Electronic Signatures and Contracts in South Africa

Should the digital signatures on an agreement or other document be contested in court, the ECT Act says that the mere fact that the agreement is recorded in a data message (or in digital form) does not invalidate the document. What is required is that the court evaluate the integrity of the data message and, most likely, the system it was generated and transmitted on to ensure that the data message has not, for example, been tampered with and was, in fact, signed by the purported signatory and that this has been verified.

A client posed the following question to us:

“Is it possible to electronically sign an agreement and have that electronically signed agreement accepted in a court of law?”

The starting point for a discussion about electronic signatures in the context of South African law is the Electronic Communications and Transactions Act (ECT Act) which was passed in 2002. The ECT Act started with the basic premise that digital communications are no less valid than paper based communications.

One important consequence of the ECT Act is the fact that a data message, like an email, has just about the same effect as a fax or letter in our law:

Information is not without legal force and effect merely on the grounds that it is wholly or partly in the form of a data message. (Section 11(1))

When it comes to signatures the Act makes reference to an electronic signature and an advanced electronic signature.  An advanced electronic signature is a specific form of digital signature that has been accredited. An advanced electronic signature is required where a law requires that a document be signed.  The primary advantage of an advanced electronic signature is that there is a presumption that the document concerned has been properly signed.  As a result of the presumption, the onus is on the party disputing the validity of the signature to prove it.  Lawtrust and TrustFactory have been authorised in South Africa to issue advanced electronic signatures.

Where there is no legal requirement for an advanced electronic signature, a 'normal' electronic signature can be used to sign agreements, letters, emails, and other documents which you may wish to signify your assent to.  You can obtain an ordinary electronic signature from various certification authorities including Thawte and Verisign.

In the commercial sphere, parties are free to contract electronically and to sign agreements using digital signatures if they wish. It would be up to the parties to the agreement to determine which forms of digital signature they require in order for the agreement to be properly signed. The Act specifies two requirements where the parties to the agreement have not specified the form of digital signature to be used:

S.13(3) Where an electronic signature is required by the parties to an electronic transaction and the parties have not agreed on the type of electronic signature to be used, that requirement is met in relation to a data message if-

a) method is used to identify the person and to indicate the person's approval of the information communicated; and

b) having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.

Basically what this means is that the rules that we apply to the signature of an agreement recorded on paper are applied to digital versions as well. When you sign an agreement your signature is a means to identify you as the signatory. Your signature is also applied to a point in the document where it is clear that the presence of your signature signifies your assent to the terms of the agreement.

Should the digital signatures on an agreement or other document be contested in court, the ECT Act says that the mere fact that the agreement is recorded in a data message (or in digital form) does not invalidate the document. What is required is that the court evaluate the integrity of the data message and, most likely, the system it was generated and transmitted on to ensure that the data message has not, for example, been tampered with and was, in fact, signed by the purported signatory and that this has been verified.

In terms of the ECT Act the following documents cannot be signed electronically:

1. An agreement for the sale of immoveable property;

2. A long-term agreement for immoveable property, such as a lease, which is in excess of 20 years;

3. The execution of a bill of exchange, such as a cheque; and

4. The execution, retention and presentation of a will or codicil.

This post is really just a summary of some of the provisions of the ECT Act pertaining to digital signatures and their commercial application. The ECT Act is far more involved and deals with issues that go beyond the subject matter of this post.

We are interested if anyone has been using electronic signatures either in emails or to sign documents and what your experiences have been so feel free to let us know.