#181 - Save time, sign online - is it legal to sign digitally?
Our interactions are becoming more digital every day.
For many of us in business, this means transacting in a digital or electronic way with our clients.
A question I'm asked all the time by my clients is whether having their clients sign their agreements electronically is legal.
Today, I’m diving into this topic and explaining the differences between digital and electronic signatures, when they’re okay to use and the circumstances in which they normally aren’t.
What’s the Difference?
When discussing signing electronically, it's essential to understand the distinction between digital and electronic signatures. Although these terms are often used interchangeably, they denote different things:
Digital Signatures
Technically, a digital signature is a signature provided via a platform. Various platforms are utilised for this purpose, including DocuSign, Secured Signing, PandaDoc and Dropbox Sign. These platforms make it straightforward for clients to sign documents: they may need to log in or simply click a "sign here" button, type their name, and voila! The document is signed and sent back.
The significant benefit of digital signatures is the unique data recorded by these platforms, noting the time, date, URL, and other identifying information. This data can be used to counter any future challenges regarding the authenticity of the signature.
Electronic Signatures
Electronic signatures, on the other hand, are simpler and do not require a signing platform. This method includes typing your name in an electronic format, inserting a scanned signature into a document, or clicking "I accept" on terms and conditions. Essentially, it involves manually indicating your agreement to a document in an electronic manner.
Legal Considerations and Exceptions
So, is it legal to sign documents digitally or electronically? For most service-based businesses, the answer is a resounding yes. When you send out client agreements or cost disclosures and request an electronic or digital signature, it is generally lawful and binding.
However, there are exceptions. Certain documents require a more traditional form of signing. These exceptions often involve contracts dealing with land, commercial leases or agreements necessitating a witness. Although some digital platforms like DocuSign can be used under certain conditions (e.g. a witness present via Zoom), this depends on the specific document and the legislation in place.
While there's a steady shift towards accepting digital and electronic signatures for basic contracts and memorandums of understanding, some traditional requirements persist as the law catches up with our changing world.
The bottom line is that for most straightforward service agreements and terms and conditions, digital and electronic signatures are lawful and practical. But, best practice is: if you’re unsure, ask!
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Tracey: [00:00:00] Our interactions are becoming more digital every day. And for many of us, that means in business, we are transacting in a digital or electronic way with our clients. I'm asked all the time by my clients, whether signing documents electronically is legal. I'm going to dive in, in a really short and sharp episode today and answer that for you and I'm going to explain the different ways of signing; when it's okay and when it's not. First of all, the context that I'm asked this question is by my clients who are service based business owners, and they want to know whether having their clients sign their client agreements or their terms and [00:01:00] conditions is okay electronically.
And the answer for the large part to that is yes, it is. When we talk, though, about signing electronically, sometimes you also hear people talk about signing digitally. So often people using it interchangeably, digitally and electronically, but they're actually 2 different things. I know that can be confusing.
When we talk digital signatures, technically, that means a signature that is provided via a platform. So there are many different signing platforms. The most popular ones I see are DocuSign. Which I use in my business, Secured Signing, which I see a lot. Panda Doc and Dropbox Sign. They are all some really common digital signing platforms that business owners use when they're sending out documentation to their clients and the client is required to use that platform [00:02:00] to sign the document. So you've all seen it. Sometimes you need to log in. Sometimes you just simply click a button that says sign here, sign here. You type your name and click done, the document's signed and it shoots back to the sender. You get a copy. Easy. That is digital signing. That is a really safe way to have your document signed because there's unique signature data that's recorded in those platforms that take note of the time and the date and the URL and identifying information that way so that if ever somebody challenged the signing and said, no, that wasn't me, I didn't sign that, there is data that the user can go back to and dig out to respond to that challenge. Now, if you think about it in the day to day that businesses like you and I use digital signing, that type of challenge is [00:03:00] unlikely because there's email correspondence, there's email trails around it. There's usually sequencing in terms of great, thanks for signing, now, here we go. Let's move forward with the work. So it would be very unusual for somebody to later come back and say, I didn't sign that document. That wasn't me. I don't agree to your terms. Oh, but yes, I did get all the emails and I did get the copy of the document and we did move forward and I didn't think to raise it.
I mean, chances of that happening are unlikely. I'll never say impossible. Unlikely, because of the sequencing and because of the level of involvement that the clients had in the work that you're doing. But the point is the digital signing is through a platform. It does record data. It is for the most part safe and secure.
As secure as they can be in the digital era that we live. I use it in my business. Lots of lawyers use these digital [00:04:00] platforms, accountants, bookkeepers... for the documents that we can accept digital signatures, those are the platforms. Those types of platforms are what we'll use. It's perfectly lawful. So to answer the question, yes, it's legal. There are times when digital or electronic signatures aren't okay, and I'm going to come to that in a moment. But before I do, I want to talk about electronic signatures and why that's different.
Electronic signatures are a lot more simple in many ways. You don't need a signing platform. It's where you type your name in an electronic format or you insert your PDF signature that you've got scanned in into a document or it's where you click I accept these terms and conditions or I accept the above terms. And then you save the document and send it back to wherever it came from, or you convert it to a PDF, for example, and send it back to where it came from. So there's no separate signing platform.
It's just you manually ticking a [00:05:00] box or inserting your signature or typing it in an electronic way to say, yes, I agree. So you've got the consent of the other party to do it that way. You've read the terms or you've read the contract, you agree to it and you sign it that way, tick the box and then it's on its way.
So you can see that's a far simpler way and it doesn't require a signing platform. So that way is the electronic signature way. The signing platform is the digital signature way. So I hope that makes sense now. And I've been able to explain the difference between those two terms. You can see why they're used interchangeably so often, but they're actually different. So for you and I, when we send out our client service agreement or our cost disclosure or our scope of works or whatever it is you're sending to your clients, because you're a service based business and you're saying to them, if you agree to this, sign this and let's get going, we are perfectly entitled to do that at law.
It is perfectly lawful. So yes, it's legal. And then we have [00:06:00] a legally binding contract or agreement between our business and our client. And that's what we want. Lots of creatives use platforms like Dubsado these days where the sequencing is all set up. The client goes through the process. It's like a user journey.
They get their scope of works or their proposal. They agree to it. Then the next step is they receive their client agreement. They read it. They sign it. Then they go into receiving their invoice. They pay it. They're in the workflow.
So that sequencing can be really handy for creatives and some other businesses. And an electronic signing is often used in that space. That's fine. So yes is the answer. That's legal too. There are times though, where we can't use digital signing or provide electric signatures because it's not permitted.
And the times that this comes up is if we're signing contracts dealing with land, buying or selling land, entering into a commercial lease, for example, documents that require a [00:07:00] witness. There are some times where digital signing can still be okay if you're getting documents witnessed, but it depends on the nature of the documents.
Since COVID, there has been a shift in terms of the legislation and what we can and can't do. So sometimes we can witness signatures if we're on Zoom, for example. Sometimes DocuSign will be permitted if the witness is on Zoom with the person signing and DocuSign sends it to everybody at the same time.
So we're all doing it at the same time. That can be okay sometimes. It just depends on the nature of the agreement. Banks sometimes won't digital signatures or electronic signatures. They need the original. So it's the old print, sign, scan, and email back, that still happens, but there is a shift more and more these days to basic contracts, memorandums of understanding, being okay for digital and electronic signatures. There are provisions under the corporations legislation now that says that directors and secretaries [00:08:00] can sign certain documents digitally or electronically.
So the law is catching up, and as I always say on here, the law is very slow to catch up, but it is slowly making progress in the right direction. So there are some circumstances where there has been shifts to accepting digital and electronic signatures, but there are still some documents that won't accept them.
But, like I've said, for our purposes, for service based business owners who are issuing client service agreements and terms and conditions to their clients, it is okay to request an electronic signature and it is okay to use digital signing platforms to issue those documents to your clients. So that's the answer to the question.
Yes, it's legal for those types of things. There are certain circumstances that you can't, but as always, if you're not sure ask, I hope that short and sharp episode has been helpful. I know that many of you will be wondering about this. So it's timely because it's coming up a lot in my business. And as I always try to do on the podcast, if I'm being [00:09:00] asked something a lot, I like to share it with you because chances are you're wondering about it too.
Thank you so much for listening. If you're keen to hear from me more regularly on other tips and guidance and tricks, like what I've just shared with you to answer questions that do come up so often and to share with you really important changes to the law that can impact your business, Please jump over to the website and sign up to receive my fortnightly briefing notes.
I send my briefing notes to my list once a fortnight. I draft them myself, and I always draw on what's topical at the time, what changes are taking place in the law, what's coming up a lot. And the idea is that these briefing notes will share with you in a really short and sharp way, in a really easy to understand way, information that I know, We'll deliver real value for your business.
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As always, I really appreciate your time and I'll catch you next week.
[00:10:00]
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