Electronic Transactions (Contract Formation) Amendment Bill

  • enacted

Commentary

Recommendation

The Commerce Committee has examined the Electronic Transactions (Contract Formation) Amendment Bill and recommends that it be passed with the amendments shown.

Introduction

The bill seeks to amend the Electronic Transactions Act 2002 to clarify in legislation the time at which a contract is formed when the acceptance of the offer is communicated electronically.

Contracts are generally understood to be formed at the time that the acceptance is communicated to the offeror. An exception emerged in Adams v Lindsell; the “postal acceptance rule” deems, for offers accepted by post, that a contract is formed at the time at which the acceptance was posted. Whether this rule could be extended to contract acceptances communicated electronically has not been tested in the courts. However, if the “postal acceptance rule” were used in an argument relating to electronic communication, the bill would ensure that the general rule of contract acceptance applied.

Time of communication of acceptance of offer

Clause 5 of the bill relates to contract formation and, as introduced, proposes inserting new section 32A to explicitly state that an offer submitted electronically would be deemed to be accepted at the time of receipt of the acceptance by the offeror. We believe this could create a misapprehension that a “hard-wired” rule applies; that an offer can be deemed to be accepted electronically “only at the time of receipt”. We therefore propose amending clause 5 to insert new section 13A into the Act (instead of new section 32A) to make it clear that this is a default rule instead of a rigid approach from which the parties would be unable to contract out.

We consider new section 13A(1) would ensure the bill achieves its intended effect. Section 11 of the Act establishes the time an electronic communication is taken to be received. Our amendment would make it clear that the time of receipt referred to in section 11 of the Act also applies to acceptances of contract offers that are communicated electronically.

New section 13A(2) specifies that the acceptance rule would not apply if the contracting parties agree otherwise, or an enactment provides otherwise. The principal Act currently allows negotiating parties to specify their own mutually agreed conditions in relation to the time and place of receipt and dispatch of electronic communication. We believe our amendment would maintain the freedom of the contracting parties to decide the time a contract is formed where the acceptance is communicated electronically.

Purpose clause

Clause 4 as introduced details the purpose of this bill. We consider section 3 of the principal Act sufficiently addresses the purpose of the legislation and a purpose clause is unnecessary in an amendment bill. We recommend clause 4 be amended to update the overview (section 4) of the Act to add reference to new section 13A.

Defining “time of receipt” and “designated information system”

We considered whether the terms “time of receipt” and “designated information system,” used in sections 10 and 11 of the principal Act, lacked clarity. However, we were not persuaded that they lack clarity, and consider the terms are therefore in no need of definition.

Appendix

Committee process

The Electronic Transactions (Contract Formation) Amendment Bill was referred to the committee on 15 May 2013. The closing date for submissions was 27 June 2013. We received and considered nine submissions from interested groups and individuals. We heard two submissions.

We received advice from the Ministry of Business, Innovation and Employment.

Committee membership

Jonathan Young (Chairperson)

Kanwaljit Singh Bakshi

Hon Clayton Cosgrove

Clare Curran

Kris Faafoi

Julie Anne Genter

Peseta Sam Lotu-Iiga

Mark Mitchell

Dr Jian Yang