Four years after the pandemic, we are still coming to grips with how business and work has changed. In bygone days, a person would accept a transaction simply using their mark, seal or signature. But with changes to how documents can be signed and witnessed during the pandemic, and new challenges with the rise of AI and digital technologies, many are asking in 2024: “Can my customer sign the credit application electronically?”

The short answer is yes BUT there are different types of electronic signatures and some precautions to follow. Make sure you get it right so that your credit application is signed validly.

Electronic signature vs digital signature

An electronic signature uses a symbol or mark to sign a digital document in a way which mimics a physical signature. For example, inserting a scan of the person’s signature into a document, or clicking “I agree” on a website.

This is different to a digital signature, which is a certificate-based digital ID used for signing a document with encryption. This allows recipients of electronically signed documents to verify the sender’s identity and authenticity of the signature.

Can my customer sign electronically?

The good news is that, yes, your customer can sign a credit application electronically. 

Tips to make sure that you create a valid contract with the customer

Even though you can have the credit application signed electronically, you still need to take precautions to ensure that it’s done properly.

• Make sure that any credit application (whether online, digital or electronic) is completed properly. In the name of a sale, you will be pushed to accept something that is incomplete, inaccurate or ineligible. If in doubt, ask the customer to do it again. For example, fuzzy or ineligible signatures should be returned. It is better to get the credit application right from the start because it might be your one and only chance to do so.
• Make sure that the credit application contains a copy of your Terms & Conditions of Trade. Clauses like “our Terms & Conditions of Trade are contained on our website. “You agree that you’ve read them” will probably lead to debate about whether the customer actually read the Terms, who is responsible for ensuring , and whether they ultimately form part of the contract. Remove all doubt and provide them with the credit application every time.
• To ensure the customer is who they say they are, identify the person who signed (usually with a copy of their driver’s licence or other photo identification). Make sure the collection of this personal information is in line with your privacy policy and the Privacy Act.
• Make sure the person signing the credit application has the customer’s authority to do so – this will avoid arguments from CEO’s and directors later (usually when they don’t want to pay a bill) that a secretary or accounts officer did not have the proper authority to enter the contract.
• If the customer’s signature is omitted by mistake, never fear. You can still agree to a contract in other ways, such as verbally or by conduct. For example, if the customer doesn’t sign the credit application but continues to send you purchase orders and paying your invoices. If a problem later arises and the validity of the contract is challenged, it takes time and money to prove a contract by conduct – it’s a far better use of those resources on getting the credit application right the first time.
• Personal Guarantees can be different, usually because they are in the form of a Deed. There are circumstances where PG’s can be signed electronically but there are some legal rules to follow. To ensure they are valid, make sure you get professional help with Personal Guarantees and other documents such as loan documentation, statutory declarations, affidavits and mortgages.
• If in doubt, check with an expert! Reach out to a lawyer if you’re not sure whether your customer’s signature (electronic or not) is valid.

Key takeaway

In a digital world increasingly lived online, any process that makes legal transactions easier should be embraced. The customer experience is paramount – quicker acceptances, a faster sales process and, ideally, faster payments. But with so much legal change after the pandemic and current economic climate, you can’t ignore the legal requirements of electronic signatures.