Are email contracts legal?

Have you entered into a contract recently via electronic communication? Did you consider whether the communications were legally valid?

Historically, one would expect that a handwritten signature was a necessity of a valid contract. The reality is that the way we do business has changed markedly in recent years, and every day many people and businesses enter into contracts without exchanging hard copy documents evidenced by the parties’ signatures. This article looks at the validity of electronically conducted contracts – with or without signatures.

E-commerce contracts

Contracts created via electronic communications, or better known as ‘e-commerce contracts’, have become increasingly popular in business practice. You may be wondering if you can enter into a contract via email, text, or even social media? The answer is yes you can. Provided certain requirements are met, e-commerce contracts are enforceable. Just like any other form of contract, e-commerce contracts require an offer, acceptance and an exchange of value, all of which can be recorded electronically. There are however a few things to be wary of.

Text, email or social media contracts

Entering into contracts via text, email or social media may be convenient, but they carry a higher degree of risk. These communication exchanges are often quick and scant consideration can be given to the conditions. This can lead to an unclear and uncertain agreement, and possibly not the agreement you thought were agreeing to. It’s always best to sit down with the other party, discuss all possibilities and draft up a written agreement that deals with those possibilities and other items you may not have thought of. This will also enable you to confirm the identity of the person you are communicating with.

A signature may be a necessity

There are some documents, however, that must be physically signed in hard copy. These documents include Powers of Attorney, or Enduring Powers of Attorney; affidavits; Wills; and requirements to produce or serve a warrant of search or seizure. The Property Law Act 2007 also requires that some specific property contracts be in writing and signed. These include the sale and purchase of land; trusts that relate to land and take effect in the lifetime of the settlor of the trust; and contracts of guarantee.

The modern signature

Although a signature isn’t a requirement for some contracts, it’s a useful tool to prove the parties’ intentions to enter into a contract. But how can you sign electronic documents? It’s possible to print out documents and then physically sign them. But it’s also possible to sign the document ‘electronically’ with an e-signature. An e-signature is a digital image of your signature that’s then inserted electronically onto the document.

The Electronic Transactions Act 2002 has paved the way for e-commerce contracts. It enables an e-signature to be accepted provided certain requirements are met. An e-signature must clearly and sufficiently identify the person signing, and clearly and sufficiently indicate the person signing approves of the information to which the signature relates. The signature must also be appropriate and reliable given the purpose and circumstances in which the signature is required. Where a contract must be witnessed the same requirements apply to the e-signature of witnesses.

Coping with the modern signature

It’s important that if you enter into an e-commerce contract you are aware of what’s necessary to complete those contracts. If you are planning on entering into an e-commerce contract and want to use an electronic signature make sure the signatures used meet the electronic signature requirements. If the signatures fall short of the requirements, the contract may be invalid and, ultimately, result in financial loss. If you are unsure of the requirements we can work with you to make sure your contract is valid.

This article was first published in the Autumn/Winter 2013 edition of NZ LAW member firms’ e-newsletter Commercial eSpeaking.

Published Winter 2013.

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