
- the method used was reliable as appropriate for the purchase of which the electronic communication was generated or communicated, in light of all the circumstances, and
- the person to whom the signature is required to be given, consents to the signature being used for the communication.
To determine if the method satisfies the reliability question, regard is to be given to all relevant circumstances at the time when the method is used, as well as the nature and purpose of the information communication. However, generally speaking, an electronic signature is considered to be reliable for the purpose of satisfying the requirement referred to above if:
- the signature creation data are, within the context in which they are used, linked to the signatory and to no other person;
- the signature creation data were, at the time of signing, under the control of the signatory and of no other person;
- any alteration to the electronic signature, made after the time of signing, is detectable, and
- where a purpose of the legal requirement for a signature is to provide assurance as to the integrity of the information to which it relates, any alteration made to that information after the time of signing is detectable.
A preliminary distinction needs to be made between a digital signature and an electronic signature. An electronic signature acts purely as a representation of the signature of the party e.g., inserting a scan of a person’s signature into a word version of a Contract or the typed name of the person on the Contract. It not only includes a Wet Signature imposed on an electronic document, but make be formed by the placing of the hand on a key or through voice recognition software generating keystrokes.
A digital signature is a subset of electronic signature. A digital signature utilises encryption technology to transform a message into a unique electronic identifier. A person who receives a digitally signed Contract can accurately determine that the Contract was signed by the sender. Therefore, digital signatures a more trusted and secure way of verifying the author of a document.
The vast majority of digital signatures rely on public key cryptography as their identity verification core. To create a digital signature, a private key is used to generate a unique code. That code is embedded in the document and becomes the digital signature. Usually an image attached to the digital signature is created as the visual aspect of the signature, but this is not legally necessary. A public key is then shared and is visible by anyone else on the receiving end of the document. The public key will show the name linked to the digital signature and include a verification that the contents of the document has not been somehow altered since applying the digital signature to the document, whether by technical error or tampering. There is generally no way for the recipient of the public key to discover the private key.
The formation of a Contract of Sale by electronic method and the signing of that Contract of Sale by an electronic signature is available in Victoria. A Contract can be signed electronically provided that the parties have agreed to the use of electronic methods and the requirements pursuant to section 9 of the ETVA are met. However, as the use of electronic signatures are still in its infancy in conveyancing, caution should be observed. If there is any doubt as to the validity of the electronic signature, the parties should re-sign using a Wet Signature.
For further information on electronic signatures, please contact us at [email protected] or on 5303 0281.
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The information on this website is of a general nature only. It is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice about your particular circumstances.
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