Are electronic signatures legally binding in Australia for contract execution?

In an era defined by digital transformation, the conventional ink and paper methods of signing contracts are being left behind. Electronic signatures (eSignatures) are rapidly emerging as an alternative. But are eSignatures legally binding for contracts?

While electronic signatures are prevalent across Australia, many still question whether contracts or agreements executed with them hold the same legal force as those executed through physical signatures.

The short answer: Yes. Electronic signatures are legally recognised in many jurisdictions worldwide, including Australia.

In Australia, electronic signatures are legally valid. They are governed by the Electronic Transactions Act 1999 (ETA) and its accompanying regulations, the Electronic Transactions Regulations 2020 (ETR), at both the federal level and in each State and Territory.

The longer answer: Not just any electronic signature will do the job.

The ETA outlines various legal requirements, including the method, participant consent and document retention.

For example, electronic signatures must be able to verify the users and trace any changes within the document to be valid. Modern systems deliver this and more with advanced encryption, decryption and a change audit trail that cannot be forged.

SECURITY RISKS:

• Brand damage: According to Deloitte’s "Australian Privacy Index", 61% of Australians said they would reconsider using a product or service if they had concerns about how their data was being handled, highlighting the potential for significant brand damage due to privacy and security concerns.
• Vulnerable record storage: According to the OAIC Australian Community Attitudes to Privacy Survey (ACAPS) 2023, three‑quarters (74%) of Australians feel data breaches are one of the biggest privacy risks they face today. (https://www.oaic.gov.au/privacy/notifiable-data-breaches/notifiable-data-breaches-publications/notifiable-data-breaches-report-january-to-june-2023)
• Compliance issues: Business Chamber Queensland’s 2023 Efficient Regulation Report shows both the time and cost businesses spend to meet regulatory burden is increasing, with 80% of businesses surveyed reporting major to moderate negative impacts from regulatory compliance, with things like the lack of an adequate audit trail potentially resulting in significant legal and financial ramifications.
  (https://businesschamberqld.com.au/news-and-resources/news/regulatory-burden-negatively-impacting-majority-of-queensland-businesses-new-data-shows/)
• Cyberattacks and identity fraud: ASD’s Australian Cyber Security Centre received over 94,000 reports of cybercrime over the financial year, with identity crimes being one of the most prevalent. The Australian Competition and Consumer Commission (ACCC) states that there were over 16,000 reports of identity theft alone in 2022 (ACCC 2023). Identity crime, also known as identity theft, fraud or misuse, is a common cyber threat worldwide and can cause severe and long-term harm.
  https://www.minister.defence.gov.au/media-releases/2023-11-15/release-annual-cyber-threat-report-2022-23
  https://www.aic.gov.au/sites/default/files/2023-07/sb42_identity_crime_and_misuse_in_australia_2023_v2.pdf

ORGANISATIONAL DIFFICULTIES:

• Unnecessary expense: Many “common” eSign providers are comparatively expensive and don’t offer full ID verification.
• Paper processes: Relying on paper processes can be very inefficient for an organisation and increase costs with things like printing, scanning, mailing, and document retention costs. Plus, with no backup for documents, if something happens to the original the organisation can face severe legal consequences.
• Poor user experience: Not integrating systems could mean users need to leave your platform, which is not UX friendly.
• Inefficient processes: Not having the right digital ID workflow could mean your employees have to handle multiple systems just to get one process completed end-to-end, which is inefficient and costly.