[Home] [Databases] [WorldLII] [Search] [Feedback] New Zealand Law Commission

[Database Search] [Name Search] [Previous] [Next] [Download] [Help]

2 The need for legislation

22 IN ECOM 1 we identified a number of barriers to electronic commerce and raised questions as to the ways in which they could be removed. As a result of receiving submissions we have been able to crystallise our views on the nature of the barriers and the way in which they can best be removed.

23 We are of the view that New Zealand should enact an Electronic Transactions Act to remove the immediate barriers to electronic commerce. The Act should be facilitative in nature. By removing immediate barriers it should encourage the development of electronic commerce. The purpose of this chapter is to identify the barriers; note the competing public policy issues involved and cross-reference our discussion of the barriers and potential solutions to:

• other parts of this report;
• the provisions of the Model Law and the Guide to Enactment; and
• the Australian Bill.

We discuss the competing public interest factors with respect to each barrier later in this report.

24 We are satisfied that legal barriers to electronic commerce can be reduced to six categories. They are:

• statutory requirements that certain documents be “in writing”;⁶⁴
• statutory requirements that the “writing” be “signed”;⁶⁵
• the need to retain for various purposes “original” documents;⁶⁶
• statutory requirements in relation to notices and the service of documents (whether by post or in person);⁶⁷
• statutory requirements for physical presence or attendance of a person when things are done;⁶⁸ and
• the negotiability of electronically generated documents.⁶⁹

25 Other barriers have been identified both by people who made submissions on ECom 1 and in other discussions which we have had with persons affected by our proposals. But, additional impediments which have been identified are equally applicable in the physical world. Examples given to us include the requirements for labelling of goods in various States and different customs requirements. Unless there is a complete harmonisation of laws relating to those, and other associated topics, such barriers will always remain.

26 In determining whether, and if so, to what extent, legislation should be enacted to remove the barriers which we have identified it is important to balance public interest considerations such as:

• the need for a minimalist approach so that the law is adapted to the needs of electronic commerce. This is consistent with our adaptability principle⁷⁰ and with existing government policy.⁷¹ In our view, if a barrier can be removed adequately by contractual means that solution should be preferred to legislative intervention;
• the need for adequate statutory requirements to address the prevention of fraud;⁷² and
• the need to avoid unnecessary transaction costs including, for example, legal costs incurred to resolve a legal point when the law is not sufficiently predictable.

We address these issues later in the context of each barrier.⁷³

27 Issues involving “writing” and “originals” are, in our view, readily resolved. Issues involving “signatures” are more complex in nature and may require differing levels of solutions. Questions of personal presence or attendance will need to be addressed on an individual basis.⁷⁴ Negotiability is something which, in general terms, can be resolved by contractual rather than statutory means.⁷⁵

28 So far as “writing” is concerned, electronically generated messages will, from 1 November 1999, qualify as “writing” as a result of the enactment of the Interpretation Act 1999 section 29. Section 29 plainly encompasses electronically generated information⁷⁶by defining “writing” as:

includ[ing] representing or reproducing words, figures, or symbols –
(a) In a visible and tangible form by any means and in any medium:
(b) In a visible form in any medium by electronic means that enables them to be stored in permanent form and be retrieved and read.

29 The requirement for “original” documents in an evidential sense will be met by recommendations made by this Commission in its report Evidence: Reform of the Law.⁷⁷ There remains a need to address the statutory requirements for “originals” in the context of record retention; our views on that issue are set out in chapter 8.⁷⁸

30 We are recommending that the question of electronic signatures be dealt with, as an interim measure, by the adoption of legislation akin to article 7 of the Model Law. Inevitably, because of the way in which article 7 of the Model Law is expressed, questions of fact and degree will arise as to whether an electronic signature is sufficiently reliable to fulfil a requirement of law for a signature. In cases where there is no need for a witness to a signature or for a seal to be affixed, the level of reliability required could well be established to the satisfaction of a court by reference to the level of security attaching to the “signature” in a technological sense. In cases where the law requires an “enhanced” manual signature (by, for example, the addition of a witnesses’ signature or the affixing of a seal) it is unlikely, in the meantime, that a court would permit such a signature to be made electronically. These issues are dealt with in more detail in chapter 9.⁷⁹

31 Statutory requirements for the giving of notices or for the service of documents also pose problems. Our views, on which we expand later in this report,⁸⁰ are:

• If there is a statutory requirement to serve a document personally that statutory requirement should remain until such time as the legislature determines that the requirement is too onerous. Such provisions are enacted to ensure that particular documents are drawn to the attention of the persons upon whom they are served. Consequently, those requirements should remain in force until the need for such emphasis is demonstrated. An example is the need to serve court proceedings on a defendant personally. The initial service must be in person, although once an address for service is given by a solicitor acting for the litigant that address for service can include a postal address or a document exchange (DX) address or facsimile address, but not an email address.⁸¹
• If there is a statutory requirement that something be sent by ordinary post then, in our view, email should be regarded as the functional equivalent of ordinary post and service by email should be permitted provided the intended recipient has consented to receipt of the information by email through use of an application which can be read by the intended recipient. We refer, in this regard, to problems caused (for example) by the inability of one computer using “Word” to read information sent on “Word Perfect”. Unless this requirement for consent is imposed, persons doing business electronically could, in effect, send messages in a language which the recipient cannot read: the functional equivalent of sending disclosure documents under the Credit Contracts Act 1981 by ordinary mail but written in Greek.⁸²
• We believe that any safeguards imposed by statutes as to the time at which delivery by post will be effected should remain; an example is section 20 of the Credit Contracts Act 1981, which refers to delivery of disclosure documents under a credit contract. Section 20(2) makes it clear that the documents will not be deemed to be received until four days after they were posted. Other examples can be found in rule 206A of the High Court Rules 1985 and rule 233 of the District Court Rules 1992 as to the time when service by post or document exchange is deemed to be effected. Similar provisions should apply equally to email to preserve the principle of functional equivalence.
• If legislation requires service by registered post, then it is clear that the legislature has required a higher level of security to apply to such service than proof that the message was received in the ordinary course of the post. A functional equivalent of sending a document by registered post may be electronic delivery in circumstances where a reliable electronic acknowledgement of receipt can be produced by the person offering the document in evidence.
• If there is a statutory requirement that notice be given, but no particular form is prescribed, then it should be legal to give notice by email as long as there has been prior consent to the use of an application which can be read by the intended recipient.

We address some proposals for statutory reform in chapter 5.⁸³

32 The next statutory requirement which creates barriers is the requirement for “presence” or “attendance” by people at a physical place where something is required to be done. An immediate problem is caused by the provisions of the Auctioneers Act 1928. The definition of the terms “sales by auction” and “sell by auction” suggest difficulty in carrying out a legal on-line auction.⁸⁴ Attendance is also an issue with regard to people who are required to witness documents: examples are affidavits filed for court proceedings.⁸⁵

33 The final barrier which we have identified is one of negotiability. Documents such as Bills of Lading and Bills of Exchange are (usually) negotiable documents. The document is handed over as a document of title. The problems caused by “negotiability” are largely capable of solution by contractual rather than statutory models. We do not think a present need for legislation has been demonstrated. We refer to the discussions on negotiability contained in chapter 4 (Transportation Documents) which explains our reasons for not recommending changes to the law to meet perceived barriers caused by an inability to negotiate electronically generated instruments.⁸⁶

34 We propose that the Electronic Transactions Act be confined to electronic transactions conducted “in trade”. The term “trade” is broadly defined by the Fair Trading Act 1986 to mean:

any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land.⁸⁷

By limiting the application of the Electronic Transactions Act to electronic transactions conducted “in trade” we avoid the need to list individually many of the legal requirements we wish to exempt from the Act’s application such as wills and affidavits and the method of delivery of government services. In the case of the delivery of government services, it is especially important that the responsible government agency is given the opportunity to consider whether its services can be delivered electronically and, if so, in what technological application. Once that has been done, the government agency can then recommend any necessary legislative changes to accommodate delivery of its services in electronic form.

35 We now discuss the issues raised in this chapter in more detail by reference to particular aspects of the law.