Goldsmith Paul: Electronic Transactions (Contract Formation) Amendment Bill — Third ReadingText is incorporated into the Bound VolumeGoldsmith Paul: Electronic Transactions (Contract Formation) Amendment Bill — Third Reading[Sitting date: 07 May 2014. Volume:698;Page:17606. Text is incorporated into the Bound Volume.]PAUL GOLDSMITH (National): I moveThat the Electronic Transactions (Contract Formation) Amendment Bill be now read a third time. It gives me great pleasure to speak at this third reading of my member’s bill here a bill over which many words have been spoken—Carol Beaumont: Far too many.PAUL GOLDSMITH: —most of them of them by me I am bound to admit. But nevertheless clear and predictable laws governing commerce are some of the foundations of the success of the modern economy upon which our prosperity depends.The fundamentals of business have not changed over the years. Trading is the most natural of all the activities of men and women. It is a civilising activity because ultimately you only succeed in business and in trade if you give other people what they want at the price they want it; otherwise you go out of business. Most of all trade flourishes in an environment where there is a shared understanding of the rules so contract law and contract formation has been fundamental to the progress that we have seen in global terms over the past few centuries and in particular in this country since its formation. I trust this bill will go some way to add to that shared understanding and on that basis I commend it to the House.Clarity and certainty lead to confidence and confidence leads to greater investment. That is why it is so important that this Government over the past 6 years has demonstrated the stable predictable Government policies that have led to business confidence levels being so high. We see right now very high levels of business confidence and commercial confidence which are buttressing the economy and are so important in getting us back into growth. Once businesses have confidence they have the confidence to invest to employ and create jobs and to grow their businesses. So our laws need to be constantly maintained and adapted to respond to changing technology. This law comes into that category.Although I said at the start of the first reading that on its own this bill is not going to bring about the brighter future to which we all aspire and to which this Government is so committed it is a small and useful addition to the lattice-work of our contract law formation. This bill tidies up one small area of uncertainty and will go some way toincrease the flow of business. Given the prevalence of electronic communications in society today—including emailssmartphones and the use of social media—it is useful that the current Act be amended to cover such areas.If we can just drill down the primary purpose of this legislation is to clarify the legal position on the time at which a contract is formed if the acceptance of the offer is sent by some form of electronic communication. The bill recognises the need for contractual transactions to join the electronic age. The general rule of contract formation is that a contract is formed at the time that acceptance of the offer is communicated to theofferor. So when somebody says “Yes I accept the offer.” or theofferor and the accepter shake hands then the deal is done.However as we know and as has been recorded in some of the earlier speeches but does bear repetition here at this important third reading an exception to the rule was created for acceptances created by post. This goes back to the famous case ofAdams vLindsell of 1818. It is worth just quickly going over the details of that case to remind the House. That case involved two parties in the sale of wool. On 2 September the defendants wrote to the plaintiffs offering to sell certain fleeces of wool—I will not be pulling the wool over—and required an answer in the course of the post. The defendants misdirected the letter so that the plaintiffs did not receive it until 5 September. In the meantime the plaintiffs had posted the acceptance on the same day but it was not received until 9 September. Meanwhile on 8 September the defendants having not received an answer by 7 September as they expected sold the wool to somebody else.The defendants argued that there could not have been a binding contract until the answer was actually received and that until then they were free to sell the wool to whomever they wanted. The judge said that if that was true it would be impossible to complete any transactions through the post. If the defendants were not bound by their offer until the answer was received then the plaintiffs would not be bound until they had received word that the defendants had received their acceptance and this would go on indefinitely. So it was considered that theofferors were making the offer to the plaintiffs during every moment that the letter was in the post. Then when theofferee has placed his acceptance in the post there is a fictional meeting of minds—and that is the phrase that the judge used “a fictional meeting of minds”—that concludes the offer and gives effect to the acceptance.The problem is that that longstanding rule relating to postal acceptances started byAdams vLindsell and enumerated in many other cases and laws consequently is not appropriate to electronic transactions. This has already been recognised. There is no clear authority yet on transactions by way of email. The point of this bill is to serve to clarify the law.When we go through the details how I intended to remedy this in the draft law was by inserting a new section 32A into the Electronic Transactions Act—Carol Beaumont: This has to be the most boring speech ever. This is a personal best in boring.PAUL GOLDSMITH: Look it may not be the most exciting topic but it is an important topic. So I was introducing new section 32A which said that an offer accepted by electronic communication is deemed to be accepted at the time of receipt of the acceptance by theofferor. I thought that was a rather neat way of getting the idea across but the Commerce Committee heard a lot of submissions on this topic led by Jonathan Young the MP for New Plymouth. The committee members thought in their wisdom that it could have been more elegantly handled. In truth this reflected some of the submissions.The concern outlined during the course of the select committee process was that there could be a misapprehension that a hard-wired rule applied and that the offer couldbe deemed to be accepted electronically only at the time of the receipt. So the suggestion during the select committee process was to abandon the new section 32A approach and instead insert a new section 13A into the Act which was indeed what was done to make it clear that this was a default rule instead of a rigid approach from which the parties would be able to contract out if they wanted to.So we have here section 11 of the principal Act the Electronic Transactions Act which already establishes a time at which an electronic communication is taken to be received. So what we have is a new section 13A which says: “(1) For the purpose of the formation of a contract an acceptance by electronic communication of an offer is taken to be communicated to theofferor at the time determined by section 11 …”. So I think this is a more elegant way of solving the problem that I set out to solve to bring clarity to the situation. As a result I think we have an effective law that will make a small but important difference.Interestingly this bill nicely dovetails with my next member’s bill in the ballot which is all about freedom of contract over employment contracts. That fits very much with my principles that people should be able to arrange whatever contracts they want and have them enforced by the courts which is the very foundation of all our commercial activities.What we have as a result of the good work of the select committee—for which I am grateful to the efforts of Jonathan Young and my colleagues—is a facilitative piece of legislation that ensures that negotiating parties are free to specify their own mutually agreed conventions but in the absence of that everybody knows the rules.Stepping back from that I know that this piece of legislation is a modest one. It deals with only a very small piece of the law that had been somewhat vague. But it is important more in the sense that it is an example of this Government’s determination to work to ensure that every little piece of contract law is well tended and kept up to date with changes in technology. On that basis I am thrilled at the broad measure of support that we have had from across the House and many parties. I commend this bill to the House and I look forward to the support of other parties. Thank you.