White Paper. The legal validity of use of DocuSign by real estate agents in South Australia

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1 White Paper The legal validity of use of DocuSign by real estate agents in South Australia CoreLogic is constantly trying to make the preparation, sale and settlement of Australian property more transparent, efficient and effective for property professionals and consumers. It has partnered with the world s most trusted electronic signature platform, DocuSign, to streamline the processing and settlement of Australian properties. This pioneering process requires that all parties feel confident in both the efficiencies and legalities surrounding the use of electronic signatures. CoreLogic has asked King & Wood Mallesons to research commonwealth and state laws and regulations to produce a series of white papers for CoreLogic to educate all parties involved. If you would like to learn more information about the contents of this document please call us on or visit us at corelogic.com.au/docusign

2 Use of DocuSign The legal validity of use of DocuSign by real estate agents in South Australia Prepared by King & Wood Mallesons for RP Data* Introduction DocuSign lets you sign documents electronically and send documents electronically for signature. What is the purpose of a signature? A signature has a variety of functions including identifying the author or sender of a document, authenticating statements made in a document and manifesting an intention to be legally bound. In each case, a signature demonstrates some particular association between the person signing and the document. It is the manifesting of intention that distinguishes a signature from the mere writing of a name or autograph. There is no legal requirement that a signature reflect a person s name or that a signature be written in pen on paper. DocuSign can be valid and legally binding in respect of the requirement for a signature. Where the law does not require writing or a signature There are many instances where the law does not require that information be in writing or that a document be signed but it is standard industry practice for this to occur. For example, there is no general legal requirement that an agent s report to a landlord as to the condition of the property during the tenancy be in writing or be signed by the agent. Where the law does not require that information be in writing or that a document be signed, DocuSign can be used without the need to comply with any specific requirements. Where the law requires writing or a signature If the law requires that information be provided in writing or requires that a document be signed, DocuSign can be used to meet those requirements, as discussed below. 1

3 Electronic Transactions Act 2000 (SA) The purpose of the Electronic Transactions Act 2000 (SA) ( ETA ) is to facilitate the use of electronic transactions. Generally speaking and subject to certain conditions, under the ETA, if under a State law: a person is permitted to give information in writing, the information may be given by an electronic communication. a person s signature is required, that requirement is met if a method of signing is used to identify the person and to indicate the person s intention in relation to the information communicated. When does the ETA not apply? In South Australia, the ETA does not apply in some circumstances. These include: where a regulation specifically states that the ETA does not apply. where another State law has more specific information technology requirements, such as a particular kind of data storage device or for a particular kind of electronic communication, or more specific requirements in relation to electronic communications. where certain transactions or communications are specifically excluded by the ETA (for example, where a law requires that delivery of a document be effected by personal service only). In addition, subject to some limited exceptions, the ETA does not apply to transactions relating to an interest in land (such as a contract for the sale of land or a lease) and documents required to be witnessed, attested, verified or authenticated under the signature of a person other than the author of the document. What does the ETA require in relation to writing? When used in South Australian legislation, writing includes any mode of representing or reproducing words in a visible form. It is not limited to paper. Additionally, if, under a State law, a person is permitted to give information in writing, the information may be given by an electronic communication, subject to the following circumstances: at the time the information was given, it was reasonable to expect the information would be readily accessible so as to be useable for subsequent reference; and the person to whom the information is permitted to be given consents to the information being given by an electronic communication. The DocuSign system can meet these requirements. What does the ETA require in relation to electronic signatures? If, under a State law, a person s signature is required, the requirement is taken to be met for an electronic communication if: the method is used to identify the person and to indicate the person s intention in relation to the information communicated; and 2

4 the method used was either (a) as reliable as appropriate for the purposes for which the electronic communication was generated, or (b) proven in fact to have fulfilled the functions set out in the first bullet point; and the person to whom the signature is required to be given consents to the use of the method. 1 The DocuSign system can meet these requirements. There has been little judicial consideration of the South Australian ETA. In one case, the Court held that a certificate of legal opinion (provided by a solicitor in electronic form) constituted a signature, even though the certificate was not signed. It was held that the certificate formed part of an in circumstances which allowed the identification of the solicitor and unequivocally showed that he subscribed to the view expressed in the certificate. The Court held that the form of communication used was an appropriate and reliable method. 2 In relation to consent, section 9(1)(c) of the ETA requires that the person to whom the signature is required to be given consents to that requirement being met by way of use of the method. Section 9(1)(c) provides that: consent includes consent that can reasonably be inferred from the conduct of the person concerned; 3 and if the consent is given subject to conditions, there is no consent unless the conditions are complied with. 4 Based on the above, in our view: the consent does not have to be in writing; the consent does not have to be signed consent; and consent may be inferred from a course of conduct. For example, if a person provides an electronic signature on a document in a certain way, it is reasonable to infer that the person consents to the counter-party providing an electronic signature on that same document in the same way. Case Study Appointment of Real Estate Agent Under the Land and Business (Sale and Conveyancing Act) ( the Act ), 5 an agent must not act on behalf of a client unless the agent has been authorised to do so in writing, signed by the vendor or purchaser. 6 There is no prescribed form outlined in the Act for this agreement. However, the Act specifies a number of additional requirements to be met where an agent is to act on behalf of a vendor in the sale of residential land Electronic Transactions Act 2000 (SA), s9(1)(c). The Corporation of the City of Adelaide v Corneloup and Ors [2011] SASFC 84 at 152. Electronic Transactions Act 2000 (SA), s5(1). Electronic Transactions Act 2000 (SA), s5(1). Land and Business (Sale and Conveyancing Act) 1994 (SA). Land and Business (Sale and Conveyancing Act) 1994 (SA), s20(3). Land and Business (Sale and Conveyancing Act) 1994 (SA), s20(1)(2); Land and Business (Sale and Conveyancing Regulations) 2010 (SA), s19(2). 3

5 An agent must ensure the vendor or purchaser is given a copy of the signed authority to act as an agent immediately, or within 48 hours as agreed with the vendor or purchaser after the appointment has been signed by the vendor or purchaser and delivered to the agent. 8 DocuSign meets the requirements of writing, because the DocuSign system is a system that reproduces words in a visible form. DocuSign meets the ETA s requirements in respect of signature as DocuSign can identify the parties and indicate their intention in relation to the appointment. The consent of the parties to use DocuSign can be reasonably inferred by their use of the system. However, if an agent does not wish to rely upon implied consent, it is recommended that the agent the client stating that the agent consents to the client using DocuSign for the purposes of being given information and for providing a signature, and asking for the client s similar consent. If the client does not provide their consent to use DocuSign, the agent must provide the appointment agreement to the client in the traditional way. DocuSign can be used to provide a client with a copy of the agreement, provided they have consented to the use of the system. Case Study Interest in Land As noted above, the ETA excludes transactions relating to an interest in land from its operation. This includes transactions such as a contract for the sale of land, a residential lease and a commercial lease. If under South Australian law an interest in land is required to be in writing (for example a contract of sale, a residential tenancy agreement or a registered commercial lease), it is not recommended that DocuSign is used. When DocuSign should not be used At the present time, we do not recommend that DocuSign be used in the following situations: for wills for transactions relating to an interest in land required to be in writing (for example, a contract for the sale of land, a residential lease or a commercial lease) 9 for a notice of termination or notice of breach, such as a notice to terminate a contract of sale or to terminate a lease where the law requires that a document be witnessed, attested, verified or authenticated under the signature of a person other than the author of the document 10 for court documents Land and Business (Sale and Conveyancing Act) 1994 (SA), s20(4). Subject to limited exceptions under the Electronic Transactions Regulations 2002 (SA), s5(3). Subject to limited exceptions under the Electronic Transactions Regulations 2002 (SA), s5(3). 4

6 where a document has to be lodged with a government department or agency; such as with the Land Services Group, with Revenue SA (Department of Treasury and Finance) or with Consumer and Business Services Will an electronic signature provided using DocuSign hold up in court? There is no longer any presumption that electronic records are less reliable than nonelectronic records. Under the South Australian evidence rules, electronic records can be reproduced allowing the record of an electronic signature to be admitted into evidence (if necessary). From a practical perspective, DocuSign technology can appropriately track electronic communication and maintain electronic records in an appropriately secure and permanent manner. These processes can be demonstrated to a Court and as such, it can be shown that the appropriate level and amount of information surrounding the signing process was retained, using a system that is in itself reliable. *This paper has been prepared on behalf of RP Data for its sole use. The legal validity of the use of DocuSign in electronic conveyancing has not been considered. This paper is based on the assumption that DocuSign is configured appropriately to comply with the requirements outlined in this paper. If DocuSign is configured by individual users, independent legal advice should be sought to determine the validity of the configuration. 5