South Africa: The Legalities Of Agreements And Suretyships Signed Electronically

Contracting in the Digital Age

One of the few benefits of the COVID-19 Lockdown is that it has speeded up the adoption of the so-called digital or electronic contracting. While this form of contracting is already the norm in many instances, the challenge is, and always will be, that the law has not caught up with the technology.

In its simplest form, an agreement is emailed in the form of a PDF (Portable Document Format). If accepted, it is signed by the recipient, who prints it out and places their handwritten signature on what at that stage is a physical document, which is then scanned back into a PDF form and emailed to the agreement proposer. Alternatively, the recipient applies a digital signature directly to the PDF document, which could take the form of a scanned version of their handwritten signature or simply a digital impression of their name. On the agreement proposer's side, the person or persons repeat the digital signing process. A PDF copy of the counter-signed agreement is then emailed back to the proposer.

The question to ask is: is this form of digital contracting a legally enforceable agreement in a court of law, and how is it presented as evidence in court?

In South Africa, electronic contracting is governed by the Electronic Communications and Transaction Act No. 25 of 2002 ("the ECTA").

The Evidence of an Electronic Contract

When it comes to relying on and presenting an electronic contract in court, the starting point is Section 15 of the ECTA - which reads:

It is submitted that Section 15 of the ECTA opens the way for an electronically signed PDF agreement to be accepted in evidence at court if:

In the Section 1 definitions of the ECTA, we see that the meaning of "data message" is:

"means data generated, sent, received or stored by electronic means and includes-

Section 12 of the ECTA reads:

"Writing-A requirement in law that a document or information must be in writing is met if the document or information is-

The case of Massbuild Pty Ltd t/a Builders Express, Builders Warehouse and Builders Trade Depot v Tikon Construction CC and another [2020] JOL 48548 (GJ) (unreported case number 6986/) (14 September 2020) ("the Builders Express Case") applied Section 15 and held that PDFs were data messages as defined in terms of the ECTA. In this case, the signing party used a hybrid system of a handwritten signature on a printed copy of the agreement by the witness, then scanned this and "pasted" a scanned copy of the signatory's signature to the PDF.

Notwithstanding this transfer of states of the document between physical and digital, the court held at 48:

"The only document that was communicated to the plaintiff was the pdf document sent to it by email. That document is a data message as defined in the ECTA... the document was a data message throughout."

Similarly in the case of Sebenza Shipping & Forwarding (Pty) Ltd v Passenger Rail Agency of South Africa SOC Ltd (43909/2016) [2017] ZAGPJHC 338; 2019 (2) SA 318 (GJ) (28 November 2017), the Plaintiff was unable to produce the original physically signed document because the Defendant had emailed a copy to the Plaintiff. The court held that in terms of Section 15(3) of the ECTA, the copy was the best evidence and that the document produced was the original liquid document for the purpose of provisional sentence.

What Constitutes an Electronic Signature?

Traditionally, physical written agreements have used the signature of both parties as proof of offer and acceptance of the agreement and its formation.

In the digital contracting world, one of the alternatives that parties use is adopting some form of electronic signature.

Section 1 of the ECTA defines "electronic signature" as:

While "advanced electronic signature" means:

"an electronic signature which results from a process which has been accredited by the Authority as provided for in section 37."

The relevant portion of Section 13 of the ECTA dealing with electronic signatures reads:

In the case of Spring Forest Trading v Wilberry (725/13) [2014] ZASCA 178 (21 November 2014) ("the Spring Forest case"), we see the Supreme Court of Appeal holding that a contractual requirement of signature is not governed by Section 13(1), which requires an advanced electronic signature where a signature "is required by law", but held that Section 13(1) applies "only to include formalities required by statute." In other words, the advanced signature requirements are only applicable where a statute requires the agreement to be in writing and signed and not where it is the contract prescribing this requirement.

In the case above, there was an original agreement that had a non-variation clause, which specified that "agreements required any 'consensual cancellation' to be in writing and signed by them". There was a series of emails purporting to consensually cancel the written agreement and the issue was whether this email exchange met the ECTA requirements.

The court held that the email signatures did amount to a standard "electronic signature" and the email was in writing, therefore the email correspondence did amount to compliance with the contractual non-variation clause allowing the cancellation of the agreement.

Suretyships and other Agreements Signed According to Statute

Credit providers commonly use suretyships as security. Suretyships are governed by statute, Section 6 of the General Law Amendment Act, 50 of 1956, which stipulates the formalities required for a valid contract of suretyship in the following terms:

"No contract of suretyship entered into after the commencement of this Act shall be valid, unless the terms thereof are embodied in a written document signed by or on behalf of the surety: Provided that nothing in this section contained shall affect the liability of the signer of an aval under the laws relating to negotiable instruments."

This means that a suretyship is a document envisaged under Section 13(1) of the ECTA and therefore 13(3) applies, requiring an advanced electronic signature.

This was confirmed in the Builders Express Case, where the credit provider had provided the Defendant company with a credit application incorporating both standard terms and conditions and a suretyship.

The facts of how the documents came to be signed were:

• Ms Robbertze , the sister of the surety and financial manager of the Defendant company had authority to sign documents on behalf of the company and the surety.
• She printed out and signed the document with her handwritten signature as witness. Thereafter she scanned the document into an electronic format.
• She would append the second defendant's signature in the form of a picture (scan) of the second defendant's handwritten signature and initials that had been set up in a software programme for the reading, creation and manipulation of electronic documents in the PDF format. The software programme she used allowed Ms Robbertze to place the picture of the second defendant's signature and initials in a document, which was then incorporated and saved as part of the PDF document.

In this case, as the suretyship had signed what amounted to an electronic signature, the court held it as invalid as a suretyship governed by Section 6 of the General Law Amendment Act, 50 of 1956 and Section 13(1) and (3) of the ECTA, which required an advanced electronic signature to be valid.

There are other statutes with a similar requirement of the agreement having to be in writing and signed by the parties, such as the Alienation of Land Act 68 of 1981, governing the alienation of land, such as selling it. The courts here have adopted the same requirement of advanced electronic signature if the agreement is concluded in electronic format (see Aarifah Security Services CC v Jakoita Properties (Pty) Ltd and Others (12994/18) [2020] ZAGPJHC 222 (21 September 2020)).

Practical Challenges of an Advanced Electronic Signature

An advanced electronic signature means an electronic signature which results from a process which has been accredited by the Authority as provided for in section 37. According to the Electronic Signature Guidelines, released by the Department of Public Service and Administration on the 12th of February 2019 the following apply:

1. The South African Post Office and Lawtrust are the only accredited authentication service providers under the ECT Act.

2. In order to grant accredited advanced electronic signature status, the user must go through a face-to-face identification process with an agent of one of the authentication service providers.

It is the writer's opinion that this second requirement makes the whole authentication of an advanced signature user cumbersome and impractical. If, for example, one were to require a prospective customer to sign a suretyship, it is submitted that it would be easier, quicker and likely cheaper to simply obtain a physically signed copy of the suretyship than embark on authenticating the surety for an advanced electronic signature.

Conclusion

In conclusion, while regular agreements can embrace the simplified process of contracting electronically under the authority of the ECTA, those who are governed by a statutory requirement of the parties having to sign the agreement are required to use either the cumbersome advanced electronic signature process or contract in the traditional physically signed agreement method. Hopefully, the legislature will enact a more practical application of advanced electronic signatures in the future.

In addition, if you are looking to hand over an agreement to an attorney to be sued on, then providing the attorney with a certificate as envisaged in Section 15(4) of the ECTA (see above) relating to the electronic agreement your action is based on will speed up the legal process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.