Let’s Talk E-signatures

1. Introduction

The new age of technology and globalisation has prompted many international and local companies to new ways of conducting business without compromising the legality and compliance aspects of operations. One of the benefits of globalisation has been to speed up the adoption of the so called digital or electronic contracting, which is much easier, quicker, cheaper and leads to early finalisation.  While this form of contracting seems to be a norm, the challenge is that in most cases the law has not caught up with such technology. Notwithstanding the seamless process of digital contracting, this has brought into question the legal validity of these transactions, particularly in relation to the electronic signing of suretyships.

2. Applicable Legislation

 For purposes of this discussion, we shall refer to the following legislations:

• The Electronic Communications and Transactions Act 25 of 2002; and
• The General Law Amendment Act 56 of 1956.

3. Applicable case law for discussion: Massbuild (Pty) Ltd t/a Builders Express, Builders Warehouse and Builders Trade Depot v Tikon Construction CC and another [2020] JOL 48548 (GJ) (the “Builders Express case”)

In this recent unreported case, the court was confronted with a situation of an agreement signed electronically, including the suretyship agreement which was in question.  In Jurgens v Volkskas Bank 1993(1) SA 214(A), the Appellate Division explained suretyship as follows:

“Suretyship is a bilateral jural act. … It is a contract which arises from agreement between creditor and surety, and it involves the acceptance of an offer. An offer is a manifestation of the offeror’s willingness to contract, made with the intention that it shall become binding as soon as it is accepted by the offeree. It is trite that an offer cannot be accepted unless and until it has been brought to the attention of the offeree.”

1. Facts of the Builders Express case
   
   The plaintiff sued the first defendant for what it claims is the outstanding balance on an account for goods sold and delivered, and the second defendant as surety for the first defendant’s debt. The first defendant was at the time in liquidation and the claim was not pursued against the first defendant at trial. The second defendant denied that he concluded a suretyship agreement with the plaintiff. To facilitate the signature of documents by the second defendant, Ms Robbertze utilised an electronic signature. This was in the form of a picture (scan) of a physical manuscript signature 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, Adobe Acrobat, allowed Ms Robbertze to place the picture of the second defendant’s signature in a document which was then incorporated and saved as part of the pdf document.The crisp issues for determination before the court was whether sections 13(1) and 13(3) of the Electronic Communications and Transactions Act, 25 of 2002 apply; If so, whether the documents relied upon by the plaintiff comply with the requirements of the aforementioned sections.

4. Applicable legal provisions 

1. General Law Amendment Act as a basis for requirements of a valid suretyship.It is important to note that a valid contract of suretyship involves compliance with the provisions of the General Law Amendment Act 50 of 1956, particularly section 6 stipulates the formalities required for a valid contract of suretyship as follows:“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.”
2. ‘Signature’, under the ECTA Act Section 13 of the ECTA Act provides as follows: –
   
   “(1) Where 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.
   
   (2) Subject to (1), an electronic signature is not without legal force and effect merely on the grounds that it is in electronic form.
   
   (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)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.
   
   (4) Where an advanced electronic signature has to be used, such signature is regarded as being a valid electronic signature and to have been applied properly, unless the contrary is proved.
   
   (5) Where an electronic signature is not required by the parties to an electronic transaction, an expression of intent or other statement is not without legal force and effect merely on the grounds that –
   
   (a) it is in the form of a data message; or
   
   (b) it is not evidenced by an electronic signature but is evidenced by other means from which such person’s intent or other statement can be inferred.”

To Summarise the above:

1. For a suretyship to be valid it must be signed by a surety or on behalf of a surety by using an advanced electronic signature. 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.
2. If a law requires a signature of a person but does not specify the type of signature, then one must use an advanced electronic signature. This also means that if a law requires a signature of a person, however the parties agree to the type of electronic signature, that same will be sufficient; and
3. Where the law does not require a signature and the parties require an electronic signature to a transaction, however the parties have not agreed on the type of electronic signature, then section 13(3)(a) and (b) needs to be adhered to.

As far as the Builders Express case and ECTA is concerned, the surety had signed what amounted to an electronic signature. The court held that it was invalid as a suretyship governed by Section 6 of the General Law Amendment Act and Section 13(1) and (3) of the ECTA, requires an advanced electronic signature for a suretyship agreement to be valid. Therefore, the suretyship claim could not succeed because the agreement was not properly executed, as the electronic signature that was utilised to sign same is not regarded as a valid electronic signature. Section 13 of the ECTA ensures that data messages can satisfy the signature formality, the effect of this section is to give legal recognition to electronic signatures. However, where legislation or a common law rule requires a signature, only an advanced signature shall be used.

5. Advanced electronic signatures

A short explanation on advance electronic signatures, with reference to the ECT Act.

i) An advanced electronic signature is deemed particularly reliable in law and is prima facie valid i.e. it is always assumed to be valid and have been applied correctly so as to shift the burden of proof to the disputing party.

ii) An advanced electronic signature is a digital signature created with a digital certificate from an accredited Authentication Services Provider after following a face-to-face identification process with the user.

iii) The signature has to:

1. 1. 1. Identify the signatory;
      2. Be identified as an Advanced Electronic Signature;
      3. Detect any subsequent alteration or corruption of the signed data message or document legal framework for electronic signatures; and
      4. Make use of a 3-factor or equivalent signing mechanism so as to ensure the highest reliability of the signature.

iv) It is an offense under section 37(3) of the ECTA to falsely claim that you are accredited, which is punishable by a fine or a maximum of one year in prison.

v) In South Africa only the South African Post Office (“SAPO”) and Law@Trust are accredited authentication service providers under the ECT Act. SAPO is the preferred service provider for the government. SAPO has a foothold in all the provinces of the country and it will facilitate rolling out e-services based on electronic signature solutions to rural areas of the country.

vi) The ECT Act defines an advanced electronic signature as an electronic signature which results from a process which has been accredited by the Authority (South African Accreditaion Authority) as provided for in section 37 of ECT Act.

vii) For an electronic signature to be considered as advanced, it must meet several requirements:

1. 1. It must be uniquely linked to the signatory;
   2. It must be capable of identifying the signatory;
   3. It must be created using means that can be maintained under the sole control of that signatory;
   4. it must be linked to other electronic data in such a way that any alteration to the said data can be detected; and
   5. It is based on the face-to-face identification of the signatory.

6. EXCLUSIONS OF ELECTRONIC SIGNATURE

It is worth mentioning that where the law requires a signature, the electronic equivalent will only be fulfilled if the advanced electronic signature is used. This does not, however, preclude parties who by agreement use a foreign signature or any other electronic signature technique. The ECTA specifically excludes four different instances where an electronic signature would be invalid. These four Acts are: concluding an agreement for the alienation(disposal) of immovable property as provided for in the Alienation of Land Act 68 of 1981; concluding a long-term agreement for immovable property in excess of 20 years as provided for in the Alienation of Land Act; the execution of a bill of exchange as defined in the Bills of Exchange Act 7 of 1953; and the execution, retention and presentation of a will or codicil as defined in the Wills Act 34 of 1964.

7. Conclusion

In summation of the above, I submit that agreements that are governed by a statutory requirement of the parties having to sign the agreement are required to utilise an advanced electronic signature. According to the ECTA there are some instances where an electronic signature other than a standard electronic signature may be required and include circumstances where the law requires that an agreement or document must be in writing and signed. In such instances, the document can only be signed with an advanced electronic signature. The current position in South Africa is that an advanced electronic signature is required for a surety agreement and is deemed particularly reliable in law and is prima facie valid. It is of paramount importance to ensure that the is proper execution of suretyships to eliminate potential ultra vires acts and the legal and financial implications that could ensue.

If you require any assistance or guidance contact please contact us on +27 21 914-4020.

Written By:  Siziphiwe Ngcobo Candidate Legal Practitioner Commercial | Tyger Valley Phone: +27 21 914-4020