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02.03.2021

News

Property contracts – going digital

Since the pandemic, the use of electronic contracts and signatures has become increasingly popular and is now commonplace. With technology playing an increasing and integral role in the production and execution of property contracts, it is imperative to ensure your e-signature is valid and you have a compliant contract in place.

So, what exactly constitutes a valid electronic contract and e-signature on a land sale contract? Real Estate lawyer Matt Dolan explains the critical elements.


Contract formation

For a land sale contract to be enforceable under the Queensland Property Law Act (PLA), it must be—

  • in writing, and
  • signed by the relevant party or a person authorised to sign.

The first requirement, that the contract be in writing, will always be met if the contract is reproduced where the words are visible in the form of an email or document on a mobile device or computer. Generally, a property contract will be produced on a computer by PDF or Word, satisfying the first criteria under the PLA.


Contract execution by individuals

Over the years, the Australian courts have relied on the Electronic Transactions (Queensland) Act (ETA) to determine whether the use of an e-signature meets the necessary requirements for a property contract to be signed. Under the ETA, there are three requirements:

  1. An e-signature must identify the signer and their intention to be bound to a contract.
  2. The method of identification must be reliable.
  3. The parties must have consented to the use of e-signatures.

Identity, intention and reliability

Currently, there are no formal common law requirements for an individual's signature and the ETA is said to be facilitative and not prescriptive in its requirements. It has, however, been established that e-signatures include the following:

  • a typed name
  • facsimile of a signature
  • a DocuSign signature, or another digital signature using public key infrastructure through a digital signature solution provider
  • an email signature block
  • handwriting a signature using a stylus or finger on a touch sensitive screen
  • inserting an image of a wet signature (handwritten).

These forms of signature satisfy the first two requirements for an e-signature to be valid and we recommend utilising one of these when signing a land sale contract. It is worth noting the courts have had some difficulty with automated or pre-set signatures (eg creating a signature through PDF) and there are some inconsistencies in judgments, so caution should be had when signing is not in accordance with one of the above six examples.


Consent

The standard REIQ property contracts contain a provision that indicates where a contract is signed electronically the parties agree to enter the contract in electronic form and consent to e-signing has been given. This satisfies the third ETA requirement.

If a standard REIQ property contract is not being utilised, it is essential to ensure there are electronic contract and signing provisions included in any special conditions so there is clear consent from the parties.


Contract execution by a company

The validity of an e-signature by a director/secretary in the context of the Corporations Act is a topic of controversy in the legal industry, with many law firms expressing differing views. The controversy arises largely due to the interaction between the Corporations Act and the ETA.

Despite the differing views, we believe company officers can apply electronic signatures to execute a land sale contract under the Corporations Act, provided the following two steps are followed:

  1. Confirm the counterparty agrees electronic execution is acceptable. This is provided for in standard REIQ contracts. However, if a different form of contract is utilised, it is imperative a clause is incorporated into the contract relating to consent.
  2. Each party to the agreement should execute it electronically. If one party opts to use a wet ink signature, then ideally all other parties should do likewise.

Each director (or secretary) signing the contract should insert or apply their own e-signature. Using a director's e-signatures has failed in the past as there was no evidence the director had authorised the use of their signature on a document.


Any questions?

If you have questions about whether your contract or e-signature is valid, our Real Estate lawyers can explain the requirements and answer any queries you may have.


Authors

Matt Dolan

Matt Dolan

Lawyer

Contact McMahon Clarke

Brisbane
T +61 7 3239 2900
A Level 7, 100 Creek Street, Brisbane Qld 4000

Melbourne
T +61 3 9909 1400
A Level 2, 696 Bourke Street, Melbourne Vic 3000