As technology continues to become more integrated into our day to day operations, it also becomes a norm for contracts and documents to be executed entirely in their digital format. New Zealand law clearly provides a mechanism for incorporation of e signatures on a range of documents. In most cases, an e signature is a compelling way of executing a legal signature where a wet-ink signature would otherwise be utilized. However, with that said, their use is yet to replace wet-ink signatures completely. This article sums up some key factors of the New Zealand law relating to the use of e-signs on legal documents.
New Zealand’s legal model
New Zealand’s legal model is usually an open one. This means, as opposed to the tiered model (which considers Qualified Electronic Signatures as a valid form of electronic signature), there are no other technology prerequisites for e signatures when used to execute a document.
In regards to legal classification, New Zealand operates a common law system that is based on:
- Laws aren’t generally of a written structure
- Judicial decisions are viewed as binding
- Normally, everything is acceptable that isn’t explicitly barred by law
Under the common law, few provisions are usually implied into a contract; therefore, it’s vital to cover all the terms guiding the relationship between the parties involved in a contract.
New Zealand Electronic Transactions Act (ETA) 2002
The ETA was introduced in New Zealand as a way of facilitating and encouraging the use of electronic communication. According to the act, so long as certain requirements have been fulfilled, an electronic signature is deemed to be legally binding just as a wet-ink signature. The ETA provisions on electronic signatures are much concerned with circumstances where there is a legal prerequisite for a signature on a document; however, the act goes an extra mile to act as a reference point, even in cases where there are no legal prerequisites for signatures for documents to be legally acceptable.
The Electronic Transaction Act follows two key principles which are backed by the United Nations Commission on International Trade Law (UNCITRAL). They include:
- The principle of “functional equivalence” – This states that the law will acknowledge both electronic transactions and paper-based transactions.
- The principle of “Technological neutrality” – According to this principle, the act does not take sides in regards to any technology platform used.
Section 22 of the Electronic Transaction Act 2002 provides that, an electronic signature should:
- Sufficiently identify the signatory and sufficiently show the signatory’s consent of the info to which the signature relates.
- Be “as reliable as appropriate” considering the purpose for which the signature is required
For increased certainty in regards to e signature usage, the Act provides users a presumption of reliability if various requirements are fulfilled. An electronic signature will be deemed “reliable as appropriate” if:
- The process of coming up with the e-sign was under the total control of the signatory only and no other party.
- The process of coming with the e-sign is wholly linked to the signatory only and no other party.
- The intention of the signature is to guarantee the integrity of the information or document to which it relates
- Any changes made to the e-signature after the signing process is detectable
Other considerations when establishing the reliability of an e-sign include:
- The sophistication and superiority of the equipment employed by each party
- The size and type of the transaction
- The nature associated with each party and the rate at which business transactions occur between them
- Observance of trade customs and practice
- The availability of substitute methods of identifications and what it takes to implement them
Documents that can be electronically signed in New Zealand
- Commercial pacts between corporate bodies including sales agreements, procurement contracts, NDAs, etc.
- Some HR documents such as benefits paperwork, employment contracts, and other new employee enrollment documents
- Certain real estate contracts, such as lease agreements
- IP licenses, including copyright, patent, and trademark
- Certain consumer agreements
Use cases that are not apt for e signatures in New Zealand
There are key general exceptions to the usage of e signatures according to the Electronic Transaction Act 2002. They include:
- Codicils, wills or other testamentary instruments
- Powers of attorney
- Statutory declarations, affidavits or other documents presided over oath
- Transfer of intellectual property such as assignment of copyright or patent
- Bills of landing
- Real property deeds and transfer contract
Key considerations relating to e-sign in New Zealand
The legitimacy of e signatures has yet to be fully tested in the New Zealand courts; nonetheless, the high court case of Welsh v Gatchell 2009 evidently demonstrated the court’s will to embrace the use of technology in fulfilling legal requirements.
When considering the use of a digital signature in New Zealand (especially where the signature is a legal prerequisite), it is crucial to comply with the prerequisites in the ETA. For instance, does the electronic signature on hand effectively identify the signatory? Does the signature on the document on hand signify approval of the information being relied upon?
Remember, if the document is very important or if the transaction on hand is of much significance or so to say comes with an exceedingly high level of risk; obviously, the sophistication levels of the technology employed for the electronic signature may require being superior to other cases. Also, it is good to understand that, what may seem satisfying to these prerequisites may not automatically be the same in every situation.
Possibly one of the main barriers to the use of e-signatures in New Zealand has been a shortage of readily accessible, trustworthy, and tested methods of signing documents online. While various e signature solutions have been available for a while, the technology itself has not been easily understood and more so, available. However, with the growing use of electronic communications, more people are now becoming comfortable embracing online transactions and user-friendly e signature solutions such eSign Genie. In short, the reluctance or level of resistance to using e signatures in New Zealand is breaking down.
All said and done, regardless of the method an organization prefers to use to sign agreements (whether electronic or hand signatures), proper care must be taken, and counsel sought before assuming legally binding obligations.