Home > Posts > 03 April 2020
03 April 2020
by Andrew Comer andrewc@shlaw.co.nz 027 513 7593
COVID-19: How do I Enter Into a Contract Remotely?

COVID-19:  How do I enter into a contract remotely?

 

For businesses running paperless offices, remote contracting will be a relatively familiar concept.  For many others, and for countless individuals across the country, contracting under current circumstances will be unfamiliar territory. 

Printing or scanning facilities may now be inaccessible.  Social distancing and ‘stay in your bubble’ policies will impact how documents are witnessed.

Thankfully, there are ways in which agreements can be entered into without the need for physical copies or face-to-face interaction.  

In this article we take a quick look at how you can enter into a contract remotely.   

 

VERBAL CONTRACTS

Unless there’s a legal, or other, reason for a contract to be in writing (e.g. if it’s a deed, if it involves the sale of land etc), a verbal form of that contract will be enforceable against the parties. 

The risk with verbal contracts, though, will always be the difficulty in establishing, with any real certainty, the parties’ intention to be legally bound and what the terms of the contract are.  This is why it’s prudent for contracting parties to enter into, and sign, a written contract. 

 

WRITTEN CONTRACTS

Electronic signatures

In general terms, if a contract must be in writing and signed, the contract will be enforceable if it’s signed with an electronic signature.  

The most common ways in which an electronic signature is applied to a contract includes:

(1)     The ‘sign and scan’ approach:  This is where parties print the contract, sign in ink and then exchange signed, scanned copies by way of email.

(2)     The ‘digital signature’ approach:  This is where parties apply a ‘digital’ signature to a contract (e.g. through DocuSign, RightSignature, Secured Signing, HelloSign, PDF or other e-signing software).

Other forms of electronic signature, that are recognised by New Zealand law, include a party’s email sign-off, a signature that has been electronically pasted into a contract, the ‘tick’ applied to an ‘I agree’ check-box and a hand-written signature applied to an electronic device.

 

Requirements for electronic signatures

Contracting parties take note – if you intend to apply an electronic signature to your contract, the following strict legal requirements must be met: 

  • Identification:  It must adequately identify the party (the ‘Signatory’) signing the document –  the Signatory’s name, position and organisation should be set out clearly alongside the Signatory’s signature in the document.
  • Indicate approval:  It must adequately indicate the Signatory’s approval of the contract’s terms and the Signatory’s intention to be legally bound.
  • Reliable as is appropriate:  It must be ‘reliable as is appropriate’, given the purpose and circumstances in which the signature is required – this will depend on the particular circumstances, but an electronic signature will generally be presumed to be reliable if: (i) the means of creating the signature is linked only to, and controlled solely by, the Signatory;  and (ii) any changes to the signature, or the terms of the contract, after signing are detectable.
  • Consent from other party:  The other party must consent to the Signatory signing by way of electronic signature.  This can be achieved  with an appropriately drafted ‘counterparts’ clause in the contract.  A ‘counterparts’ clause typically says that each party can sign their own copy of the agreement – including electronically – which, when collated, will be treated as a single document.  Alternatively, the other party could grant consent by way of email confirmation.

 

Documents which cannot be signed electronically

At the time of writing there are certain documents which still cannot be signed or witnessed electronically. 

These documents tend to be sensitive and solemn in nature with subject matter likely to impact the parties to, or named in, the document. 

Examples include wills, powers of attorney, affidavits, statutory declarations, bills of lading and notices required to be given to the public.  (A full list is set out in Part 3, Schedule 5 of the Contract and Commercial Law Act.)

In light of current circumstances, the hope is that the Ministry of Justice and/or the New Zealand Law Society will issue guidance or grant lenience around the manner in which these documents can be signed remotely.

 

What about deeds?

Strict signing formalities apply to deeds.  They must be in writing and signed in the presence of a witness who cannot be a party to the deed.  (One common exception is if a company has at least two directors, in which case two directors can sign in the absence of a witness.)

Under current circumstances, video-conferencing technology (e.g. Zoom, Teams, Skype etc) – in which a witness can actually observe the Signatory sign a document – seems to provide the most logical and practical means of having a document witnessed. 

In terms of the witness him or herself signing a deed remotely, the requirements for electronic signatures (and rules around which documents cannot be signed electronically), outlined above, also apply in relation to the witness’s electronic signature.

At the time of writing, we are not aware of the audio-visual approach to witnessing outlined above having come before a court, let alone be ruled upon.  However, if asked to do so, our view is that the courts would likely adopt a pragmatic view and acknowledge the parties’ attempts to make the most of a highly restrictive situation with the facilities at their disposal.

 

Additional practical steps

If you intend to apply an electronic signature to your contract, you may want to consider the following additional, practical steps:

  • Unique identifier: 
    • Apply a unique identifier to the document (e.g. a document identification number, a ‘time stamp’ or a ‘Signing copy’/‘Execution copy’ stamp) prior to emailing the document to the parties. 
    • This step may help minimise uncertainty around the contract’s authenticity.
  • Acknowledgement of intentions/evidence of signing
    • If printing, scanning or e-signing software facilities are not available:
      • email a written acknowledgement of your intention to be legally bound by the contract, and an undertaking to sign the contract when circumstances permit, to the other parties; 
      • email a photograph of the signed contract, or a video of the signing process, to the other parties;  or
      • use video-conferencing technology to provide evidence of signing.
      • These steps may help minimise uncertainty around your intention to be legally bound by the contract.

We recommend you seek specialist legal advice, as soon as possible, in relation to how you can enter into a contract remotely.

 

The above overview has been provided for general information purposes only.  It is not, nor is it intended to be treated as, legal advice, or an exhaustive list of considerations for parties looking to enter into contracts remotely, and is subject to change without notice.