Hire and Rental News - February 2017

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22 HIRE AND RENTAL NEWS • FEBRUARY 2017
INDUSTRY in FOCUS
To combat this risk, you may consider
sending the electronically signed
document back to the party that allegedly
signed it to obtain their separate
confirmation they had in fact considered
the document and applied their signature
electronically.
Recent contract law case
This use of electronic signatures in
contracts was recently considered by
the New South Wales Court of Appeal[1].
Briefly, the facts of the case are:
• Williams Group Australia Pty Ltd
(Williams), a supplier of building
materials, approved a credit application
which was electronically signed by
IDH Modular Pty Ltd (IDH) using a
technology called HelloFax.
• The credit application required
the directors of IDH to personally
guarantee the obligations of IDH (such
as the payment of all moneys owing
to Williams by IDH). The guarantees
were also electronically signed using
HelloFax.
• Williams supplied building materials
valued at $889,534.35 to IDH on credit.
• IDH went into liquidation. Williams
sought to enforce the personal
guarantees against the three directors
of IDH, to make them pay for the
monies owed to it by IDH.
• One director of IDH, Mr Crocker,
challenged the enforceability of the
personal guarantee, arguing he didn't
affix his electronic signature to the
document using HelloFax and it had
been applied by someone else in his
organisation without his knowledge or
consent.
Enforceability of the contract
Williams argued: Mr Crocker was
bound by the guarantee because he
had acquiesced to his signature being
electronically applied to contracts by
other people in his organisation. In
What are the risks of accepting an electronic
signature on a commercial contract?
By Priti Joshi, Lawyer, Bartier Perry Lawyers
If your business accepts a commercial contract that has been signed electronically, there
is a risk the contract will not be enforceable against the person that had allegedly signed
it if the electronic signature was applied without authority.
support, it argued other
people had access to
Mr Crocker’s HelloFax
password, Mr Crocker
had failed to change his
password to the system and
accordingly the person in
his organisation had applied
Mr Crocker’s electronic
signature to the personal
guarantee with his apparent
authority.
Even if Mr Crocker had not
given apparent authority
to any person to apply his
electronic signature, he was
subsequently aware of and
had consented to being
bound by the guarantee by:
• signing other credit applications
noting Williams as a trade referee; and
• placing purchase orders with Williams.
• Williams was required to disprove Mr
Crocker’s evidence he did not know he
personally committed to the guarantee.
Ultimately, Mr Crocker won and was
not required to personally pay the
monies owing to Williams by IDH.
Position at law
The Court found:
• Williams’ ability to rely on the
electronic signature and enforce
the personal guarantee against Mr
Crocker required Mr Crocker to have
held out the person who had applied
his electronic signature had his
authority to do so. Williams failed to
prove Mr Crocker had made any such
representation.
• Mr Crocker would have required
full knowledge of all the material
circumstances under which the
guarantee had been signed in order
to have ratified the application of his
signature to the guarantee after the
fact. While Mr Crocker could access
the list of signed documents through
the HelloFax system, the list did not
note the directors had provided a
personal guarantee.
The Court commented there was
some authority that would support the
conclusion placement of a ‘genuine’
electronic signature on a document
without any authority may amount to
forgery, however it was not required to
decide on this point.
Accepting contracts with an
electronic signature
This case is a timely reminder while
accepting a contract with an electronic
signature may be very convenient, if the
electronic signature is applied without
the relevant party’s consent or knowledge
(and essentially, forged) the Court may
not uphold the contract against the party
that allegedly signed it.
As with any transaction that may be
susceptible to forgery, making appropriate
enquiries can ensure the document is
properly authorised and enforceable.
This article is intended as a source of
information only. No reader should act on any
matter without first obtaining professional
advice.
Contact Bartier Perry on 02 8281 7868 or
visit:
Electronic signatures may not be enforcable