Living in the age of technology has its benefits, but what happens when the convenience of technology gets us locked into deals we didn’t even know existed? While more and more companies move towards electronic signatures we thought we’d better let you know how to actually use them.
Section 127 of the Corporations Act (Cth) 2001 allows office holders to sign documents by way of electronic signature — well actually, rather than allow it, it doesn’t prohibit it. The question remains, how and when can we use these electronic signatures?
In a recent case a director, Mr Crocker, uploaded his signature onto an electronic signing system where someone else from the company used his signature to sign a deed of guarantee and indemnity. To Mr Crocker’s surprise, instead of receiving baked goods from his wife Betty he was hit with a lawsuit enforcing his personal guarantee on a credit transaction he didn’t even know he was a party to. Thankfully, the courts found that because Mr Crocker didn’t give actual authority, he wouldn’t be held liable for the guarantee.
Authority is key here: where directors and secretaries are uploading their signatures for convenience, it is crucial to receive instructions each and every time their signatures are used. In other words, a director merely uploading their signature and giving you access to it does not mean their signature can be used as a free-for-all. While it may be easy to just copy and paste a fellow office holder’s signature on the bottom of a letter or back of an agreement, remember these signatures may mean next to nothing without authority from their owner.
If you’ve already used another director’s electronic signature without first receiving authority, (don’t panic just yet ...) you can put that person on notice, which allows them to either reject or ratify its use. And we don’t mean dropping it in over Friday night drinks. To put someone on notice and enable ratification, that person will need to have seen, read and understood the document before confirming his or her consent.