The age of technology
It is becoming increasingly common in today’s age of instant communication for email and the internet to play a role in the formation of contracts. There are many issues to consider when dealing with electronic contracts. These issues are compounded when the contract is for the sale of land.
Types of electronic contracts
Broadly speaking, there are two types of electronic contracts:
contracts that have been executed in hard copy (whether prepared manually or electronically), and are exchanged electronically (for example, by email or fax); and
contracts that are formed entirely electronically (including execution or acceptance).
Contracts of the first kind are common and are largely accepted as an appropriate method of forming a contract, though they do require the consideration of several issues (for a discussion on exchange of contracts by email, please click here).
Contracts of the second kind are also extremely prevalent, particularly in the case of internet shopping, although various difficulties arise when considering these types of contracts in the context of the sale of land.
Requirements for the formation of a contract
For a contract to be formed, the following criteria must be met:
a valid offer has been made by one party to another;
the offer has been unconditionally accepted by the other party;
there is an intention to be legally bound by the contract by all parties;
the promises made in the contract are for valuable consideration; and
the terms of the contract are certain.
The contract will be formed once the acceptance of the offer has been communicated to the party that made the offer.
Contracts for the sale of land, carry the additional requirements under the Property Law Act 1969 (WA) (PLA), that they be in writing and signed by the person selling the land.
Electronic contracts “in writing”
The current position in Australia regarding whether electronic contracts meet the requirement of “in writing” is unclear, as there has been no consideration of the term by the courts. However, the position in England and Wales appears to be that the screen display of the contract will satisfy the definition. The courts in Australia are likely to adopt the same position.
The Electronic Transactions Act 1999 (Cth) (ETA) and the Electronic Transactions Act 2011 (WA) (WA ETA) do not provide much assistance. Though they contain provisions allowing for information to be provided electronically, it does not appear as though the formation of a contract would fit into the description of “providing information”.
At present, the safest practice to avoid any dispute regarding the validity of a contract for the sale of land (on the grounds of it not being “in writing”) is to keep a hard copy of the completed contract.
Electronic signatures
In the case of contracts executed in hard copy and exchanged electronically, there can be no dispute as to the parties having signed the contract. However, if a contract is entirely electronic, an electronic signature must be used and potential issues of validity arise.
The most common types of electronic signatures are:
biometric signatures (such as fingerprint and retina scans, and voice recognition);
digital signatures (such as personal identification numbers, private digital “keys” and digital certificates); and
physical signature capture devices (such as tablets and signature pads).
Under both the ETA and the WA ETA, an electronic signature may be used (and will satisfy the requirement under the PLA) if:
it identifies the person signing and indicates their intention to be bound by the document;
it is reliable as appropriate for the purposes of the document, in light of all the circumstances (or it is proven to have identified the person and their intention to be bound); and
the person signing electronically consents to the requirement of a signature being met by electronic means.
In Getup Ltd v Electoral Commissioner [2010] FCA 869, the Federal Court held that electronic signatures created through an online signature tool were sufficiently reliable to identify the person under the ETA, for the purposes of enrolling to vote online. However, as the method of signing must be “reliable as appropriate for the purposes of the document, in light of all the circumstances”, it is unclear whether this would be sufficient for a contract for the sale of land.
The Western Australian Land Information Authority (Landgate) currently requires the transferor of land to have their identity verified (by way of 100 points of ID) prior to signing documents registered at Landgate. However, a system is currently being introduced (and is due to be rolled out over the next 12 months) for lawyers and banks involved with property transactions to verify the identity of the individuals and then execute documents on their behalf by way of a digital signature (discussed above). This may suggest that contracts for the sale of land can be executed in a similar manner – whereby the identity of a signatory is independently confirmed and a digital signature is issued (which they can then affix at a later stage).
Unfortunately, this method (and any others likely to satisfy the criteria of “reliability”) is quite onerous and goes some way to undermining the convenience of an electronic contract. At present, there does not appear to be a convenient method for electronically affixing a signature that meets the high-standards of identity verification required when dealing with the sale of land.
Given the incidents of fraud and attempted fraud with respect to land transactions, we do not expect that there will be any relaxation in these high standards of identity verification.
Lavan Legal comment
The current position in Australia appears to allow the formation of contracts electronically, provided they meet the common law criteria required of a contract. However, contracts for the sale of land must meet additional criteria of being “in writing” and “signed”.
While it is unclear at present if electronic contracts are “in writing”, the position in England and Wales appears to be that they are – and it is likely that a similar position would be adopted in Australia.
Contracts may be signed electronically if the method of signing meets the criteria set out in the ETA and WA ETA. At present, there does not appear to be a convenient method for electronically affixing a signature that meets the high-standards of identity verification required when dealing with the sale of land.
If land transactions move into the digital age, we will have to resolve the issue of identity verification in support of the execution of documents. In the interim, the position that is proposed for the first wave of electronic conveyancing (that is, lawyers verifying the identity of individuals and then signing by way of a digital signature) may be a first step in the true electronic formation of contracts.
