Understanding the validity of electronic contracts in South Africa amid the Corona virus (Covid-19) Pandemic
With the corona virus pandemic, many are sceptical about the validity of concluding electronic contracts. Are electronic contracts and electronic signatures legally binding?
Validity of E-Contracts
As a general rule, a contract can take any form and it can be verbal, in writing or tacit. In terms of common law, for a contract to be valid it must amongst other things adhere to certain formalities. Formalities may also be prescribed by legislation and by the parties themselves. Thus, to determine whether an electronic contract which is signed electronically will be regarded as legally binding, one need to determine this by considering these various above factors. For instance, the National Credit Act requires a credit agreement to be in writing and signed by both parties, thus concluding a credit agreement by making use of an electronic contract which is signed electronically would be of no force or effect.
Prior to the enactment of the Electronic Communications and Transactions Act 25 of 2002 (ECT Act), the court’s view regarding the technological development was indicated in Council for Scientific and Industrial Research v. Fijen 1996 (2) S.A (A). It was stated that an E-mail sent to a principal indicating ones intent to resign constituted a valid letter of resignation in the context of a written and signed document.
The ECT Act is the statute which governs the topic around electronic contracts and signatures. In terms of Section 12 of this Act the lawful requirement that a document or information must be in writing is met if these document or information is:-
(a) in a form of a data message; and
(b) assessible in a manner usable for subsequent reference’.
The ECT Act entrenched the recognition of data messages in our law to be an effective equivalent to paper. (Snail, S. ‘Electronic Contracts in South Africa – A Comparative Analysis’ 2008 (2) Journal of Information, Law & Technology (JILT)).
Therefore, if electronic communication between two or more parties can be perceived as having adhered to the requirements of a valid contract as indicated above, it can be inferred that a valid contract has been concluded. The question of the valid electronic signature in an electronic contract then arises.
Validity of E-Signatures
The purpose of a signature especially in commercial practice is to provide proof of the identity of the signatory, to ensure that the signatory intended the signature to be his signature and to confirm that the signature had an intention to bind himself to the terms of the document being signed. (Coetzee.J.’The Electronic Communications and Transactions Act 25 of 2002: Facilitating Electronic Commerce’ 2002 University of Stellenbosch: Law Review).
An electronic signature prima facie would not be sufficient to fulfil the purpose of a signature.
Section 13 of the Act gives us guidance in this regard. Section 13 (2) read with section 13 (3) states that ‘an electronic signature is not without legal force and effect merely on the grounds that it is in electronic form and may be used by the parties to an electronic transaction. Section 13(2) is, however, subject to section 13 (1) which states that ‘[w]here the signature of a person is required by law and such law does not specify the type of signature, that requirement in relation to a data message is met only if an advanced electronic signature is used’.
An advanced electronic signature as defined by the Act in section 1 means an electronic signature which results from a process which has been accredited by the Authority as indicated in section 37 of the Act. An Accreditation Authority may not accredit authentication products or services unless it is satisfied that such products linked to the user, is capable of identifying that user, is created using means that can be maintained under the sole control of the user, etc. Therefore, the advanced electronic signature effectively fulfils the purpose of a signature and thus would contribute to the validity of a contract making it legally binding.
There are some exceptions that were entirely excluded from being concluded electronically by the law, whether the parties utilised an advanced electronic signature to sign it or not. These are documents which contain agreement for the sale of immovable property, long term lease of immovable property, the execution, retention and presentation of a will or codicil, the execution of a bill of exchange and documents or agreement which the parties agree may not be generated electronically (Gereda.S.L,’The Electronic Communications and Transactions Act’ Telecommunications Law in South Africa, 2006).
It is important therefore that, when entering into a sale of immovable property or other contracts that falls within these exceptions, that the application of the ECT Act to communication between parties, variations, alterations and cancellations of the contract are addressed in the contract.