Electronic Transactions (Contract Formation) Amendment Bill

I move, That the Electronic Transactions (Contract Formation) Amendment Bill be now read a second time. The purpose of this bill is to clarify the legal position on the time at which a contract is formed if the acceptance of the offer is sent by electronic communications. It is indeed a very important piece of legislation.

If I may begin with just a quick overview of the importance of contracts—

💬 Hon Ruth Dyson: You could tell us why you thought of it, too. Like, where did the inspiration for this come from?

We will move on to that later on, thank you. Of course contract law is one of the fundamental cornerstones of our legal system. Contracts facilitate trade and commerce, as well as other business and social transactions, where they are proof of a transaction having taken place for a promise to fulfil a certain obligation. A contract is important as it protects both parties from any surprises and any changes to the contract. This helps parties to avoid any type of misunderstanding that may arise, and sometimes provides a mechanism for settling disputes that arise between parties. So a contract is an agreement having a lawful object, entered into voluntarily by two or more parties.

Typically, each of these parties intends to create legal relations between themselves. The elements of the contract are offer and acceptance, normally by competent persons having legal capacity, who exchange consideration—which is generally in the form of money—and where the terms of the contract must be certain. So contracts are at the very heart of the market system that underpins the prosperity that we all enjoy and, indeed, are the foundation of this nation and our economy. Contracts may, of course, be formed orally. They may be formed on paper or through conduct or electronic means.

As has been explained in the explanatory note of this bill, the general rule is that the contract is formed at the time at which acceptance of the offer is communicated to the offeror. An exception to that was created by a famous legal case called Adams v Lindsell. Here I must impose a little bit of history on the House and go back to 1818, when the two parties in that case were involved in the sale of some wool. On 2 September 1818 the defendants wrote to the plaintiffs offering to sell them fleeces and required an answer in the course of the post. The defendants in this circumstance misdirected the letter, so that the plaintiffs did not receive it until 5 September. The plaintiffs posted their acceptance on the same day but it was not received until 9 September. Meanwhile, on 8 September, the defendants, not having received an answer by 7 September as they expected, sold the wool to somebody else. Therein was the nub of the problem.

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 somebody else. The judge 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, and it would go on and on indefinitely. So it was decided that when the offeree places their acceptance in the post, there was a fictional meeting of minds that concluded that the offer was done and gave effect to the acceptance. The idea was tidied further into what is now referred to as the postal acceptance rule in the 1892 case Henthorn v Fraser, where the court determined the precise time limit of acceptance—that is, the moment when the letter of acceptance is posted.

So the longstanding rule as to postal acceptances in Adams v Lindsell is not appropriate for electronic transactions. Therein lies the background to this member’s bill.

💬 Kris Faafoi: Why take 5 minutes to explain something that takes 30 seconds? Get on with it.

I know it is difficult sometimes for these complex things to sink in on the other side of the House, so I want to take my time. However, be that as it may, the will of this House was sufficiently favourable to pass this bill at its first reading. I think it was 83 votes to 37, so it was quite a resounding victory. It was sent off to the Commerce Committee, which considered this bill in quite some detail and heard submissions. I was grateful for the work—

💬 Hon Member: You don’t have to do the full 10.

What was that? I was grateful for the forbearance of the committee and the hard work that it did in listening to the submissions and wrestling with some of the issues. It is not as simple as it seems, because when indeed is an electronic offer accepted? Is it when it arrives in the in-box, or is it when it arrives in the server? Sometimes there is a gap between when it arrives in the server and when it arrives in the in-box. It is not always as straightforward as it seems.

The committee made a couple of suggested changes, which I am grateful for. Clause 5 of the bill relates to contract formation. My initial bill introduced a proposed 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. This would create a misapprehension of a hard-wired rule applying—that the offer can be deemed to be accepted electronically only at the time of receipt. The committee proposed amending clause 5 to insert a new section 13A into the Electronic Transactions Act 2002, instead of the 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.

Proposed new section 13A(1) would ensure the bill would achieve its intended effect. Section 11—

💬 Kris Faafoi: I’ve changed my mind; I want to hear the rest.

Mr Deputy Speaker, there is a lot of disruption. I am finding it hard to follow my train of thought on this, and I am finding myself getting muddled. I am wondering whether I should start again—go back to the start—because I really have lost my train of thought.

If you do not mind, I just want to touch on the committee’s proposed amendment to clause 5 to insert new section 13A instead of the new section 32A into the Act, to make it clear that this was a default rule instead of a rigid approach from which the parties would be unable to contract out. So new section 13A would ensure that the bill achieves its intended effect. Section 11 of the Act establishes the time at which the electronic communication is taken to be received. The 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.

Proposed new section 13A(2) specifies that the acceptance rule would not apply if the contracting parties agree otherwise. I think that is absolutely appropriate because if the parties negotiated specifically their own mutually agreed conditions in relation to the time and place of receipt, then good luck to them. We live in a free society and they should be able to do that, and I absolutely agree. In fact, that is indeed the principle that underlies my next member’s bill, which I hope to have to drawn in the next ballot. That bill is about contract formation in terms of fitting in elements of industrial relations. The committee’s amendment would maintain the freedom of contracting parties to decide the time at which a contract is formed.

I also want to mention the question of the time of receipt and the designated information system. The committee considered whether the terms “time of receipt” and “designated information system”, used in sections 10 and 11 of the principal Act, lacked clarity. I am pleased to see that the committee was not persuaded that they lacked clarity and considered that the terms were in need of no further definition. On that score I was very pleased that the committee reported back and I do want to thank the Hon Clayton Cosgrove for all his work on the committee and the fact that he was part of the overall group who reported back unanimously that this bill be continued on in this way. So I am looking forward to the support of Labour this time round.

If I did have a little bit more time—

No, you have no more time, unfortunately.

There are times in this Parliament when history is made, and tonight has been one of them. The member Paul Goldsmith, who is the author of this bill, the Electronic Transactions (Contract Formation) Amendment Bill, thanked the Commerce Committee, of which I am a member, for its assistance. Indeed, I have to say that after dealing with this piece of legislation the members of the Commerce Committee felt like the collective guys with the shovels following the elephant—big time.

I have to say that I thought that Mr Goldsmith was a writer of some repute. He is a man who has penned many literary works including, I think, a biography—he will correct me—of Don Brash and some interesting works regarding that notable member of Parliament John Archibald Banks, known to us here colloquially and affectionately as “Brown Bag Banks”. But when it came to this piece of legislation, I have to say to Mr Goldsmith, you would have thought it had been written by the local village idiot. This is a piece of legislation that presumably came about because the whips or somebody in the hierarchy of the National Party said: “Look, we need a member’s bill. We need to throw a few in the ballot to cut Labour’s chances and the Greens’ chances down. So can somebody somewhere come up with a few pages of drivel so we can bang it in.” You know, a bit like taking a lotto ticket.

💬 Kris Faafoi: And Paul said yes.

And Paul said yes. You know, there is an old military phrase: “Never volunteer.” And I have got to say that this was pure spin, pure bunkum, and Mr Goldsmith is right in one thing. The Commerce Committee—

💬 Louise Upston: You’re just jealous you didn’t come up with the idea, Clayton.

Jealous of Mr Goldsmith? Hell no, I have got to say, not on this one—and a man who has on his CV the biography of John Archibald Banks. I am told he got sidetracked and that is why this bill is in trouble—because he got sidetracked. He got sidetracked because apparently he is writing the trilogy of John Archibald Banks, the penultimate work. I think it is going to be entitled John Banks: Looking Through Striped Sunshine—or something like that—From Behind the Wire, or something like that. This will be the final chapter, or the penultimate chapter, in the career of one John Archibald Banks.

But I have to say that when I heard Mr Goldsmith talking about this, I heard three words. I heard the words “fleece”, “fraud”, and “the defendant”, and I have got to say that I thought of John Banks again. Mr Goldsmith was quoting ancient legal cases. Mr O’Rourke is a lawyer. He will take up this point, I am sure, because unlike me he has got a legal mind—I am not a lawyer. But there was “fleecing”, “fraudulent” activity, and “the defendant”. Maybe Mr Goldsmith could answer this question: did the Hon John Archibald Banks act as a consultant in respect of this bill? “Fleecing”, “fraudulent behaviour”, and “the defendant”, I think, are three concepts that Mr Banks—I am sure he will take a call at some point—could give us many hours of dissertation on. “Fleecing”, “fraudulent behaviour”, and being “the defendant”—after all, he has been the defendant three times, convicted twice, and is up on the third strike.

Then we look at the bill, and it talks about “offer” and “acceptance”. It talks about “offer” and “acceptance”. Sam Lotu-Iiga, again a lawyer, will know this. He will recall his stage 101 law classes on offer and acceptance. I am just wondering whether Mr Goldsmith, as he put this piece of drivel together, actually consulted John Archibald Banks. He had the offer, he accepted, and he is now the defendant. Who got fleeced? I would say it was Dotcom, but who knows?

I have to say that this bill should have been encompassed in a Statutes Amendment Bill. When it arrived at the select committee it even failed to clear up ambiguities in electronic contract acceptance by not defining when the contract “arrived” at the recipient’s electronic address. That is how much effort and intellectual rigour was put into this legislation. He could not even define the word “arrived”—when an offer and an acceptance have arrived. This is the drivel that was put in place.

So I say to Mr Goldsmith, who I know is hanging on every word, that if he paid John Archibald Banks a consultancy fee to consult on this bill, he should ask for his money back. He should ask for his money back because a fraud has been committed, because Mr Banks was obviously offering advice—[Interruption] Well, maybe he did have a qualification for it, actually. Did that advice arrive in a plain brown paper bag? I do not know. So I just say to Mr Goldsmith that surely there is a lesson in here for him. Next time the whips ask for a volunteer, I say to Mr Goldsmith, do not volunteer, because this is drivel. This is absolute drivel. It is wrongly defined, badly drafted, and I presume it never made its way anywhere near the Clerk’s Office for the assistance that we can obtain in drafting legislation, because the Clerk would have looked at this and said: “Oh my God! How do we fix this?”. So it obviously got nowhere near the Clerk’s expertise or any legal mind, or any intelligent mind of any kind. It was just hashed together as a bit of political spin that is substandard.

I have got to say that I cannot recall the amount of money per hour—maybe the Speaker or somebody else could remind me—that it actually costs to run this place. Mr Goldsmith in his political career has been one who has railed against wasteful expenditure, as has Mr Banks, even though in his last term as mayor Mr Banks trebled the debt of the Auckland City Council, the big spender.

💬 Kris Faafoi: He did what?

He trebled the debt of the Auckland City Council. I do not know how many dollars, how many thousands of dollars, it takes to run this Parliament hour after hour, but it is a disgrace that we are wasting taxpayers’ money tonight dealing with a political stunt and political drivel, which was so badly drafted that the Commerce Committee spent hours trying to put Humpty-Dumpty back together again. We did our best. We shovelled behind the elephant. We tried to get something with a semblance of intelligence back into this Chamber, wasting taxpayers’ money every hour that we did it. I say to the Government that I look forward to the next speaker who will get up and have a crack at this. If you cannot even define the word “arrived” in your draft legislation that goes before a select committee, if you cannot define “offer” and “acceptance”, you should not be in this Parliament.

I got one member’s bill through. That was the boy-racer stuff. Luckily, I had a lot of good sound minds to lean on both in my party, in the bureaucracy, and in other places. The bill was actually adopted by the Government and got through and hopefully contributed to doing a little bit of good work around the country.

But I have to say that this bill is political drivel. This is a political pamphlet. But I have got to say that it is very apt when the owner of the bill, the sponsor of the bill, John Banks’ biographer, gets up and talks about fleecing, fraud, and the defendant, and quotes legal cases, then we know he is still under the influence of that very special mind, that very special mind in the Parliament, John Archibald Banks. He is in the rotten pile, one of two, including Peter Dunne, that props this crew up over there. It is very, very telling that this bill deals with offer and acceptance because we know, of course, that Mr Banks was offered, he accepted, and got the brown bag and then does not want to admit it, and he is going to pay a price for that.

So I just say this to the National Party. Fair go. Let us treat the people out there with a bit of respect. They are not numbskulls. They are not stupid. They are intelligent in our communities, and they can smell and see bull when it is put before them, and this is pretty substandard stuff. Those members over there know that this bill does not make sense and know that it makes very little contribution to the body politic. But I suppose again there is a correlation with Mr Banks in that when he was Minister for Small Business he introduced a piece of legislation that abolished 31 Acts that did not exist—another classic and historic moment in this Parliament. I say to Mr Goldsmith: next time, do not volunteer, but I will buy a copy of the book when it comes out, John Banks: Behind the Wire.

Mr Cosgrove has painted a very unparliamentary picture, or perhaps a metaphor, of the Commerce Committee wandering through a zoo, following an elephant—

💬 Hon Clayton Cosgrove: With a shovel.

—with a shovel. Yes, those were your words, Mr Cosgrove. Fortunately—well, possibly fortunately—in regard to the bill, I was not a member of the Commerce Committee at that point in time, and so I come to it with fresh eyes. I come to it with fresh eyes and a different perspective from Mr Cosgrove. I read the title of the bill—Electronic Transactions (Contract Formation) Amendment Bill—and I think about the modern economy that we are currently in. It is a wonderful economy, and it is an exciting time to be a Kiwi, to be a New Zealander, in the New Zealand economy. It is exciting for a range of reasons.

I will start with the Business New Zealand Back to the Grindstone function I attended just last night down at the Cake Tin, where the speakers stood up one after another and said there were very good omens for business in New Zealand. They talked about the positive vibe that was in the business community and the way the Government was creating the right conditions to invest in New Zealand. There was a great vibe. I think that is why it is so exciting to be part of the New Zealand economy at the moment and to be part of this Government, which is actually driving that economy forward. The reason why I say that in relation to this bill, the Electronic Transactions (Contract Formation) Amendment Bill, is that, actually, more and more transactions are occurring online. I do not know the figures, but, in fact, millions and millions of transactions are being conducted every year online, and that requires us to be pretty clear and accurate about when the offer and acceptance on those transactions takes place.

I commend Mr Goldsmith for bringing this bill to the House. I commend him for bringing this member’s bill. Not too many members have the opportunity to get to this point in time, to successfully bring a member’s bill into the House and to have it pass, as I am sure it will over the next few weeks in this House. But let us be clear about what this bill does. It clarifies the legal position on the time at which a contract is formed if the acceptance of the offer is sent by electronic communication. It does take the debate forward, and it actually adds to the initiatives this Government has rolled out to drive a better economy. According to those guys at the Back to the Grindstone meeting last night, there has not been one silver bullet that has actually taken the economy forward; it has actually been done by a huge volume of different policies that we have driven as a Government.

Just to remind you, there have been four key goals of the Government. Firstly, there is getting the country back to surplus. We are going to do that in 2014 and 2015. Secondly, there is rebuilding that beautiful city of Christchurch.

💬 Chris Hipkins: What has this got to do with the bill?

There are 50,000 repairs that have taken place down there already. I tell you, Mr Hipkins, it has a lot more to with this bill than what Mr Cosgrove was talking about when he talked on and on about Mr Banks. So I will continue. The third goal is actually about building better public services, and in that regard, we have outlined 10 key result areas. Result 10, which is actually about driving more online transactions, has a lot to do with this bill, and I want to talk about that in some depth. I will come back to Better Public Services Result 10, because for electronic transactions, the point at which offer and acceptance is agreed, as defined clearly by this bill, is going to play a big part in modern transactions going forward.

The fourth area where we have tried to drive big change is through a more competitive and productive economy. That has been driven by the Business Growth Agenda, of which there have been six key components, many of which require changes in information and communications technology.

💬 Kanwaljit Singh Bakshi: Can you elaborate on that?

Can I elaborate more on that? I certainly can. One of the big initiatives there is ultra-fast broadband. What will that do? It will drive more electronic transactions. It is a modern economy. This bill helps us to be clear about when offer and acceptance is achieved in those electronic transactions.

I just want to be clear about what we have achieved with ultra-fast broadband, because it is exciting to see what the Government has rolled out in that respect. In terms of broadband, we are spending $1.65 billion, or that sort of level, on making sure that that electronic highway to conduct these transactions is good. The aim is to have that delivered by 2025. We have rolled it out to 40,630 new end-users just in the last quarter, up until 31 December. Now there are 363,000 end-users around the country with ultra-fast broadband. We are 27 percent complete. That is another huge initiative. There are more than 2,000 schools that are now online. They are able to connect to fibre. We have even got 39 of the most remote schools connected, allowing those communities to be connected through hubs. And, guess what? They also depend on electronic transactions, as well.

💬 Kris Faafoi: Is that right?

They probably even do out in that beautiful suburb that you live in, in Wellington, Kris. They will actually be concerned about electronic transactions, as well. But I will come back to the third point, which I wanted to spend some time on, which is around those key objectives in building Better Public Services, which this bill certainly adds to significantly. In terms of Better Public Services, we had 10 result areas that the Prime Minister rolled out. Result 10 was about bringing more transactions online in a digital environment so that by 2017, 17 percent of transactions by which the Government interacts with New Zealanders are online. In that regard we have brought out a basket of those transactions, many of which are electronic transactions that require an offer and acceptance component.

Let us go through a few of those transactions that are in the basket of 10. I will just start with applying for financial assistance with the Ministry of Social Development. Fifty-one percent of those transactions are now being delivered online. For paying individual tax, 75.1 percent of those transactions are now being delivered online. For filing an individual tax return, 77.9 percent are. Paying for a vehicle licence from the New Zealand Transport Agency actually requires an offer and acceptance. This bill goes to the heart of being clear about when that transaction is completed, so I think it is really important, and 24.8 percent of those transactions are being delivered online now. The New Zealand Police—paying for a fine on time. I accept that in respect to that it is probably not a transaction where there is an offer and acceptance. One is actually being forced to pay that one, but 42.2 percent of those are delivered online.

💬 Kanwaljit Singh Bakshi: What about for passports?

Passports? Well, that was one that I was fortunate to have a fair bit to do with myself through the Department of Internal Affairs rolling out passports online. We now have 31.4 percent of passports being delivered online, which is 20 percent more than they used to be, with a turn-round time of 3 days. That is absolutely sensational. We have also got New Zealand Customs using digital transactions, with 45.6 percent using SmartGate.

So, far from the metaphor that Mr Cosgrove wanted to paint at the start of this debate—that the Commerce Commission was following around some elephant with a series of spades—I see a totally different view of this particular piece of legislation. I see it as part of a tranche of new initiatives that this Government has rolled out. We have made it clear that we agree that there is no silver bullet for taking this economy forward. It is going to take constant and never-ending improvement and constantly lifting the bar. Even small bits of legislation like this inch the economy forward. And, guess what? We are actually seeing results. Some of the best economic growth in the Western World is being projected. This economy will be back in surplus in 2014-15. We are in fantastic shape. It is an exciting time to be a New Zealander and an exciting time to be part of this Government. Thank you.

There are some bills that this side of the House opposes when they come before this House because they are wrong, because we fundamentally disagree with them, or because we are philosophically opposed to them. We absolutely oppose the Electronic Transactions (Contract Formation) Amendment Bill because it is not worth the paper it is written on. Quite frankly, it is an embarrassment that a member has brought in a member’s bill that has wasted the Commerce Committee’s time. The Commerce Committee usually does very good work. Officials were brought in on more than one occasion essentially to tell us that this bill is a nothing bill and that it has essentially been rewritten to become a nonentity.

The only thing I want to say about this bill is that the “Purpose” clause no longer has a purpose. The purpose has been removed. This is a nothing bill. We oppose it.

When I was elected to Parliament, I hoped to come to this House to really make a difference to New Zealand, because I really believe in creating a fairer, greener, and smarter future for all New Zealanders, and that is what the Green Party is working towards. I do have to say that I knew when I came here that we would have to deal with some trite and trivial details, but I never really expected anything quite as trite and trivial as this bill, the Electronic Transactions (Contract Formation) Amendment Bill, which I had to sit through in the Commerce Committee. I do not really have much to say on it, so I will stop there. Thanks.

We are moving through this bill, the Electronic Transactions (Contract Formation) Amendment Bill, at tremendous speed because members of the Opposition have very little to say. I am very surprised at that. We live in an electronic age and it is imperative right through the systems of electronic transactions that we have in this country that they be foolproof, and that when we see areas where improvements can be made, no matter how small, we actually apply ourselves to that. You know, there is an old saying that if you look after your pennies, then the pounds will look after themselves. It is important in regard to detail that attention is paid to it and that things are improved, and that is what this bill, brought to the House by my friend and colleague Paul Goldsmith, does.

It is small but he has gone through and shown through history that moments of transactions being conveyed and completed are very important for the economy of whoever may be involved. It is nothing to be trite about. We know that businesses have been lost because of transaction failures at times. No doubt relationships have been lost because of transaction failures at times. It is important, as Mr Goldsmith has identified, that this is an area where clarity can be achieved, and this is what we have achieved in this bill.

I guess it is part of this John Key - led Government that we attend to the detail of these sorts of measures, and this member of Parliament, this National member of Parliament, has sought to do that. We are very committed to ensuring that we have a very competitive and robust economy. So although it may be in the mind of the Opposition to mock and make trite these things, we take these things, as small as they are, as very serious. So I would like to congratulate and commend my colleague who has brought this bill to the House.

It has gone through the Commerce Committee. During that process we had eight people submit. Members of the Opposition will acknowledge that we had some very interesting discussions during that select committee process. Although on the surface it may seem to be a small measure, behind it there were some very interesting philosophical discussions that I think we need to acknowledge.

As I come to the conclusion of my remarks, I want to just mention that we did find in our procedures in the committee that there were cases—in Australia, in particular—where there had been errors and mistakes made in the transmission of information, payments, or bills, whatever it might be, that actually did cause concern. Mail servers in a particular jurisdiction of a council received information but it was not passed on to the appropriate person. In that particular case, that did go to court. It was deemed that once it had been received by the server in that jurisdiction, in that council, it was received then. Those things do not go to court unless they really matter, and they did matter. We found those sorts of cases where just a single transaction, an email, an acceptance, a payment, whatever it could be for anybody out there who uses electronic means to communicate, even though it might be a small email, to that person it could mean a lot. So we worked through this and we have brought our recommendations back to the House. I am very pleased to stand in support of this bill under the name of Mr Paul Goldsmith. Thank you.

The Electronic Transactions (Contract Formation) Amendment Bill is not one of the great pieces of legislation by this Government. In fact, if it was, it would be the only great piece of legislation by this Government. It is also not one of the many awful pieces of legislation by this Government, and it has actually been crowded out by so many pieces of even worse legislation by this Government. So it is neither good nor bad; it is sort of neutral, in between.

In fact, it is probably a piece of legislation that is not really needed at all, because the general rule of contract formation is that a contract is formed at the time an acceptance of the offer is communicated to the offeror—that is, when the acceptance is received. This generally applies unless there is an established exception. There is no such exception for electronic transactions such as emails. There is an exception for acceptances by post in Adams v Lindsell, so that the date and time of acceptance is when the letter is posted, not when it is received. The reliability of the postal system was considered to be such that this rule should apply. Otherwise, it would be impossible to complete any contracts through the post because if the offeror is not bound by their offer until the acceptance is actually received, then the offeror, if he wanted to avoid the contract, could simply deny having received acceptance. So the longstanding rule for postal acceptances in Adams v Lindsell is not applicable to, or appropriate for, electronic transactions.

Contractual offers by telex, as with the telephone, are simultaneous, so a contract is formed in those cases when the offeree accepts, and that is accepted law. Although it is correct that there is no clear authority on acceptance by way of email, there is no established exception either, so the general rule applies in favour of acceptance when it is received. This, effectively, is at the same time as when it is sent, if it is sent by an electronic means such as email. Nevertheless, this bill will serve to clarify the law.

I accept that the position with telex differs from emails in some respects because communication by telex is generally acknowledged at each end—the sending machine and the receiving machine. With email it is not known with certainty to the sender that an email has been received unless confirmation is received from the recipient. The sender of an email can obtain confirmation that a message has been received, although that is not commonly done, as we all know. It is also true that emails are delivered by a variety of servers, and there is therefore not the same assurance that an email will get to the intended recipient as in the case of post. This bill, therefore, does deserve support, as recommended by the Commerce Committee. I also support the select committee’s amendment of the bill to confirm that the contracting parties can decide for themselves when and how acceptance will occur, and that the provision in the bill for acceptance as at the time of receipt will be the default position. This bill clarifies this one small area of uncertainty and would, to that extent, assist business in New Zealand.

Given the prevalence of electronic communications in society today, especially email and by smartphone and social media and so on, it is useful that the current Act be amended in the way that is now set out in the amended bill. So although it is certainly not an earth-shaking piece of legislation, it does have some use. New Zealand First will, therefore, support it.

It is a great pleasure to speak on the second reading and in support of the Electronic Transactions (Contract Formation) Amendment Bill. This bill is in the name of my good colleague National MP Paul Goldsmith, and I would like to thank him for bringing this member’s bill to the House.

This bill amends the Electronic Transactions Act 2002 and clarifies the legal position on the time in which a contract is formed, if acceptance of an offer is sent by electronic communication. This bill is a simple but good bill. It will tidy up uncertainty and offer New Zealanders peace of mind, as well as increasing the flow of business. Businesses and consumers are now living in the internet age, and our legislation needs to keep up with changing technology to ensure that we have consistency.

The internet has already impacted the economy in a range of ways, such as investment in internet-related infrastructure and creating an industry that provides goods and services that enable the internet. In 2009 Statistics New Zealand valued the net capital stock held in the telecommunications, internet, and library services industries at $14.7 billion, or 2.6 percent of New Zealand’s total capital stock. Since then the Government has agreed to invest $1.65 billion in the ultra-fast broadband or “UFB” roll-out through to 2019. In 2009 the internet service industry contributed $4.2 billion towards GDP, or 2.3 percent of GDP.

The Boston Consulting Group estimated in 2012 that the internet economy contributed US$2.3 trillion towards the G20 economies in 2010 and projected that it would reach US$4.2 trillion by 2016. It is believed that broadband will deliver $32.8 billion in benefits to New Zealand end-users over the next 20 years.

The New Zealand Institute of Economic Research completed a report on the role of the internet in the New Zealand economy in 2012. The report emphasises, and it is quite a long quote but a very important one, that “Economists see the institutions (‘rules of the game’)—such as the legal status of different types of transactions—in an economy, as vital determinants to the way it functions. The structures and frameworks must ‘suit’ (match and support) the type of economic activities that are taking place. So the wider rules of society such as laws, enforcement provisions, and other policies outside the internet play a role in determining its effect on the level of structural change or innovation in an economy. This suggests that for the internet to maximise its impact, complementary policy and institutional settings need to be correctly set and kept up to date.”

Under the current legislation, when the contract is accepted by post a rule applies and it means that the contract has been formed as soon as the acceptance was placed in the post. However, this rule does not cover contracts accepted electronically, namely by email. So if someone accepts a job by email, then there is no legal certainty over when that contract was formed.

The National-led Government is focused on building a more competitive and productive economy—hence we are rolling out ultra-fast broadband and we are working hard to ensure our public services utilise online services. This bill recognises that we live in an internet age. The Commerce Committee has recommended that the postal acceptance rule be applied to electronic communications. This bill is as simple as that.

I would like to talk a bit about the amendments. Firstly, in the original member’s bill, clause 5, which relates to contract formation, proposed inserting new section 32A, which clearly stated that an offer submitted electronically would be deemed to be accepted at the time of receipt of acceptance by the offeror. However, the Commerce Committee felt that this could create a misapprehension that an offer can be deemed to be accepted electronically only at the time of receipt. Therefore, the committee has proposed amending clause 5 by inserting new section 13A, instead of the original section 32A, to clarify that this is by no means a rigid approach but instead a default rule that would allow flexibility. This amendment would ensure that the time of receipt, referred to in section 11 of the Act, would be applied to acceptances of contract offers that are communicated electronically.

The National-led Government is committed to making better online services for New Zealanders. We believe that ultra-fast broadband is vital and that it will promote innovation, create jobs, and grow the New Zealand economy. This is why we are investing $1.65 billion to deliver ultra-fast broadband to 97.8 percent of all New Zealanders by 2025. It will bring us closer to the rest of the world and increase our competitiveness.

There are now more than 363,000 end-users connected to ultra-fast broadband in New Zealand. The Rural Broadband Initiative has connected over 179,000 rural homes and businesses to fast wireless broadband, and over 2,000 schools are now connected to fibre. Ultra-fast broadband has revolutionised the way that many businesses, schools, health care providers, and communities operate.

The impact that the internet has on us is far-reaching. It is believed that the changes that the internet has already caused could be the tip of the iceberg. Many types of commercial and social contacts are possible on the web. It is also noted that the internet’s transformational impact is not limited just to who produces what, and how, and where; the internet has already created new wants, and the products and the markets to meet them.

From day one, National has been firmly focused on the issues that matter to our economy, to our community, and to all New Zealanders: a strong economy, more jobs, better front-line health and education services, a safer New Zealand, and rebuilding Christchurch. We have a Business Growth Agenda with hundreds of initiatives to improve the productivity and competitiveness of the economy.

To conclude, clear and predictable laws governing commerce are some of the foundations of the success of the modern economy upon which our prosperity depends. Clarity and certainty lead to confidence, and confidence leads to greater investment, so our laws need to be consistently maintained and adapted to respond to changing technologies. This bill tidies up one small area of uncertainty and will go some way to increasing the flow of business. I commend the bill to the House. Thank you.

I know that the country is still basking in the collective glory of our cricket result yesterday and the season that our cricketers had, but what people at home are either listening to or watching tonight is not cricket in two senses. The first sense that this is not cricket in a parliamentary sense is that the Electronic Transactions (Contract Formation) Amendment Bill should not even be being debated on a members’ day. This is one of those bills that the Government puts into the ballot to prevent really, really good bills from this side of the House being debated, so for that reason this bill is a waste of time. The second reason that this debate in the House tonight is not cricket is that the National Party members will take up about an hour of this House’s time explaining one simple thing, the one very small thing that this bill does.

The bill cleans up a piece of legislation that the Government has already amended. This amendment bill went to the Commerce Committee and was actually tidied up by that select committee. When it arrived at the select committee it was rubbish, and then the select committee cleaned it up. This bill does one thing; it does not do all the things that the National Party members are debating tonight about the economy. All it does is clarify a rule about the formation of a contract. The postal rule, which has applied for many, many years, is that if you have a contract offered to you, then that deal is done when the letter is sent—offer and acceptance. In this digital age it is different, so when someone’s server receives the acceptance, that is when the contract is done. That is all that this bill does. That is all it does. And this House has spent time in this House and money—in terms of the select committee process and all of the officials—just to do one small thing. So, on that basis, this bill is a waste of this House’s time. It should have been put through as a Government bill and as part of a Statutes Amendment Bill, and that is why we oppose it.

I was absolutely intrigued to listen to the last person speaking, Kris Faafoi—I suppose that was what he was doing. He did start to talk about something extremely constructive for a moment or two—the cricket, which I thought was going to be really interesting. He wavered off, of course, into something that the Labour Opposition, since I have been in this House, has spent hours and hours and hours doing: wasting the time of this House. I listened to Mr Cosgrove tonight making the same speech that I have heard him make seven times since Christmas. It is beyond me to understand how Mr Faafoi could get up there and accuse this Government of wasting the time of the House, given the record of his associates.

Anyway, it is a privilege for me to get up and speak on the Electronic Transactions (Contract Formation) Amendment Bill. I, of course, do not sit on the Commerce Committee and have had no part in the discussion on this bill. I sit on the Primary Production Committee with the guru from the Greens, Steffan Browning, who is very busy over there. The guru from the Greens is constantly on the case of the agricultural sector. I sit on that committee with him and of course we do some very structured stuff in our select committee. We pass the most important bills—bills that keep this country running—like the animal welfare legislation and the Food Bill. Of course, to use one of Mr Cosgrove’s favourite terms, they are pillars of this country’s economy. He talks about the pillars or whatever, does he not?

Anyway, I listened to Mr Goldsmith tonight speaking extremely eloquently about this bill. I then listened to Jian speaking about this bill, and in no uncertain terms he outlined the whole process of this bill—the process that it goes through and all of the parameters of it. I thought he did a wonderful job of it and I was impressed with his speech.

I am old enough, I guess, to remember a time when a shake of the hands formed a contract. We have come a long way since those days, of course. Now you zap your little card across the top of a machine and it steals your money very quickly. That is what this bill is all about. It is about creating the environment for us to do business quickly, efficiently, and effectively. I cannot help but go back to the Greens and think of the objection they have to bills like this. The amount of time the Greens spend in this House tabling papers—for a party that spends its life trying to preserve our environment, it is beyond me to understand why it would consistently, every day, table more and more trees in this House. I think that is a great shame. For a party that ostensibly supports the environment, for it to be tabling paper after paper in this House seems extraordinary to me.

💬 Kris Faafoi: What about CO2 emission?

That is a problem as well, Mr Faafoi. That does create quite significant problems. Actually, I do have the privilege of driving through your electorate of Mana on a regular basis, and I do see there is quite a problem there. I just cannot wait for that road to get built, because that will definitely lower not only the carbon dioxide emissions but a number of other emissions as well, particularly the carbon emissions. From a Wellington perspective, I think once we get that motorway open and operating—and there is now a fly in the Chamber, and I have been here so long it is settling on me. To get that motorway open I think will be quite—in fact, the fly is attacking me—a major bonus for the capital city, and it will certainly help us get down to this most important place. I have got the fly. I have got it—that has solved that problem. So I am very keen to support this bill.

I just want to get on to the comments of Mr O’Rourke. Mr O’Rourke believes in policies that uphold public benefits ahead of private interests. That is the statement he makes on his own website. I was very pleased to hear him tonight supporting this bill. For New Zealand First to be supporting this bill through the House with Mr Goldsmith and, of course, the Government, I think is a pretty good effort.

Tonight, across the passage from here, we saw people from the Riddet Institute from Massey University, Palmerston North—the electorate of Iain Lees-Galloway. They live on my side of the river. They were in there tonight with some outstanding young scientists. They had six of the very best scientists who specialise, as they do, in food innovation and health. They were talking about things that would make this country a much stronger country. I was most impressed with the activities of the Riddet Institute and the presentations that were made tonight. Without those sorts of people working in this country, practising and putting into place scientific stuff that is hugely important to us, we would not make the progress we need to make in this country.

Of course, the same thing applies to technology. The Electronic Transactions (Contract Formation) Amendment Bill deals very much with modern technology—

💬 Kris Faafoi: This is not cricket.

—and the way our society has evolved. Of course, if you really want to get back to that cricket, for those of us who like cricket, the last few days have almost been made in heaven for us. For people who are very keen cricketers, like Mr King here—who, in fact, props up the parliamentary cricket team—the last 3 months have been bliss for us. You just cannot believe that you could have so much success. So thank you, Mr Faafoi, for bringing up the cricket. It has been an extraordinarily successful time for us in New Zealand. Of course, the other thing about sport is that it emotionally prepares you for the dour bits of life. Those of you who participate in this House should play sport on a regular basis because it will encourage good health and make you feel an awful lot better about what goes on.

I just want to get back to Mr Browning, who is still in the House. I do not think he has listened to one thing that has gone on in this debate tonight. In fact I am sure he has not. I just want to get back to him for a moment, because he does make an interesting contribution to this Parliament and his theories on agriculture are well worth listening to.

Anyway, to get back to the bill, I heard Dr Jian Yang speak on this bill at length tonight. He talked about the way the bill is structured and the way it works. He talked about some of the history of it and gave me a great background on it, I guess. As I said earlier, I was not on the Commerce Committee, which dealt with this bill, and it certainly educated me as to what these sorts of things do for us.

It is a very interesting place to be, this Parliament, and I think that members’ day, particularly, is an interesting time.

💬 Kris Faafoi: Not cricket.

No. Well, I will get back on to rugby now. Members’ day does give us the opportunity to bring things from our electorates into this House—things that concern us and things that concern us as members of Parliament—and to make a difference as to where we are going in the future, to make a difference as to where the country goes, and to have some little bit of influence on what goes on in our lives on a daily basis.

This Government is committed to producing or creating an environment where we can thrive and do well as a country. It is determined to create an environment that creates less dependence and gives people the ability to make their own way in life and to sort things out for themselves. I think that we have some extremely good policies in place to achieve that. We have taken a great lead in the last 3 years or so, and, certainly in the last 2 years since I have been in this House, we have taken a great lead in a lot of these things. I think we are really creating an environment that will make a huge difference to the future of this country.

We have listened to a number of speakers tonight on this bill. Most of them spoke for a very short time, which I find absolutely ironic given the amount of stuff we have had to listen to from the other side of the House over the 2 years since I have been here. It gives me a great deal of pleasure to support this bill. I want to congratulate Paul Goldsmith once again on navigating this bill through the select committee stage and getting it into the House and through its second reading in one piece. Thank you.

I am advised that this is not a split call.

As my colleagues have said, Labour is opposing the Electronic Transactions (Contract Formation) Amendment Bill. This is just a waste-of-time bill designed to clog up the member’s bill ballot process. If it was meaningful, it should have been part of a Government bill designed to deal with e-commerce matters. If it is a very minor thing, as it is, it should have been part of a Statutes Amendment Bill. For those reasons, Labour is opposing this bill.

It is my privilege to stand in support of this bill. This bill, the Electronic Transactions (Contract Formation) Amendment Bill, is an excellent piece of work done by my colleague Paul Goldsmith. The purpose of this bill is to provide some much-needed clarity on contracts and agreements that are accepted electronically or online. As more and more organisations look to offer their services online, it is only natural that the legal agreement that two parties sign may well be signed electronically. Therefore, it is imperative that the law is clear on such contracts and agreements so that the consumer is protected and the party offering the services is aware of its legal obligations.

This National Government has always said that clear and predictable laws are the foundation for any modern economy to succeed. Furthermore, it is no secret that markets prefer clarity and certainty from the Government in order to work with confidence and also to ensure that all parties to the transaction benefit. I congratulate my colleague Paul Goldsmith on introducing this bill and providing consumers and the market with certainty. This no doubt will increase the flow of business and make it easier for consumers to avail themselves of services. This will also attract more investment in different sectors with the clarity of this electronic contracts bill. The bill also fits in with the Government’s agenda for making public services more efficient. We have, for instance, initiated electronic passport renewal services, electronic applications with Work and Income New Zealand, filing one’s tax return online, and renewing one’s worker licence online, among a number of initiatives to make life for New Zealand consumers easy.

We are also working proactively on providing ultra-fast broadband to all New Zealanders. This will no doubt revolutionise the way many businesses, schools, health care providers, and communities operate. It will also overcome the tyranny of distance from the rest of the world, and new applications and ways of doing things will be developed. The latest quarterly report on the Government’s ultra-fast broadband and rural broadband programme shows fibre roll-out to a further 4,630 end-users across New Zealand during the 3 months to 31 December 2013. This means that more than 363,000 end-users are now able to connect to ultra-fast broadband networks across New Zealand. This means that 27 percent of the project has been completed. Further, fast broadband will provide prompt, innovative, and creative services to the consumer. It will also create new jobs and grow the economy.

I would like to touch on the bill regarding the time of communication of acceptance of offer. Clause 5 of the bill relates to contract formation, and, as introduced, it proposed 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. … 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’.” The committee proposed 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.” A new section 13A(1) would ensure that the bill achieves its intended effect. Section 11 of the Electronic Transactions Act establishes the time an electronic communication is taken to be received. The amendment would make it clear that the time of receipt referred to under section 11 of the Act also applies to the acceptance of contract offers that are communicated electronically.

The Commerce Committee received nine submissions and heard two submissions in person. The committee recommended that the bill be passed with amendments. The committee reported: “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.”

It is the intention of this Government to provide better public services to New Zealanders, and we have set a target of having an average of 70 percent of New Zealanders’ most common transactions with Government being completed in a digital environment by 2017. Ten transactions are being used to make progress towards the 70 percent uptake online. Renewal of adult passports—more than 125,000 people have renewed their passports online since the launch of online adult passport renewals in November 2012. Other transactions include applying for a visa; applying for financial assistance to the Ministry of Social Development; applying for an Inland Revenue Department number; paying individual taxes; filing individual returns; paying fines like speeding tickets or any other tickets issued by the police, which can be paid online; and paying a vehicle licence with the New Zealand Transport Agency. The experience of SmartGate for air travellers is a unique one. It is very convenient that you can just go to the SmartGate and you are processed without any hesitation. This has really brought New Zealand into the category of countries that have got modern technology available for their people travelling overseas.

This Government wants to make sure that people have got all those facilities that they need in this modern world, and we are committed to the development of this economy. We are proud of what this Government has done so far, and we hope that we continue to grow this. I am really proud to be part of this Government, led by the Rt Hon John Key, who has ensured that in the past 5 years the economy has got back on track. When we received the economy in 2008 it was in a real shambles. We are proud that we have really made progress, and we hope to continue doing this.

💬 Kris Faafoi: Now he’s ad libbing.

Sorry? I hope that this continues for 5 more years, and we will make this country the top country in the OECD. Thank you.

Bill read a second time.

Sitting suspended from 10 p.m. to 9 a.m. (Thursday)