Many rules which apply to "paper" contracts also apply to electronic contracts entered into by email, online or otherwise electronically. As many businesses and suppliers move to online and electronic credit applications, including with customers who are not in Australia, these rules are even more pertinent.

Some of these rules were recently considered by a number of courts, including the Supreme Court of Queensland in Stellard Pty Ltd & Anor ("Stellard") v North Queensland Fuel Pty Ltd ("NQF") ("Stellard's Case") which considered the electronic signing by email of a contract which created an interest in land. Thomson Geer Lawyers acted for the successful party, Stellard.

In a three part series, we will discuss certain issues concerning electronic transactions and how they might affect you:
- PART ONE: can an email be a "signature"? When do Credit Applications and their Terms and Conditions of Trade (called "T's+C's") and guarantees need to be "signed" and are foreign laws relevant?
PART TWO: who has sufficient authority to "sign" on behalf of a customer or guarantor and what happens if they do not have authority?
- PART THREE: when are the parties bound during negotiations, even when they say "subject to contract"?

Can an email be a signature?

Generally, if a contract (or a clause therein) creates an interest in land or is a guarantee, the laws in Australia and elsewhere require that there must be a memorandum or note in writing signed by the relevant party or their agent. This is especially relevant for creditors who rely on charging clauses to lodge caveats over interests in land or on guarantees. In Stellard's Case: 
- Stellard wanted to buy land off NQF and after a trail of various emails sent NQF an email noting the amount the company was offering to pay and the general terms of the offer ("offer email"). 
- No formal contract document had ever had a handwritten or electronically encrypted signature placed on them.
- An email ("the acceptance email") was sent by NQF's agent (being the director's son "Drew") accepting Stellard's offer email, and containing the intentionally typed name "Drew" at its end.
- NQF agreed that the acceptance email was sent by Drew and that it was a "memorandum or note in writing".
- NQF alleged that the acceptance email was not an enforceable contract for the land as it was not "signed".

Was the acceptance email a "signed" memorandum or writing?

Australia has a national scheme for electronic transactions laws. Similar laws also exist in other countries. In Stellard's Case, the Court ruled that, given the trail of emails, the acceptance email contained a "signature" and so there was an enforceable contract for land as it was a “memorandum or writing …signed” by the registered owner or its agent:

In circumstances where parties have engaged in negotiation by email and in particular where an offer is made by email then it is open to the court to infer that consent [to the method of use being email] has been given by conduct of [the relevant party, being consent by the seller NQF].

Drew, in communicating negotiations via emails had implied consent on behalf of NQF to the method of signing by email. Which of the relevant electronic transaction laws apply to suppliers T’s+C’s will depend on their wording and whether a business uses an online system, emails or other electronic communications for credit applications and guarantees especially if there is no email trail. If done correctly, “signing” of documents may be possible by an electronic means other than emails, provided a supplier strictly complies with the relevant electronic transactions laws of Australia or elsewhere.

When do T’s+C’s and Guarantee’s generally need to be “signed” to be enforceable for certain rights?

T+C’s and guarantees will normally contain express terms to secure any payments owed to their supplier. Common examples of these are:
- The supplier will retain ownership of its goods until they are paid for in full (called “a ROT clause”). This is a “security interest” under the Personal Property Securities Act (2009)(Australia) (called “the PPSA”) and the equivalent laws of other countries that suppliers might operate in. To be enforceable against the goods:
Under the PPSA, the T’s+C’s may be either “signed” by the customer, or “adopted” by an act or omission of the customer. 
— Under the equivalent laws of other countries, the T’s+C’s must be “signed” by the customer and cannot be merely adopted. Failure to have the T’s+C’s “signed” will mean that there is no “security interest”. The ROT clause is not enforceable and the supplier is at best an unsecured creditor.  
- A charge is granted to the supplier over any interest in land the customer may have either currently or in the future (called “a charging clause”). A charging clause entitles the supplier to lodge a caveat over any interest in land registered in the name of the customer. This is a powerful tool in debt recovery. To be able to lodge a caveat under Australian law the T’s+C’s (as in Stellard’s Case) must be “signed” by the customer. Most other countries have the same or similar requirement for their caveat lodgement systems. 
- In guarantees, a charge is also often granted over any interest  in real or personal property which the guarantor has, or is capable  of granting an interest in (called  “a general charging clause”): 
Under Australian law, a guarantee must be “signed”  by the guarantor or its agent for its terms to be enforceable. It cannot be “adopted” and the PPSA does not override this requirement; — The test of whether an email by a guarantor is a “signed” guarantee is similar to that discussed in Stellard’s Case; and
— The requirement for a guarantee to be “signed” is  also common under the laws  of most countries. Under the PPSA and equivalent foreign laws, registration on the relevant register is normally also required.

Takeaways

In summary, as suppliers more commonly use online and other electronic transactions for account applications, guarantees and other documents, it should be ensured that their processes and documents comply with various laws for how a document can be “in writing” and lawfully “signed”. Whilst an email can be a signature, generally suppliers should:
- Identify the requirements of the PPSA and relevant equivalent foreign laws and whether their T’s+C’s need to be “signed” or need only be “adopted”. 
- Ensure that guarantees are “signed” as required under the relevant Australian and foreign laws.
- Ensure that documents and processes comply with Australian and foreign electronic transactions laws and other laws to ensure that they can enforce their ROT clause, charging clause and/or general charging clause. 
- Whether they use email, facsimile, hard copy, a web portal or other process, make sure that it satisfies the relevant requirements for the relevant document to be “signed”. This will depend on the facts, the relevant electronic transactions laws, supplier documents, processes & procedures and whether a foreign country’s laws are relevant.
- Consider the risk if they fail to have their T’s+C’s and/or guarantees “signed”, they may not be able to enforce various rights against the relevant assets, customer, guarantors or third parties, or lodge caveats.
- Ensure that they properly register under the PPSA and the equivalent foreign laws.

Written by: Peter Mills, Special Counsel pmills@tglaw.com.au T +61 7 3338 7921
Robert Gallagher, Partner rgallagher@tglaw.com.au T +61 7 3338 7920

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