“If we do not reach our hands will always be empty”
— Tad Williams
Confirming consent
In a previous article, we examined how the law empowers you to replace hard-copy documents with digital alternatives, particularly as it relates to contracted services. The theory is well understood, but advisers and licensees often struggle to operationalise the law.
In this article, we’ll address the operational aspects of effectively documenting contractual arrangements and focus, in particular, on client engagement and genuine consent.
The good news is that life may become much simpler given the Government’s intent to facilitate the use of electronic transactions and promote business and community confidence in their use.
The fundamentals: Digital and electronic signatures
Before we explore the opportunities afforded by the law, it’s important to understand the technology and the similarities and differences between electronic and digital signatures.
An electronic signature is simply a visual representation of a person’s name or signature that’s provided for the purpose of confirming their identity and their intention to contract.
It’s captured electronically or through mechanical means such as signing a PDF.
A digital signature is an encrypted and independently validated e-signature that provides greater assurance to contracting parties.
Key differences: Digital and electronic signatures
While it seems self-evident that an electronic signature is, of necessity, digitised there is a difference between electronic and digital signatures.
The Law(s)
“To present a whole world that doesn’t exist and make it seem real, we have to more or less pretend we’re polymaths.”
— William Gibson
As a general rule, the Electronic Transactions Act 1999 provides that a communication will not be invalid merely because it took place by means of electronic communication, such as email or through use of a platform. So you can effect arrangements by email (but it’s prudent to retain read receipts).
In Australia, with limited exceptions, there’s no real difference between electronic signatures (a visible representation of a person’s mark or name) and old-school wet signatures.
Some government or regulatory bodies, like the ATO or ASIC, might prescribe their protocols for accepting digital documents, but as a general rule electronic signatures are generally valid for most purposes. To be more accurate, for a digital signature to be valid, it must satisfy certain conditions:
- It must clearly identify the signatory and confirm their intentions.
- The method of identification must be reliable.
- The parties must expressly consent to the use of the digital signatures.
Although some lawyers might argue in favour of the evidential weight of physical documents, an ‘Agreement’ doesn’t have to be physically signed to have validity. In Stuart v Hishon [2013] NSWSC 766 where Justice Harrison noted that
“Mr Stuart typed his name on the foot of the email. He signed it by doing so. It would be an almost lethal assault on common sense to take any other view”.
This reinforces an earlier case that found that the use of a typed signature was sufficient to provide identification and confirm consent.
Practical considerations
The Law provides advisers with options, but you need to appreciate the importance of context and genuine consent.
Acknowledging an email won’t create a legal contract in the absence of intent to contract. Without certainty, and consideration and capacity to contract, neither a wet nor an electronic signature will have any legal weight. However, those clients that would prefer simpler and more efficient communication methods can provide their consent, and authorise your activities, by electronic means.
To maximise the flexibility the law allows, you should:
- amend your Financial Services Guide (and similar collateral) to refer to your use of electronic signatures;
- provide clients with the option to use, or provide, wet signature documents;
- obtain clients’ specific consent to accept, and rely on, electronic signatures;
- choose an e-signature technology platform with a consistent and reliable methodology;
- warn them of the risks of providing electronic signatures and the need to secure their email; and
- tell them how they can withdraw their consent.
Going Digital: Step One
Your website Terms & Conditions
Electronic Signatures.
The Electronic Signature Disclosure and Consent (“Consent”) sets forth the terms and conditions governing my consent to sign documents electronically through, and my use of, our e-signature technology platform (System). I may decline to electronically sign any document by clicking “Decline” instead of signing.
At any time, I may contact my adviser and request a paper copy of any document signed electronically through the System, at no cost.
By agreeing to this process, I understand that:
(i) electronically signing and submitting any document(s) legally binds me in the same manner as if I had signed in a non-electronic form, and
(ii) the electronically stored copy of my signature, any written instruction or authorization and any other document provided to me is considered to be the true, accurate and complete record, legally enforceable in any proceeding to the same extent as if such documents were originally generated and maintained in printed form.
I agree not to contest the admissibility or enforceability of any electronically stored copy of this Consent and any other documents.
By using the System to electronically sign and submit any document, I agree to the terms and conditions of this Consent.
Going Digital: Step Two
To improve your clients experience, and the efficiency of your service, you’ll want to be able to use digital/electronic communications as much as possible.
To do so, you need your client to acknowledge that if they authorise us to accept email instructions (or to provide documents by email) then they are responsible for the security and integrity of their email.
It’s a critical pre-condition. They need to understand their responsibilities, or how you’ll rely on your instructions.
Given that you’ll be referring to, and relying on, your privacy policy, it would be prudent to have it properly reviewed and updated.
If you authorise us to accept email instructions (or to provide you with information and regulated documents by email) please understand that you are responsible for the security and integrity of your email. We can treat any communication from your nominated email account as a communication from you and can rely on those communications without seeking further confirmation from you. Likewise, you accept that an email from us to your nominated email account is communication with you. Information or documents sent to your nominated email is deemed to have been provided to, and received by, you. Further, we can reasonably rely on this authorisation and use the nominated email unless, or until, you either revoke it in writing or nominate an alternate address.”
You could, perhaps, also take the opportunity to address issues particular to joint-clients such as spouses or partners in a business by including text similar to the following:
“Where we provide advice and services to both you and your spouse (or equivalent), if you instruct us to take instructions from, or provide advice or release information to, your spouse (or equivalent) you are authorising us to do so without seeking further confirmation from you. We can rely on your instruction unless, or until, you revoke your instructions, and you acknowledge that your authorisation indemnifies us in relation to any loss, cost, damage or expense suffered by you as a result of our reliance on, and compliance with, your instructions.”
Going Digital: Step Three
In respect of an ongoing service agreement, consent can be demonstrated by a simple email response from your client stating:
“I have reviewed the Ongoing Service Agreement provided to me and wish to engage you on those terms. I understand the costs of engaging you and agree to the terms and conditions of the proposed Agreement.
Regards, [Client Name]”
