6 questions, answered, about systems of agreement and electronic signatures

As a 2023 sponsor of Tax Talks, Docusign recently featured in one of its podcasts (episode #386, which is part 1 of 3), in which our own Jennifer Lauchlan and Marcus Hannah provided helpful answers to the big questions about systems of agreement.

Electronic signatures are everywhere in business today. But here’s the thing. An electronic signature is not a standalone item. Rather, it’s part of a much bigger picture that helps streamline and secure the contracts and documents that keep the wheels of business in motion. It’s part of the system of agreement.

Despite widespread adoption, there are still some questions out there about the what, why and how of electronic signatures and systems of agreement. Thanks to Jennifer, Marcus and the Tax Talks podcast, we’ve got the answers.

1. How is an electronic signature different from a digital signature?

It’s a theoretical question in Australia and New Zealand, as our regulations only refer to electronic signatures and not digital signatures. It’s a good thing — electronic signatures usually have a better user experience since less complicated with less ID required. 

However, in the EU and other parts of the world, digital signatures are often required for high-value contracts due to their higher level of authentication. 

Digital signatures (which are also called standards-based signatures or qualified electronic signatures) have more steps involved — like additional digital certification technology, encryption, or even the requirement for one person to speak to another person to identify themselves — which means more effort for end customers.

We dive into the difference between electronic and digital signatures in detail in this blog. 

2. Did Covid impact government legislation around electronic signatures?

Yes, Covid did change things — although, for the most part, electronic signatures were already legislated as acceptable for the vast majority of agreements. What Covid did was to open up temporary provisions allowing more documents to be signed electronically. So, things like deeds and mortgages could be signed electronically. After a period, many of these provisions were made permanent.

Importantly, companies can now sign deeds under the Corporations Act. And you can witness most documents via an audio-visual link now, which opens up many more opportunities for businesses.

As Jennifer said, “The government’s been super supportive in reforming the legislation, and that’s really helped to modernise business communications. Covid provided a really good test period to show that these types of documents could be signed safely with the right technology in place.”

3. Is an electronic signature safer than a wet signature?

A paper (‘wet’) signature just gives you a scribble, a written date and, in some instances, a written location. You have no way to verify whether it was actually signed on that date in that location — unless of course, you or a witness was there, or you can do some fancy microchemical analysis.

An electronic signature should be able to provide you with an IP address, logged-in email address, date signed and geo-location (just be wary, as not all electronic signature solutions are created equal). It can also provide SMS verification, ID verification and, in an audio-visual link, you can see the person signing. And, once things have been signed, the document is ‘locked’ — as in, no-one can tamper with it or make changes.

In short, an electronic signature solution like Docusign provides a superior audit trail compared to wet signatures, and it’s admissible in a court of law. Learn more about the safety of electronic signatures here. 

As well as the safety aspect, documents signed with Docusign eSignature are also searchable, making it easier for businesses to find specific agreements or even clauses within each one.

4. Do fewer documents require a witness nowadays?

These days, the need for witnessing is less common. As Jennifer said, “It’s a bit of an outdated and flawed process.” In fact, Victoria, Queensland and Western Australia have entirely removed the need for a ‘face-to-face’ witness. Why? Well, there are better authentication methods available.

Of course, you still need a witness for crucial documents such as oaths, affidavits, wills and POAs, but that can be done through audio-visual links and the use of electronic signatures.

5. Do wet and electronic signatures face the same challenges?

Electronic and wet signatures have a lot in common. They both sit within a system of agreement, which incorporates four key stages: preparing, signing, acting on and managing agreements. And these four stages can lead to inefficiencies, information silos and unbalanced risk.

The thing is, with a wet signature, you’re dealing with mainly manual processes — which only exacerbate the challenges. 

Electronic signatures, on the other hand, solve the problems head-on by: 

• Delivering time and cost efficiencies, no matter what your internal processes are

• Connecting to everyday applications across the business, to help eliminate information silos

• Mitigating risk, with things like field validation to ensure no documents are filled in incorrectly, and inbuilt security and authentication  

6. What does a system of agreement look like?

A system of agreement, which wraps around each signature, is made up of the person signing, the person needing the signature, the data going into the document, the document itself, and the processes and legal framework linking it all together. It’s a highly connected system, and the more automation you can embed, the better. 

Yet, while companies are investing billions to improve systems of record and systems of engagement, many are yet to modernise their system of agreement — that is, the collection of technologies and processes used for preparing, signing, acting on and managing agreements. Their legacy systems are often slow and prone to human errors, leading to inefficiencies and a drag on productivity.

Want to know more? 

We explore the rise of the modern system of agreement in this eBook. Or to learn more about how Docusign can help you set your business up for success, get in touch today.