Are physical signatures necessary when executing legal documents?
Not always. The rules are found in the Contract and Commercial Law Act 2017 (CCLA). The core principle is that a signature must be RELIABLE in order to have any legal effect. In determining whether the signature you have provided is reliable, the questions are:
- Does the signature adequately identify you?
- Does it indicate your approval of the information in the document?
- Given the nature of the transaction, is the means by which your signature was provided (physical or electronic) appropriate?
An electronic method must satisfy the first two aspects above in order to be recognised as an “electronic signature” in New Zealand. Generally, an electronic signature is presumed to be reliable provided:
1. The means of creating the electronic signature is:
(a) linked only to the signatory;
(b) under the control of the signatory alone; and
2. Any alterations to either the signature or the information in the document, is detectable.
However, this presumption may be overturned if the electronic signature is held not to be ‘as reliable as is appropriate’ given the purpose and circumstances in which the signature is being required. This is very much a fact-specific determination that will depend on the context of each situation. It is suggested that the following factors be considered:
- the size of the transaction (i.e. the level of risk e.g. documents involving large sums);
- how often you transact with the other party concerned; and
- whether the other party (and yourself) often enters into the sort of agreement represented by the document.
Practical examples of these principles
Below are some case law examples that help illustrate the standard:
Wilfred v Lexington Legal Ltd
An electronic signature (in the form of an email from a client to their lawyer signing “best regards — Harmon”) sufficed as being a reliable for the purposes of entering into a contract for legal services.
Company Net Ltd v Registrar of Companies
Original signatures were required by the Registrar of Companies in relation to company incorporation documents — albeit in this case, there were issues of identifiability that caused concern. The companies office makes clear that they do accept electronic signatures for most documents.
Welsh v Gatchell
Agreements for sale and purchases of land can be signed electronically. Notice to the other party about electronic signatures is already provided in the standard terms of the Auckland District Law Society document which is commonly used for these types of transactions.
Consequently, although electronic signatures will generally be considered reliable, where there is a lot riding on a particular document (i.e. a sizeable transaction as opposed to a mere box ticking activity), it appears prudent to require physical signatures. Where physical signatures pose significant inconvenience and you wish to sign electronically, we advise that you give express notice to the other party that an electronic signature will bind all parties to the contents of the document, and that you expressly specify the form of electronic signature required.
What documents can be signed electronically?
As noted above, documents can be signed electronically as long as the signatory is identifiable and the signature is reliable. However, there are two main caveats to this:
Where there is a legal requirement on you to give information to a person (thus requiring your signature), you must obtain that person’s consent to receiving the information through means of electronic signature.
Documents of Integrity
Electronic signatures have no effect on documents that concern “matters of integrity” such as:
- Documents relating to citizenship, elections, fish and game, civil aviation, corrections, credit contracts and consumer finance, disabled persons community welfare, fisheries, medicine regulations, misuse of drugs, passports, and court procedural documents;
- Documents that relate to affidavits, statutory declarations, documents given on oath or affirmation (although there are some short term changes due to Covid-19 which we discuss below);
- Powers of attorney and enduring powers of attorney, Wills, codicils and the like;
- Negotiable instruments;
- Bills of lading;
- Warrants to enter, search or seize; and
- Fair Trading Act 1986 provisions in relation to consumer standards information on goods or services, and products or safety standards.
Is it sufficient to provide electronic pdf versions of the signed documents or are originals always required?
The inclusion of a counterparts clause in documents allows parties to exchange pdf copies of signed agreements through email or fax. The party last to sign the document effects a binding contract upon their provision of the signed document to the other party/parties. It is common practice for physical signatures to be exchanged in this manner i.e. physical signature presented in electronic form/through electronic means will suffice.
The absence of a counterparts clause in the document itself however means that wet-ink physical signatures will be required. A signature may be deemed unreliable where it is performed in a manner that wasn’t agreed to between the parties as evidenced in the document.
Provision of the originally signed documents is also required when executing deeds. Section 10 of the Property Law Act 2007 requires a signed deed to be delivered in order to take effect. Delivery is commonly understood as being the physical handing over of documents either in person or through post. If the intention is to effect delivery otherwise, we advise that this be made clear in the document itself by recording that the deed shall be deemed delivered upon transmission of a scanned copy of the original executed document by one party to the other.
This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact Steven Moe at firstname.lastname@example.org should you require assistance.