eContracts for Property Transactions

Australian commerce is becoming increasingly electronic and credit managers need to be mindful and supportive of their business and the need to interact with their clients.

Forms of electronic contracts have been operating in Australia since before Federation. The first working electrostatic telegraph was built by the English inventor Francis Ronalds. In 1816 when he laid down eight miles of wire and successfully transmitted messages. Electric telegrams were commercially available from 1837 in the UK. Between 1854 and 1869, telegram lines were opened across Australia. International trade was conducted by telegrams and since 1872 when Australia was connected to Java from Darwin, international trade was able to be contracted via electronic means. 

Relevant cases to peruse include:

To understand electronic case law and their enforcement relies I find the 3 following precedents very helpful:

  1. 1880 - Stevenson v McLean[1]– UK case - contract for sale of goods case concerning the rules on communication of acceptance by telegraph. Its approach contrasts to the postal rule and explored the specific words required at the stages of offer and acceptance or rejection of offer or revoking of offer.
  2. 1893 - Harvey v Facey[2]– contract for sale of land. The Privy Council found that telegrams were capable of forming a valid, legal, binding contract. However, on the facts of the particular case, the Privy Council held that the agreement was not binding, because in its view the terms of the telegrams were not sufficient to prove that the vendor had made an offer capable of forming the basis of a contract.
  3. The research into validity of electronic signatures to bind parties, complying with formalities and addressing provisions of the Real Property Act 1900 (NSW), Conveyancing Act 1919 (NSW), Duties Act 1997, Electronic Transactions Act 1999 as well as provisions of other State and Federal statute has revealed there is nothing to stop the implementation of electronic signatures being used to satisfy the formalities component and bind parties to a Contract, so long as the Contract itself complies with the usual requirements.

 

Binding contracts in general

The essential elements of a binding Contract are:

  • Agreement – Offer & Acceptance
  • Consideration
  • Intention
  • Capacity
  • Formalities
  • Certainty

 

Legislative

Electronic Transactions Acts, based on the MLEC, were enacted in Australia in 1999 – 2003, and later amended to incorporate substantive provisions of the Convention on the Use of Electronic Communications in International Contracts (CUECIC).  Section 8 of the Electronic Transactions Act 1999 (Cth) essentially reproduces §5 of the MLEC.  Section 9 provides that where a law of the Commonwealth requires a person to give information in writing, information given by means of an electronic communication will satisfy the requirement.  Arguably, this is a narrower enabling of electronic communications than §6 of the MLEC, referring only to information required, such as certificates of title, and not to contracts for the sale of the land which are inter partes and not required by legislation

 

Validity

The two key legal factors in determining if a contract for sale is binding, are set out in section 54A of the Conveyancing Act 1919 in NSW and are:

  1. that it is in writing; and
  2. the contract is signed by the party to be charged (or their authorised representative).

With the ETAs and recent amendments to the Conveyancing Legislation of NSW, contracts for the sale of land are now expressly valid and binding if created and signed electronically.

 

Elements of a signature

Signatures are an “authentic”, “act” made with “intention”. For a signature to be valid, it must have been made by the person purporting to have made the gesture, whether it be a mark with a pen on some paper or clicking with a mouse on a computer, with the intention to actually be signing. Very rarely would two signatures be precisely identical. Wet ink signatures because of physical differences and eSignatures in the variance of the metadata.

The wonderful thing with technology is the evidence behind an eSignature is that they are more robust than a scribble on a piece of paper. The metadata encrypted in an eSigned eDocument provides a superior level of data behind the signature including:

 

  • Time and date
  • Location of signing
  • IP address and device particulars
  • Security measures

 

The use of eSignatures in accordance with the Electronic Transactions Acts do not change the law regarding execution of documents, they provide an evidentiary trail that enables any later repudiation to be rebuffed.

An electronic signature is different in this sense from a digital signature, which is concerned with cryptographic authentication technology rather than a person signalling their assent to a document by marking

eSignatures authenticate and securely encrypts the signed document and has extensive features to prevent tampering or amending so the document does not become compromised. When we upload a document and the e-signature is attached to it, DocuSign’s firewall-protected server, encrypts it and then "hashes" it — essentially creating a mathematical algorithm of the file that can be examined to determine if it’s been tampered with. The metadata can also indicate the time and place the document was signed.

 

Electronic Signatures vs Digital Signatures

An electronic signature (eSignature) is a visible representation of a person’s name or mark, placed by a person on an electronic document or in a form of electronic communication, by electronic or electronic and mechanical means, as a method to identify the person and indicate that they have put their eSignature on the document or communication.

An electronic signature is different in this sense from a digital signature. A digital signature is concerned with cryptographic authentication technology rather than a person signalling their assent to a document by marking it.

Types of electronic signatures include a person typing their name in an email or word document (although this will not be accepted in all jurisdictions), pasting a digitised image of their physical hand-written signature, selecting an option in eSigning software such as “I Agree” or “Buy Now” buttons, signing a soft copy of a document with a stylus or finger on a touchscreen, or using another form of biometric identification.

In the judgment of Justice Harrison in Stuart v Hishon[3]: “Mr Stuart typed his name on the foot of the email. He signed it by doing so. It would be an almost lethal assault on common sense to take any other view.”

Digital signatures are more advanced and secure types of enabling an electronic document be executed or signed. They can be used to comply with the most demanding legal and regulatory requirements because they provide the highest levels of assurance about each signer's identity and the authenticity of the documents they sign.

Digital signatures use a certificate-based digital ID issued by an accredited Certificate Authority (CA) or Trust Service Provider (TSP). When a party digitally signs a document, their identity is uniquely linked to that party using a variety of metadata, the signature is bound to the document with encryption, and everything can be verified using underlying technology known as Public Key Infrastructure (PKI).

An emerging approach for PKI is to use the blockchain technology commonly associated with modern cryptocurrency. Since blockchain technology aims to provide a distributed and unalterable ledger of information, it has qualities considered highly suitable for the storage and management of public keys.

Following the Masterchef/PEXA incident, there are requirements for multi-factor authentication methods when a practitioner applies their digital certificate on land titles registry documents of authorises a financial settlement.  

 

Conveyancing Legislation Amendment Act 2018 No 75

In support of the industry’s transition to paperless conveyancing, clarity has been codified for NSW land transactions can now expressly be conducted electronically.

New provisions in the Conveyancing Act 1919 make it clear that land transaction documents will be valid and enforceable when they are:

- contained in an electronic data file form; and

- electronically signed and witnessed.

These new provisions now apply to all contracts and deeds relating to land under the Real Property Act 1900 (NSW).

Towards the end of November 2018 certain legislations were amended by the Conveyancing Legislation Amendment Act 2018 no. 75. This was to make expressly clear to anyone Transacting in the property space in NSW could use and rely on electronic contracts as being valid.

The NSW Minister for Finance, Services and Property Victor Dominello noted that "by introducing e-signatures we are giving buyers more time to read documents, providing greater security and reducing the time needed to settle a property transaction".

 

Following an announcement in July 2016; the Government introduced plans to transition to electronic conveyancing known as “eConveyancing”

Although the Electronic Transactions Act 2000 permits requirements for writing and signing to be satisfied electronically, it was observed in the second reading speech that “there is a general reluctance in the conveyancing industry to use electronic land contracts because of concerns about the validity of electronic agreements.”

To address these concerns the Amendments of the Conveyancing Legislation included:

  • clear confirmation that reference to a contract includes an electronic data file containing a contract in electronic form;
  • that a disclosure document, required to be provided by the vendor can be given electronically;
  • any requirement for an instrument to be in writing is taken to be met if the information is given by means of electronic communication;
  • that a Deed may be created in electronic form and electronically signed and attested;
  • a contract to sell or dispose of land is not invalidated or rendered unenforceable only because it has been created in electronic form and electronically signed or attested;
  • service can be effected by email;
  • any document that supports the electronic lodgement of a dealing, memorandum, caveat or priority notice is not invalidated only because it has been executed electronically;
  • certain statements, caveats, notices, applications and other information may be verified in the manner approved by the Registrar-General, as an alternative to providing a statutory declaration; and
  • a client authorisation produced in electronic form may also be electronically signed.

Many of these proposals are already allowed for in various Electronic Transactions Acts across the nations various jurisdictions.

 

Minimisation of human error

Several eContract platforms connect to your client management system and minimise the re-keying of data. By using information directly from the eContracts, practitioners can pre-populate

eContracts are a real game changer for the profession, not only will practitioners save time and increase efficiency, it is also a service that the client can easily appreciate the value of in the most important ways to them – time and convenience. It will also allow practitioners to name a fixed price for the job and to be very confident that the price will match the work required.

Another cost benefit is that most eContract costs are a disbursement rather than a time cost, increasing both value for money and profit and improving the disbursement recovery rate.

 

Is there anything special to be done where the party is a company or the signatory is acting under a Power of Attorney?

It is widely believed that section 127 of the Corporations Act requires physical signatures on a physical document to trigger the benefit of the statutory assumptions relating to due execution.

Many argue that a “document”, for the purposes of section 127, should be read down to mean a physical paper document because section 127(2) requires the use of a physical seal and section 127(3) refers to execution of deeds which are traditionally required to be printed on paper, parchment or vellum.

They also point out that the Corporations Act is expressly excluded from the “no invalidity” and signature provisions of the Commonwealth Electronic Transactions Act.

Other lawyers hold a contrary view. They argue that, while section 127(2) may require the use of a physical seal, there is no reason to read down the broad statutory definition of “document” that would otherwise apply under section 25 of the Acts Interpretation Act 1901, which is broad enough to include electronic documents, at least for the purposes of sections 127(1) and 127(3).

When it comes to a company signing a deed under section 127(3), these lawyers may argue that printing the signed electronic document satisfies requirement for paper, parchment or vellum. They also point out exclusion of the Corporations Act from the Commonwealth Electronic Transaction Act doesn’t mean that electronic signature is prohibited.

Pursuant to s 127 Corporations Act 2001 (Cth), a corporation can sign by any method, with certain presumptions of authority pursuant to s 129. Therefore, if a document is electronically signed by the corporation, then there would need to be some evidence that the company has authorised the method.  Ostensible authority may be relied upon if there is sufficient evidence.

The ubiquity of electronic signatures is now such that the recent decision of the Court of Appeal of New South Wales in Williams Group Australia Pty Ltd v Crocker [4]turned not on the validity of the electronic signature, but on the question of ostensible authority to sign.

In the absence of clear legal authority, a practical approach for companies that wish to sign electronically is to articulate early the better view that documents can be signed electronically under the section 127 of the Corporations Act, to print out the electronic document once signed to satisfy any need for a physical instrument and to be prepared to provide evidence of due authorisation in case the counterparty requires further comfort that the company has properly authorised execution of the document.

One way around relying on s127 is to have a Power of Attorney appointed by the company and include a copy of that document in the contract.

 

  • Claire Martin
  • Senior Associate
  • KREISSON
  • T: 61 2 8239 6511
  • E: claire.martin@kreisson.com.au

 

Download article

 


[1] (1880) 5 QBD 346

[2] (1893) AC 552

[3] [2013] NSWSC 766

[4] [2016] NSWCA 265