“I’ve grown up signing our business contracts with pen on paper. With Covid however, most of my suppliers send me their agreements electronically which I sign by adding a copy of my signature digitally or, in some cases using specific software through which I then add my signature. It does make things easier, but I was wondering how valid and binding these agreements are?”
In accordance with South Africa’s common law, agreements need not be in writing in order to be valid, meaning oral agreements (if successfully proven) are also valid and enforceable. With written agreements, to assess the validity of an agreement, one must establish whether the requirements of an agreement are present.
Here one can note that, as with physical agreements signed with pen on paper, electronic agreements have the same requirements which must be met, namely:
- the content of the agreement must be clear to determine and enforce the obligations arising from the contract;
- there must be consensus between the parties to the agreement;
- the parties must have capacity to act;
- the content of the agreement must legal and lawful;
- the contract must be capable of being performed; and
- any required formalities for the specific type of agreement must be met.
Accepting that the electronic agreements provided to you by your suppliers comply with these requirements one must then consider what constitutes a valid electronic signature. Since the promulgation of the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”), most agreements are now valid and binding if there is an electronic signature. There are certain exceptions, such as the Alienation of Land Act 68 of 1981 and the Wills Act 7 of 1953 which require certain formalities to be met in order for such an agreement to be valid and are excluded in terms of the ECTA. One can also specifically exclude the ECTA from applying to a contract, meaning that although in law you could sign the agreement with a digital signature, the contract itself prohibits this.
The ECTA effectively allows for two forms of signatures, being an ‘electronic signature’ and an ‘advanced electronic signature’. An electronic signature is defined as “…data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. An example hereof is using an e-pen to sign on a tablet, adding a scanned image of your signature or even adding a standard signature through the use of online signing platforms or software.
An ‘advanced electronic signature’ on the other hand is an ‘electronic signature’ accredited in terms of section 37 of the ECTA. The differentiating factor between an ‘electronic signature’ and an ‘advanced electronic signature’ is the authentication and verification by a certification authority of the latter. For authentication products on the market to be valid as an ‘advanced electronic signature’ and to be accredited in terms of the ECTA they have to, amongst other things, ensure that the ‘advanced electronic signature’ is uniquely linked to the user thereof and should be capable of identifying the user. These products will issue a digital certificate which verifies the authenticity of the signature.
Having regards for section 13 of the ECTA which deals with signatures, you basically have three instances to which the section applies and the agreement you are dealing with will determine which is applicable. Firstly, you can have a situation where no signature is required in which event the absence thereof would not render the agreement invalid. Section 13(5) of the ECTA allows for an expression of intent to have legal force and effect if it is in the form of a ‘data message’ or evidenced by other means inferring that a person had the necessary intent. Section 11(1) of the ECTA affords specific legal recognition to data messages, resulting in offer and acceptance to occur by way of electronic data messages like an e-mail or by clicking on a ‘tick-box’ (usually stating ‘I agree’) when making use of a website.
Secondly, when an ‘electronic signature’ is required, but the parties do not mention the type of signature required, the standard ‘electronic signature’ will be acceptable.
Lastly, in those instances where a person’s signature is required by law, yet the law does not specify the signature, then only an ‘advanced electronic signature’ can be used. This is because an ‘advanced electronic signature’ is automatically assumed to be a valid signature that has been applied properly and thus binding the parties to the agreement, unless the contrary is proven. Whereas an ‘electronic signature’ will only be binding if a method could be used (which method must be reliable and appropriate given the circumstances at hand) to identify the person and to indicate the person’s approval of the information being communicated.
To summarize: Provided your electronic agreement and electronic signature complies with the abovementioned, your agreement will be validly executed and binding on the parties to the agreement. Where at all possible, it is highly recommended to rather make use of an ‘advanced electronic signature’ due to the security benefits that it offers, but unless specifically required, this is not a requirement for a valid contract to exist.
Source: Seymore Du Toit & Basson