Goldsmith Paul: Electronic Transactions (Contract Formation) Amendment Bill — In CommitteeText is incorporated into the Bound VolumeGoldsmith Paul: Electronic Transactions (Contract Formation) Amendment Bill — In Committee[Sitting date: 09 April 2014. Volume:697;Page:17094. Text is incorporated into the Bound Volume.]PAUL GOLDSMITH (National):It is very kind of you to give me an opportunity to talk about the Electronic Transactions (Contract Formation) Amendment Bill which I have brought to Parliament. We are dealing first with clause 1 which is the title. The Act is the Electronic Transactions (Contract Formation) Amendment Act 2012—Hon Ruth Dyson: I think it’s “bill”.PAUL GOLDSMITH: —bill. Yes thank you very much. I thought we could just have some opening remarks about contract formation and why that is an important area of the law.Most important people need to know that their contracts will be honoured in life and in business. That is a very important function of the law. Clear and predictable laws governing commerce are some of the foundations of our successful society and are part of the foundation of a successful economy. The fundamentals of business have not changed over the years in that trading is among the most natural activities of humanity. It is a civilising activity at bottom because it is about making an arrangement from which both parties will benefit. People make deals only if both of the parties will flourish. So most of all trade flourishes when there is a shared understanding of the rules. I trust that this bill will go some way to add to that shared understanding which is so important in contract law. Clarity and certainty lead to confidence and confidence leads to greater investment. Investments lead to jobs employment and economic growth which drive the economy so that we can afford quality health-care decent education support for the vulnerable—all those sorts of things that this Government supports.In my first reading speech on this bill I said that this bill may not on its own “bring about the brighter future to which we all aspire and to which this Government is so committed but it is a small and useful addition to the latter’s work.”Moana Mackey: You’re halfway there.PAUL GOLDSMITH: Thank you. So this bill tidies up one small area of uncertainty and will go some way to increase the flow of business. Given the prevalence of electronic communications in society today including emails smartphones social media Twitter and all those things it is useful that the current Act be amended to cover such areas.I confess that I am not a lawyer. In fact I actually started off studying a law degree at the University of Auckland but found it was not to my taste so rather indulgently—and now I cannot believe that I did it—I turned down my place in the law school at Auckland University and decided to do a Bachelor of Arts in history.Hon Todd McClay: The rest is history.PAUL GOLDSMITH: The rest as they say is history—that is right. So I did not get to study law but funnily enough here we are in the Committee of the whole House embroiled in the details of law.I wonder whether I could take just a little bit of time in this opening address to bring out some of the details and the origins of the bill that we have got before us. In essence it is about bringing clarity to the question of electronic transactions hence the title the Electronic Transactions (Contract Formation) Amendment Bill. In essence the bill clarifies a point of contract law that is currently vague. Its purpose is simply 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 at which acceptance of the offer is communicated to the offeror. So when somebody says: “Yes I accept the offer.” or the offeror and the acceptor shake hands then a contract is formed. However an exception to that rule was created for acceptances created by mail. This goes back to a famous case that we heard about in some of the early addresses Adams v Lindsell in 1818. I might trespass just a little bit to go into the details to explain the case.The case involved two parties in the sale of wool. On 2 September the defendants wrote to the plaintiffs offering to sell them certain fleeces of wool and requiring an answer in the course of the post. The defendants however misdirected the letter so that the plaintiffs did not receive it until 5 September.Scott Simpson: Fleeced.PAUL GOLDSMITH: No no—they were not fleeced. They were trying to buy a fleece. The plaintiffs posted their acceptance on the same day but it was not received until 9 September. Meantime on 8 September the defendants not having received an answer by 7 September as they had expected sold the wool to somebody else hence the case. The defendants argued that there could not be a binding contract until the answer was actually received and that until then they were free to sell the wool to another buyer. The judge however said that if that was true it would be impossible to complete any contract through the post because if the defendants were not bound by their offer until the answer was received the plaintiffs would not be bound until they had received word that the defendants had received their acceptance and this could go on indefinitely.Instead it must be considered that the offerors were making the offer to the plaintiffs during every moment that the letter was in the post. So when the offeree had placed their acceptance in the post there is a fictional meeting of minds that concludes that the offer gives effect to the acceptance. This was tidied further into what was now referred to as the postal acceptance rule in the 1892 case Henthorn v Fraser—and I will not go into the details of that right now—where the court determined the precise timing of acceptance and that was the moment when the letter of acceptance was posted.The longstanding rule as to postal acceptances in Adams v Lindsell is not appropriate I contend for electronic communications. This has already been recognised by the courts in relation to acceptance of contractual offers by telex as far back as 1955 in Entores Ltd v Miles Far East Corporation which treated the communication as being—as with a telephone communication—simultaneous. The facts in the Entores Ltd case involved a London-based trading company that sent an offer by telex for the purchase of copper cathodes from a company based in Amsterdam. So there is no clear case authority on acceptance by email.I am very grateful to members right across the House because in the second reading I think we had unanimous support for this bill. I am very grateful to members on all sides of the House for their support on this bill and I hope we can continue in that spirit of bipartisanship as we go through the rest of the debate this evening.This bill provides an appropriate way to deal with email acceptances by providing that an offer that can be accepted by electronic communication is deemed to be accepted at the time of receipt by the offeror—that is when it arrives at the offeror’s in-box. As we go into further consideration of this bill in the later clauses we can look at some of the intricacies and nuances around arrival times and the definition of receipt which is an area of great discussion. That will hold for a few minutes.I gave consideration to other potential names. The “Email (Contract Formation) Bill” might have been one but that does not cover the full gamut of potential electronic transactions that could be dealt with by this legislation. The “Text Email and Other Electronic Transactions (Contract Formation) Bill” could have done it or the one that I thought probably covered it in most detail would have been to call it the “Electronic Transactions (Clarifying the Moment When a Contract Is Formed When Sent by Electronic Means) Amendment Bill” but I felt that that might have been too wordy. That might not be the first time that I have been accused of being too wordy and I did not want that reputation to extend. So on that basis I was hoping that—