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Electronic Signatures

Electronic signatures save time and paper. But there are legal implications - do you know who is signing? Are they authorised to do so? Is your contract safe?

Remember the 'good old days' when you had to sign a document on behalf of the company? Not only you but the company manager or other authorised individuals had to counter-sign. If they weren't around, the client had to wait, and wait. The reason for multiple signers was to act as a guarantee. The law said that in normal circumstances that person had the authority from the company to do so. Therefore, the company couldn't deny the contract.

As we move towards a paperless society, it's easy to assume that the person who signs electronically on behalf of a company has the same authority. However, in a recent case, the Court held no.

In NSW a trading customer made a credit application to its suppliers, Williams Group Australia, who required directors' guarantees and a guarantee document. The credit application (including the personal guarantee document) was returned to Williams with the electronic signatures of the directors attached, each of them having been purportedly witnessed by the customer's administration manager.

The customer defaulted and Williams looked to enforce the guarantees. One director resisted the claim against him, on the basis that his electronic signature had been added to the credit application and the guarantee without his knowledge or authority, by 'an unknown person' in another branch office.

The online system used for the electronic signatures needed users to re-enter a private username and password. The director had not updated his, so that anyone in the office who knew his previous login details could have 'signed' his name. The court accepted that the director had not given any actual authority to the 'unknown person' to add his signature in this case.

Williams simply assumed that the signature was genuine and authorised as it had been apparently witnessed by the office administration manager. However, there was nothing to indicate that a personal guarantee had been signed at all, much less one by that particular director.

The moral of the story is that you should check that the person signing electronically has authority from the company. In this particular case, the company denied that it had entered into the contract and escaped liability.

If you have entered into an agreement involving electronic signatures and are unsure of where you stand, call us at TopNotch Legal.

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