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Risks of Electronic Signatures on Contracts

Conveyancing is slowly moving into the realm of a paperless system.  Whilst electronic settlements are still not mandatory in Queensland, signing contracts electronically has gained popularity in recent months.  An electronically signed contract is legally valid and enforceable.  However, as electronic conveyancing in Australia is new, there is little in the way of structure or processes to validate these documents.  Such programs such as DocuSign and EchoSign make signing contracts more convenient than ever but are you aware of the risks associated in signing documents, especially contracts, in this manner?

Contracts signed in person, are required to be witnessed by a third person, over the age of 18 who is not a party to the contract.  In signing contracts electronically, no witness to your signature is required. This presents as a higher risk and opportunity for fraudulent transactions.  In some circumstances, where the system is used effectively and third-party verification certificates are used, the system is regarded as secure and lower risk.

More often than not, it appears that contracts are being signed electronically with little or no verification of the parties.  This of course poses a risk of fraud in terms of the parties’ identity.  For example, the seller (who has electronically signed the contract) may not be the person who owns the property as per the title. There is also no way of knowing if a buyer or seller have control of the email accounts used in conjunction with the electronic signature process.

Our firms’ lawyers work to alleviate such risk as much as possible.  Where contracts are presented and have been signed electronically, we seek that a third-party verification report be provided.  These reports, however, are not always useful in verifying identification accurately.  Throughout the conveyancing process, we seek identification in line with the requirements of the Titles Office of Queensland from our clients and the transfer documents required to be executed prior to settlement are required to be witnessed by a qualified witness. These requirements further reduce the risks associated with electronic conveyancing.

As part of our fixed fee costs for standard conveyances, we offer a complimentary review of contracts prior to signature.  Conveyancing is a high-risk area of law for all parties.  We strongly recommend you have your contract reviewed before signature, so we can further advise you in relation to the conditions and options in relation to signing the contract as this will limit the risk where possible.

 February 2019

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