Which Contracts Or Agreements Can Be Signed Electronically?
We are often asked whether seller or buyer can use an electronical signature with an Offer to Purchase Property or an a Property Rental Agreement.
Business transactions are nowadays increasingly concluded electronically by the click of a button. To what extent can an electronic signature by the click of a button validly replace a "wet ink" signature on a document?
The Electronic Communications and Transactions Act, 25 of 2002 ("ECTA") regulates this matter.
According Carl Prinsloo of Cluver Markotter Attorneys, ECTA provides in sections 11 and 22 that an agreement is not without legal force and effect merely because it is wholly or partly in the form of a data message. Section 13 of ECTA also states that an expression of intent is not void or invalid because it is in the form of a data message. The requirements for a valid electronic signature are:
- the name or mark of a person must appear on the agreement;
- the person signing must have applied the name or mark themselves; and
- the person signing must have intended that name or mark to serve as their signature.
ECTA distinguishes between 'normal' electronic signatures and 'advanced' electronic signatures. A normal electronic signature is applied to an agreement that is not required by law to be signed, such as an employment agreement. This is the position for most agreements. An advanced electronic signature is necessary to conclude an agreement required by law to be signed; and this signature is created when accredited by the South African Accreditation Authority.
Examples of agreements and documents required by law to be signed include:
- An agreement of sale for immovable property;
- a long-term lease agreement for immovable property for a period longer than 10 years;
- a deed of suretyship;
- a notarised document;
- a will or codicil.
A normal electronic signature will be valid and binding if it constitutes a method to identify the person signing and indicates the person's approval of the information communicated; and, having regard to all the relevant circumstances at the time of the signature, the method was reliable and appropriate for the purpose for which the information was communicated.
It follows that one can validly sign a document and enter into an agreement by ticking a box to accept terms and conditions; or by clicking "accept cookies" on a website; or by simply adding one's name at the end of an email or a WhatsApp message.
However, electronic signatures also open the door to fraud, by purporting to sign a document or conclude an agreement in the name of or on behalf of another person. The following safeguards can according to Carl Prinsloo ensure the reliability of an electronic signature:
- Reduce the risk of interception of agreements by cutting out intermediaries and sending a signed document directly to its intended recipient.
- Make use of additional mechanisms to verify the identity of the signatory and the intent of the signatory to enter into the agreement.
- Prescribe additional signature formalities in the agreement.
- Make use of a service provider to authenticate the identity of the signatory.
When used properly and carefully, electronic signatures are legally as effective as "wet ink" signatures and offer obvious benefits of time-saving and convenience.