The use of electronic signatures and digital execution platforms such as DocuSign has become increasingly prevalent in New Zealand’s corporate and commercial landscape.
As businesses embrace this digital transformation, understanding the legal framework and practical implications of electronic execution is essential.
The legal framework under the Contract and Commercial Law Act 2017 (CCLA) supports the use of electronic signatures but parties must ensure reliability, consent, and proper authority.
As case law continues to evolve – both locally and internationally – businesses and legal practitioners should remain vigilant and adopt best practices to ensure enforceability and reduce risk.
What is an electronic signature?
An electronic signature is a method used to identify a person and indicate their approval of the information to which the signature relates.
Common forms of electronic signatures offer varying levels of assurance and include:
- Clicking an “I agree” checkbox.
- Scanned copies of signed hardcopy documents.
- Electronically drawn signatures, inserted images of signatures, or typed names.
- Email signatures.
In contrast, a digital signature – typically generated through secure platforms like DocuSign – uses encryption and audit trails to provide a higher level of document integrity and authenticity.
Legal framework in New Zealand
Electronic signatures are expressly recognised under Part 4 of the CCLA. Section 226(1) provides that a legal requirement for a signature is met by an electronic signature if:
- The method identifies the signatory and indicates their approval.
- The method is as reliable as appropriate for the purpose and circumstances.
In addition, the recipient must have consented to receiving the electronic signature.
Presumption of reliability
Section 228 CCLA provides a presumption of reliability where:
- The signature is uniquely linked to the signatory.
- The method is under the signatory’s sole control.
- Any changes to the signature or data are detectable.
- A reliable verification method exists.
DocuSign and similar platforms typically meet these criteria through features such as encryption, time-stamped audit trails, and identity verification.
Applying this to s 228 CCLA, DocuSign’s features can establish the presumption of reliability. However, if the counterparty presents evidence to rebut this presumption, the party relying on the signature must provide credible evidence that the counterparty received and used the relevant email address and consented to the use of the platform. This may require additional steps, as discussed in the practical considerations section below.
Case law guidance
Wilfred v Lexington Legal Ltd
This case involved a guarantee accepted via email. The Court found that Mr Wilfred’s email response, which included his name and acceptance of terms, met the requirements of a valid electronic signature. The decision was upheld on appeal, affirming that the method used was sufficiently reliable.
Feldman v Dexibit Limited
The High Court held that shareholder resolutions executed electronically were invalid as the plaintiffs had not signed the agreement consenting to electronic execution. This highlights the importance of explicit consent.
Williams Group Australia Pty Ltd v Crocker
In this Australian case, the Court found that Mr Crocker’s electronic signature was applied without his authority via HelloFax. He was not in the location where the signature was applied and had not authorised anyone to sign on his behalf. The Court held he was not bound by the guarantee, and this decision was upheld on appeal. This case underscores the importance of verifying both identity and authority when relying on electronic signatures.
Emojis as signatures?
In Southwest Terminal Ltd vs Achter Land & Cattle Ltd, a Canadian court held that a thumbs-up emoji sent via text message constituted valid acceptance of a contract. The Court considered the parties’ longstanding relationship and the context of the communication. While not binding in New Zealand, this case illustrates how courts may interpret non-traditional forms of electronic acceptance under modern legislation.
Exceptions to electronic execution
Despite the broad acceptance of electronic signatures, certain documents remain excluded:
- Wills, affidavits, and powers of attorney.
- Deeds requiring witnessing, unless electronic witnessing requirements (for example, contemporaneity) are met.
During the COVID-19 pandemic, temporary law changes allowed for remote witnessing of documents such as wills and Enduring Powers of Attorney (EPOAs) via audio-visual means. These changes required safeguards to ensure the witness actually observed the signing. However, these provisions were tied to the Government’s Epidemic Preparedness (COVID-19) Notice 2020, which has since expired.
Deeds can be signed electronically but must still comply with formalities – typically requiring two directors or one director and a witness. If someone other than a director signs on behalf of a company, written confirmation of their authority should be obtained.
Practical considerations
In corporate transactions, the key issue is whether the person signing has actual or apparent authority under ss 128–130 of the Companies Act 1993. Electronic execution does not override these requirements.
While “wet ink” signatures may still be preferred in some contexts, electronic execution offers efficiency and convenience. To mitigate risk, especially in high-value or high-risk transactions, consider the following safeguards:
- Conduct a phone or video call to confirm the signatory’s identity.
- Use software that records the signing process via audio-visual means.
- Perform live AML checks.
- Execute the document as a deed with a witness.
- Require a lawyer’s certificate confirming the signatory’s understanding and execution.
- Capture the IP address of the signatory.
These steps can help ensure that electronic signatures are not only legally valid but also practically enforceable.
