February 23, 2011 1 Comment
One of the fundamental concepts in relation to a contract of sale of land is that the contract must be in writing and signed by the parties (or at least ‘the party to be charged’). This requirement can be traced back to the Statute of Frauds of 1677 and can now be found (if you know where to look) in s.126 of the Instruments Act. The requirement that a contract be signed was designed to prevent fraud by preventing one party to an agreement claiming or denying that an enforceable contract existed in situations of uncertainty. By requiring a signature the law created certainty.
The world has come a long way in 350 years and we are now in the electronic age. Indeed, in relation to contracts for the sale of land, we are now in the age of electronic conveyancing and the long-awaited EC system has been operational since November 2007 and conducted its first settlement in May 2008. Independently of any title registration system, there are various commercial transactional providers, such as EBAY, that facilitate buying and selling of assets as valuable as aeroplanes and, as reported recently in the press, are now facilitating the sale of real estate. Communication between representatives such as estate agents, lawyers and conveyancers is now consistently undertaken electronically and the question of whether a contract of sale of land that has been signed and exchanged electronically is enforceable will no doubt occupy the attention of a Victorian Court in the not too distant future. The question therefore will be; is a contract of sale of land enforceable if it is signed electronically?
A preliminary distinction needs to be made between a digital signature and an electronic signature. A digital signature involves an encryption device and implies the existence of an authentication network standing behind the signature. This is the process utilized in Electronic Conveyancing for execution of the transfer and involves a trusted third-party signing the transfer of land on behalf of the parties. This no doubt satisfies the requirements of the Statute of Frauds. On the other hand, an electronic signature stands alone and acts purely as a representation of the signature of the party. It is not made by hand, as is the case of a traditional signature, but rather is formed by the placing of the hand on a key, or even conceivably by voice recognition software generating the appropriate ‘keystrokes’. Does a party who ‘signs’ an email that in all other respects constitutes an enforceable contract of sale of land become bound by that electronic signature?
At common law (including the Statute of Frauds) the answer is ‘no’. But s.126 Instruments Act was amended in 2004 to provide that the requirements of s.126 ‘may be met in accordance with the Electronic Transactions (Victoria) Act 2000’. This Act in turn provides in s.9 that the requirement of any law for a signature is ‘taken to have been met in relation to an electronic communication if’:
(a) the signature identifies the person and indicates approval of the information;
(b) the method of communication was appropriate in the circumstances; and
(c) the person has consented to the use of electronic communication.
Thus it may be concluded that where two parties to a contract communicate with each other electronically then, subject to any other underlying contractual limitations, any agreement that they reach in relation to the sale of real estate will be binding on them when they have each sent to the other an electronic communication (email) that includes an electronic representation of their signatures. This would be satisfied by the mere typing of the name of the party at the end of the communication and certainly by the inclusion of a more formal ‘signature box’.
However it is relatively rare for parties to communicate directly in relation to the negotiations for the sale of real estate. Usually estate agents will be involved and also party representatives such as lawyers and conveyancers. Parties will not be bound by the actions of these participants in the process UNLESS those third parties are authorised in writing by the party . However such an authorization could itself be communicated electronically. Thus, not only will a party who electronically signs a contract be bound to that contract, a party will also be bound if the party’s representative has been electronically authorised to sign on behalf of the party and does in turn electronically sign the contract. It is certainly possible to conduct the whole contractual process in cyberspace.
A few cases in Australia and England have considered these issues and there are no doubts that arguments can be raised on the way . However, essentially it appears that even concepts – such as the importance of signed documents – going back as far as the 17th Century are capable of adapting to the electronic age.
By Russell Cocks