Contracts, agreements and deeds are bread and butter to a successful business, however they must be executed correctly to be enforceable and legally sound.
The rules around executing contractual documents can be complex and difficult to remember, and they also change according to the kind of entity being engaged with.
When you’re entering into an agreement or a deed, how can you make sure that the deed or agreement is executed properly and therefore is enforceable? Read on to find out and, remember, our experts who are here to provide guidance and support if you need it.
Electronic signing
Many documents (notably excluding those in Schedule 5 of the Contract and Commercial Law Act 2017 (CCLA) such as wills, affidavits, and powers of attorney) can be signed electronically under the CCLA.
In the context of the CCLA, an electronic signature does not refer to just an electronic copy of a person’s handwritten signature. It is acceptable if the signature adequately identifies the signatory’s approval of the information to which the signature relates, and is as reliable as is necessary in the circumstances.[1]
An “electronic signature” is a method used to identify a person and to indicate that person’s approval of that information.[2] Electronic signatures can include:
- using an “I agree” tickbox
- scanned copies of signed hardcopy documents
- producing a signature through e.g. electronically drawing a signature, inserting an image of a signature, or typing a name
- an email signature.
These examples provide varying levels of assurance to transaction parties. A “digital signature” – which is the use of a document execution software which uses encryption and has higher levels of document protection such as Docusign – will provide a more reliable execution of significant documents, such as key supplier contracts.
New Zealand companies
Agreements
- Any person acting under the company’s express or implied authority may enter into an agreement on the company’s behalf.[3] However, the Court has found that a single director in a company with multiple directors has limited authority.[4]
- Therefore, depending on the scale of the agreement being entered into, it may be best practice for two directors to sign the agreement, or otherwise to satisfy yourself that the signing director has authority from the other directors to enter into the contract.
Deeds
- A company with one director can execute a deed alone, with their signature being witnessed. A company with two or more directors needs at least two of those directors to execute the document, and those signatures do not need to be witnessed.
If someone other than a director, such as an employee, purports to enter into a contract, then you should have the directors of the company confirm that person’s authority to act for the company, so that person is acting under the company’s express authority.
The constitution of a company may further restrict the requirements imposed by law.
A company which has not yet been incorporated may enter into a contract and that contract must then be ratified within a specified or reasonable time after the company’s incorporation.[5]
Items to review
- Company name and number.
- Details of directors.
- Company constitution.
- IDs of the people executing.
This information is available on the Companies Register.
Because many people can share the same name and even the same date of birth, a contracting party should also sight and take copies of, or request certified copies (e.g. from a lawyer) of, the relevant individuals’ IDs (e.g. driver licence, passport and proof of address). Generally, the more information you obtain, the harder it is for the contracting entity to deny they entered the contract.
Overseas companies
Overseas companies pose specific problems due to a lack of familiarity with how to bind overseas entities. Even if a contract contains a governing law or exclusive jurisdiction clause stating that the contract is governed by New Zealand law, overseas laws on contractual engagement may mean the contract is not binding.
It may help to engage with an overseas company’s lawyers, or your own overseas lawyer, who will know the local law on binding the company. Depending on the jurisdiction, lawyers may also have been required to complete anti-money laundering/counter-financing of terrorism identification (AML/KYC) checks on their clients, which can provide reassurance.
You may like to consider other means of managing risk, such as trade credit insurance, utilising an escrow agent to ensure funds are received prior to releasing product, or a third-party AML/KYC agent.
Individuals
Agreements
- An individual’s execution of an agreement does not need to be witnessed but, if it is, this will generally make it harder for them to deny that it was not them who signed it.
Deeds
- An individual’s execution of a deed must be witnessed. You should also ensure that the other formal requirements for a deed under the Property Law Act 2007 are met. These include the witness must not be a party to the deed, they should give their full name, their occupation and the name of the town or locality they usually reside.[6]
- Items to reviewThe IDs of the person, to check they are who they say they are. As noted above, sight the original and keep a copy, or obtain a certified copy.
Sole traders / trading name
Remember that sole traders are individuals. They may be operating under a trading name and have a non-personal brand attached to their business but ultimately a sole trader’s execution requirements are the same as any other individual.
Sole traders may have a New Zealand Business Number, which can be searched on the NZBN Register. You can use that register to check that the trading name being used by the sole trader is in fact registered to a sole trader and not, for example, a company.
Trusts
Deeds and Agreements
Trustees generally have a duty to act unanimously.[7] Therefore, when executing an agreement or deed, all trustees are required to execute the document but this requirement may be altered in the trust deed. If not all trustees are executing the document, check their ability to do this in the trust deed. Trustees execute documents in the same manner as individuals, in their capacity as trustees of the trust.
Trustees enter into a contract under their own name and are therefore personally liable for the obligations under a contract, though usually the trust deed will indemnify them for their actions as trustees. To provide comfort regarding the trustees’ ability to meet their obligations, you may wish to seek disclosure of assets and liabilities or other financial information for both the trusts and the trustees.
Summary of what is required
- The Trust Deed
- Any documents regarding the appointment or removal of trustees.
- IDs of the people executing.
You will need to ask for this information because it is not publicly available.
Incorporated societies
There are thousands of incorporated societies in New Zealand. They include sports clubs and hobby groups like the College Rifles Netball Club Incorporated, social or cultural groups like Alliance Française d’Auckland Incorporated, and professional groups like the New Zealand Institute of Credit Management Incorporated. The Incorporated Societies Act 2022 requires all incorporated societies to re-register by April 2026. Until then, societies registered under the former Incorporated Societies Act 1908 have slightly different obligations to those registered under the new Act.
Agreements
- An agreement may be entered into by any person acting under the society’s express or implied authority.
Deeds
- Incorporated societies under the new Act require a deed to be executed by two or more officers of the society (unwitnessed) or, if the society’s constitution allows, one officer (witnessed). For societies incorporated under the 1908 Act, deeds instead require a resolution by the Committee and affixation of the common seal countersigned by two officers of the society.
The constitution of an incorporated society may restrict the statutory requirements further.
Affixation of the common seal of the society is not required for societies registered under the new Incorporated Societies Act.[8]
Items to review
- The society’s constitution.
- The details of the society’s officers.
- IDs of the people executing.
The society’s constitution is available online through the Incorporated Societies Register. Details of societies’ officers are available online for societies registered under the new Incorporated Societies Act 2022.[9]
Legal partnerships
A partner is an agent of the partnership,[10] and one partner may execute a contract if the contract is carrying on in the usual way business of the kind carried on by the firm.[11] The instrument must be executed in the firm’s name or otherwise showing an intention to bind the firm.[12] Common examples of partnerships include law firms and accounting firms, but a partnership can be made up of any group of legal entities.
Items to review
- The partnership agreement.
- IDs of the people executing.
You will need to ask for this information because it is not publicly available. Partners collectively are personally liable for the obligations of the partnership.
Limited partnerships
Agreements
Any person acting under the limited partnership’s express or implied authority may exercise an agreement, usually the general partner.
Deeds
A deed executed for a limited partnership must be executed by a general partner, or anyone else empowered by the partnership agreement, and signatures must be witnessed.[13]
Summary of what is required
- Details of general partners.
- Partnership agreement, if execution is not by a general partner.
- IDs of the people executing.
This information is available online from the Limited Partnerships Registers.
General partners are personally liable for the obligations of the limited partnership, limited partners are only liable to the extent of their capital contribution to the partnership.
Joint ventures
If the joint venture is incorporated, then the way documents are executed will be in accordance with the type of entity the JV member is. If the joint venture is unincorporated, then each party will need to execute documents individually. JVs can be between all types of entity (e.g. an individual and a trust could be in a JV).
Items to review
- Joint venture agreement.
- Documents suggested in this paper for the type of entity party to the JV.
Statutory entities
Under the Crown Entities Act 2004
A statutory entity under the Crown Entities Act 2004 is a body corporate that is established by an Act and is listed under schedule 1 of that Act. These entities include Crown agents like the Accident Compensation Corporation and Fire and Emergency New Zealand, autonomous Crown entities like Heritage New Zealand Pouhere Taonga, and independent Crown entities like the Electoral Commission. The Crown Entities Act 2004 applies to these statutory entities, but they are founded by their own governing legislation such as the Fire and Emergency New Zealand Act 2017 and the Heritage New Zealand Pouhere Taonga Act?? 2014.
Section 127 of the Crown Entities Act 2004 sets out the method of contacting with a statutory entity. The wording closely mirrors the requirements for New Zealand companies. For this reason, the process for contracting with New Zealand companies should be applied to statutory entities, with directors being replaced by members of the governance board of the entity or the persons who constitute the entity (such as the Privacy Commissioner, which is a corporation sole).[14]
Educational institutions
School boards, Te Pūkenga—New Zealand Institute of Skills and Technology, and wānanga are educational institutions founded by the Education and Training Act 2020.[15]Universities are founded by their own statutes, such as the University of Auckland Act 1961.
School board members govern school boards. School board members are not personally liable for their actions as school board members if they acted in good faith and in the performance of the functions of the school board.[16]
Universities and wānanga are governed by councils.[17]Section 274 of the Education and Training Act 2020 sets out the method of contracting for these tertiary institutions. Its wording closely mirrors that of section 180 of the Companies Act 1993, and for that reason, the same document signing guidelines apply as that apply to a company, with directors being replaced by council members.
Ensure that any statutory entity is named correctly – for example, the University of Auckland uses the name Waipapa Taumata Rau, but under the University of Auckland Act 1961, its legal name is the University of Auckland.
Items to review
- Founding legislation to check legal name and legal structure.
- IDs of the people executing.
Details of educational board or council members are likely to be available online, though there is no official register.
Māori Incorporations
Māori Incorporations are a specific kind of entity governed by Part 13 of Te Ture Whenua Maori Act 1993. These incorporations resemble companies and are created by an order of the Court for administration of specific real property.
The provisions of section 180 of the Companies Act 1993 apply to Māori Incorporations therefore contracting rules for regular New Zealand companies apply to Māori Incorporations.[18]
The name of Māori Incorporations are stylised using the word “incorporation” at the end, eg “Mawhera Incorporation”, or older incorporations are styled using “the Proprietors of” eg “the Proprietors of Mawhera”.
The Māori Land Court keeps a register of Māori Incorporations, which appears to have last been updated in 2017.
Items to review
- The incorporation’s constitution.
- IDs of the people executing.
You will need to ask for this information because it is not publicly available.
Iwi/Hapū
The legal structure of iwi or hapū vary from iwi to iwi and hapū to hapū. Engaging with an iwi or hapū may involve engaging with many different types of corporate entity – there is no one size fits all, and many iwi and hapū have complex corporate structures.
Clarify the legal entity you are contracting with. It may be an incorporated society (eg Ngāti Ranginui Iwi Society Incorporated), it may be an iwi-controlled company (eg Ngāi Tahu Investments Limited), a Māori Incorporation, or it could be a statutory entity (eg Te Runanga o Ngai Tahu Act 1996).
Charities
Charities, like iwi and hapū, are not one specific kind of entity and can take many forms. They may be a company, an incorporated society, a charitable trust, or could be an unincorporated group which carries out business in the name of individuals. Charitable status is like an added label on the existing entity.
Charitable trusts created under the Charitable Trusts Act 1957, unlike regular trusts, may enter into a contract under the name of the trust itself. The trustees of charitable trusts, unlike regular trustees, are not personally liable for the obligations of the trust. Section 19 of the Charitable Trusts Act 1957 mirrors the execution requirements under section 180 of the Companies Act 1993, and therefore the same approach to execution should be taken for charitable trusts as for companies, with the charitable trust’s rules replacing the company constitution, and the additional option of affixation of the common seal to any deed.
Items to review
- The Charities register or charitable trusts register.
- IDs of the people executing.
Registered charities may be found on the Charities Register, and charitable trusts can be found online on the Charitable Trusts Register.
Powers of attorney
Entities may appoint attorneys who are empowered to act on the entity’s behalf. In this case, the attorney should provide and the deed or agreement should attach a copy of the power of attorney documentation. A power of attorney may not be electronically signed – it needs to be executed on paper, in wet ink.[19]
This documentation should be accompanied by a certificate of non-revocation of power of attorney, which provides that the attorney’s powers remain in force.[20]
Trusts are only able to appoint attorneys in restricted circumstances, so trusts should not usually be executing documents via attorney.[21]
Items to review
- The power of attorney and check if the kind of contract being entered into is within the attorney’s designated powers.
- The certification of non-revocation.
- IDs of the attorney.
You will need to ask for this information because it is not publicly available.
Conclusion
Executing contractual documents correctly is crucial for ensuring their enforceability and avoiding potential legal pitfalls.
As highlighted, if you are unsure about the type of legal entity you are dealing with, it is essential to seek more information from the customer and obtain professional advice.
In addition, if it appears that there are multiple individuals within the organisation, you may need more than one person to bind the entity. Generally, the more senior the representative, the better.
If in doubt, always confirm the authority from the owner or controlling persons.
Should you have any uncertainties or require assistance with executing your contractual documents, do not hesitate to contact the experienced team at Lane Neave. We are here to provide the guidance and support you need to ensure your agreements are properly executed and legally sound.
Disclaimer
This article is not intended as legal advice and it should not be considered or relied on by any reader as such. Like most aspects of law, each legal issue must be considered by reference to its own facts. The paper should not be treated as professional advice of any kind (e.g. legal, accounting, tax, investment or financial advice). It is for educational purposes only. Please note that the material linked in the article is for illustrative purposes only. Its inclusion is intended to make the paper accessible for all readers, not just lawyers. Lane Neave does not necessarily agree with or endorse the statements made in the linked material. We reference it for its overall usefulness for this discourse. Other than links to our own articles, Lane Neave does not claim any copyright or other intellectual property rights in those linked works. We also reserve the right to correct any errors in the paper that we discover.
[3] Companies Act 1993, s 180.
[4] Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285.
[5] Companies Act 1993, s 182-183.
[6] Property Law Act 2007, s 9
[8] Incorporated Societies Act 2022, s 123.
[9] Incorporated Societies Act 2022, s 52.
[10] Partnership Law Act 2019, s 17.
[11] Partnership Law Act 2019, s 18.
[12] Partnership Law Act 2019, s 20.
[13] Limited Partnerships Act 2008, s 17.
[14] Crown Entities Act 2004, s 10.
[15] Education and Training Act 2020, s 124.
[16] Education and Training Act, ss 151, and 272.
[17] Education and Training Act, s 271.
[18] Te Ture Whenua Maori Act 1993, s 270.
[20] See Property Law Act 2007, s 20.
