Covid-19 restrictions have caused a massive increase in the number of documents being signed electronically, with research conducted in 2021 finding that two-thirds of businesses began using electronic signatures (“e-signatures”) in the last two years.
Post pandemic, the use of e-signatures is expected to become even more widespread, as organisations increasingly use technology to conduct business remotely. The global digital signature market is expected to grow from $2.17 billion in 2020 at a compound annual growth rate of 27% to $6.9 billion in 2025 with 95% of organisations either currently using e-signatures or planning to use e-signatures in the future.
There has not been any notable case law to date on e-signatures in New Zealand. E-signatures are, however, now covered in Part 4 of the Contract and Commercial Law Act 2017 (the “Act”).
In this Article, we discuss the requirements for a valid e-signature under the Act, including when an e-signature is considered reliable, and which documents are unable to be electronically signed.
Requirements for e-signatures
Generally speaking, the Act allows e-signatures wherever normal handwritten signatures are required. For example, the following documents can be signed electronically:
- Agreement for Sale and Purchase of Real Estate;
- Commercial agreements;
- Leasing documentation;
- Director and Shareholder Resolutions; and
- Trustee Resolutions.
To be valid, the e-signature must satisfy the following requirements:
- The signer and their intention to sign the document are clearly identifiable;
- The e-signature is “as reliable as is appropriate” given the purpose for which, and the circumstances in which, the signature is required; and
- The person receiving the signed information consents to receiving the signature in electronic form.
When is an e-signature “reliable”?
Whether an e-signature is “as reliable as is appropriate” is determined by the following criteria:
- The e-signature can be linked to the signer and no one else;
- The e-signature was generated under the signer’s full and total control and under no duress or persuasion from another person;
- The purpose of the e-signature is to provide assurance of the integrity of the information to which it relates; and
- Any alteration made to the e-signature after signing is detectable.
If the reliability of an e-signature becomes contested, whether or not an e-signature satisfies the above requirements will need to be assessed. Other considerations when determining the reliability of an e-signature may include:
- The sophistication of the equipment used by each party;
- The nature of each party's trade activity and the frequency with which commercial transactions take place between them;
- The kind and size of the transaction;
- The function of the signature requirements given the statutory and regulatory environment;
- The availability of alternative methods of identification and the cost of implementation; and
- Compliance with trade customs and practice.
Generally speaking, e-signatures are much more widely accepted now than a few years ago. However, there has not been any legal precedent to date on what electronic document signing services are appropriate to be used. DocuSign and Adobe Sign would usually be regarded as sufficiently “reliable” methods of signing documents electronically. However, for highly valuable transactions, it may be advisable to use handwritten signatures on documents.
Which documents cannot be electronically signed?
There are some documents where e-signatures cannot be used, including (amongst others):
- Enduring powers of attorney (“EPOAs”);
- Statutory declarations; or
- Any other documents that must be sworn under oath.
The Government introduced temporary law changes to modify the requirements for witnessing the signing of these documents during the Covid-19 pandemic. For example, wills, oaths, affirmations or declarations, and EPOAs were able to be witnessed using audio-visual means (for example, Zoom, Skype, etc.) where this would usually need to be done in person. These changes require additional safeguards and evidence to show that the witness actually saw the person signing the document, even though they were not physically present.
However, these changes only apply whilst the Government’s Epidemic Preparedness (COVID-19) Notice 2020 (“Epidemic Notice”) is in force in New Zealand. The Epidemic Notice came into force in New Zealand on 25 March 2020. It must be renewed by the Government every three months to stop it from expiring. The Epidemic Notice remains in force currently until 17 June 2022 (although may be extended again).
Can e-signatures be used for documents which require witnessing?
E-signatures can be used whether the signature must be witnessed or not. For example, Deeds can be signed electronically. In the case of two directors signing a Deed, each director can sign the Deed in counterparts using an e-signature. However, if a sole director is signing in the presence of a witness, the witness must first observe the director’s signature (whether that be electronically or by hand), before signing the Deed themselves. All requirements for witnesses will still apply, i.e. the witness should not be party to the Deed and should be adequately identified by stating their name, address and occupation.
New Zealand law provides guidance for the use of e-signatures on a variety of legal documents. In most circumstances, an e-signature is just as valid as a handwritten signature provided the e-signature meets the identification, reliability and consent requirements described above. It is expected that the law regarding e-signatures will evolve as increasing numbers of individuals and organisations use e-signatures as an alternative to handwritten signatures.
This article is provided to assist clients to identify legal issues on which they should seek legal advice, and by its nature cannot be comprehensive and cannot be relied on as advice. Please consult the professional staff of Clendons for advice specific to your situation. Clendons has experience advising on the electronic signing of legal documents, and can assist New Zealand organisations with this issue.
 Contract and Commercial Law Act 2017, s 228(1).
 Contract and Commercial Law Act 2017, pt 3.
 Epidemic Preparedness Act 2006, ss 5(3) and 7(3).