The legal requirements for forming electronic contracts, agreements and e-signatures.

Contracts made electronically are legally binding

Contracts made via electronic communications (e-commerce) and social media such as Facebook (f-commerce) are all legally binding as long as they are validly made.

The internet, social media, texts and email have changed the way we do business and buy or sell products and services. Entering into an electronic contract involves the same steps as a paper-based contract. The Contract and Commercial Law Act (CCLA) clarifies when an electronic contract is formed, including time and place of dispatch, and receipt of electronic communications.

But the risks may be greater since the terms and conditions may go unnoticed. It is important to keep electronic or printed records of all electronic communications relating to an electronic contract, including any variations.

Read Forming contracts and agreements to find out more.

E-signatures

A signature usually proves the parties’ intention to enter into a contract. You can either print out documents and then provided a scanned copy of your handwritten signature, or sign them electronically with an e-signature.

The CCLA enables an e-signature to be accepted as long as certain conditions are met. The e-signature must clearly and sufficiently:

  • identify the person signing (text of your name, position and organisation)
  • indicate the person signing approves of the information to which the signature relates (statement signalling your intention to be legally bound)
  • be appropriate and reliable given the purpose and circumstances in which the signature is required.

A digital signature is a form of encrypted technology that is created and verified by code and therefore is very secure and reliable, but it is expensive to buy.

Know your rights

Business-to-consumer e-marketplaces

These are simply businesses selling consumer products and services directly to consumers. They include international websites like Amazon and Priceline, which manage online retailers. If they are based in New Zealand, you have rights under the Consumer Guarantees Act. If they are based overseas, your rights are more limited under the Fair Trading Act.

Read Shopping online to find out more.

Business-to-business e-marketplaces

These are emerging as the most important commercial internet applications and have the potential to transform the way business is conducted.

A B2B e-marketplace can be thought of as a virtual space where transactional activities (including searching, sourcing, negotiating/bidding and ordering) occur online through the support of the internet.

Many structures are possible. Some B2Bs focus on a particular product across many industries, others on the supply chain in one particular industry. B2Bs may also be owned by the organisations who use them or by independent organisations.

As these are business-to-business transactions, the Consumer Guarantees Act will usually not apply.

Read Buying products and services for commercial use to find out more.

Forming electronic contracts

With emails and texts, a contract is formed when the acceptance email or text arrives at the seller’s stated email address or mobile number, rather than when it is actually read or sent, under the Contract and Commercial Law Act.

A contract is formed when the email or text accepting an offer arrives at the stated email address or mobile number, not when it is read or sent.

It is more difficult to be specific about when a contract is formed with an online purchase on an interactive website. Usually a buyer will click ‘Submit’ after entering payment details; the website will display an order confirmation page and an email confirming the purchase is sent. It is still unclear whether the webpage or the email confirmation is the ‘acceptance’.

The supplier’s terms and conditions may include a term stating when the contract is formed. It is a good idea to check these before buying.

For online auctions such as Trade Me or eBay, the contract is formed when the time limit set by the seller is reached and the highest bidder has met the reserve price (if there is one). The highest bidder is bound to complete the purchase at that point.

Note: Be wary of scams such as fraudulent emails asking for your personal data or account information.

Read Scams and online safety to find out more.

If things go wrong

Contact the seller

First negotiate with the seller to cancel the sale or reduce the price if:

  • you have been misled
  • the products or services are faulty or unsafe
  • the seller did not have the right to sell those products.

Read Resolve a problem to find out more.

Try to resolve the dispute directly with the seller. If you can’t contact them, use the website’s dispute resolution process if this is available.

If it’s a daily deal site, tell them and the business that they’re equally responsible for providing a remedy. If they don’t fix the issue, you can take both the business and the daily deal site to the Disputes Tribunal at the same time.

Place feedback on the website about the seller so others are aware of any issues. Provide fair feedback and accurately describe any issues or problems with the sale.


Next steps

If you are unable to resolve your issue directly with the retailer, manufacturer or service provider, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Contracts

Resolve it: Scams

Resolve it: Spam and cyberbullying


Need more help?

Contact us for more guidance.

Common situations

Buying online

Katy decides to buy a computer online from an overseas retailer on Amazon. When it arrives from overseas, the computer has several problems and needs to be repaired. Katy contacts the retailer and Amazon to sort out the issue. The retailer is very prompt to sort out the issue as they don’t want a negative feedback rating, and Katy is able to return the computer and get a replacement easily.

Bidding on Trade Me

Fiona has an automatic bid up to $150 on a bike being sold on Trade Me. When the auction is closing, she wins the bid and the bike is sold to her. Fiona changes her mind the next day, but she can’t cancel the sale unless the seller agrees to do so, as the sale is a binding contract.