By Paul Martin -
Snapshot
- The NSW Court of Appeal has found that an individual whose electronic signature appeared on a guarantee did not authorise the use of his signature, and was thus not bound by the guarantee.
- The case shows the need for documentary evidence that a person actually authorises the use of his or her signature in contractual documents, especially where the individual may be exposed to personal liability.
The execution of contracts has become quicker and easier since the appearance of online tools that allow parties to affix their signatures without physically signing documents. These methods can be particularly useful when it is not convenient for all signatories to meet in one place to sign documents. However, a recent NSW Court of Appeal case, Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265, shows that the use of electronic signatures can be attended by risks.
Factual background
The appellant, Williams Group Pty Ltd (‘Williams’), was a supplier of building materials. One of its customers, IDH Modular Pty Ltd (‘IDH’), wished to seek credit from Williams. Each of the three directors of IDH, including Mr Crocker, appeared to affix their signatures electronically to the credit application.
The three directors also purportedly affixed their signatures to an all-moneys guarantee in favour of Williams, and this was apparently witnessed by IDH’s administration manager. The signatures had been inserted using ‘HelloFax’, an electronic, password- protected system that enabled users to sign documents electronically. Mr Crocker had a username and password for the system, but had not changed the password. Williams supplied materials to IDH, and IDH became heavily indebted to Williams for the sum of $889,534.25.
