Concluding a contract online or by email by means of a data message or using an electronic signature can cause uncertainty in terms of whether the contract is legally enforceable. However, with the introduction of the Electronic Communications and Transactions Act 25 of 2002 (ECT Act), South Africa has recognised the legality of data messages and electronic signatures and provided some legal certainty in relation to electronic contracts.
A data message is defined in the ECT ACT as data generated, sent, received or stored by electronic means. There are two types of electronic signatures, the first being “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature“. The second type is an “advanced electronic signature”, which although being similar to a normal electronic signature, it is far more secure as an advanced electronic signature can only be created using a digital certificate issued by an authentication services provider whose products and services have been accredited by the South African Accreditation Authority.
This recognition has paved the way for organisations to move towards operating in a paperless environment and take advantage of concluding contracts electronically by means of sending a data message to each other in certain instances or by attaching an electronic signature to a contract, thus reducing a large amount of the inefficiencies within organisations.
In addition to how the ECT Act defines electronic signatures, it goes on to state in Section 13(3) that “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 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.”
The Supreme Court of Appeal helped provide clarity on Section 13(3) in the case of Spring Forest Trading CC v Wilberry (Pty) Ltd t/a Ecowash and another (2015). In this case the lessee had sent an email to its landlord cancelling the lease agreements and the landlord responded by email, confirming the cancellation. The landlord later denied this cancellation and argued that there was a non-variation clause in the agreement that could only be cancelled in writing with both parties’ signatures. This case therefore focused on the non-variation clause in a lease agreement which stated that no variation of the agreement or cancellation of the agreement would be of force unless such variation or cancellation was reduced to writing and signed by both parties.
The court had to consider whether or not a person’s email signature is sufficient to satisfy the requirements of an electronic signature in terms of Section 13(3).
After weighing up both parties’ very detailed arguments, the court found that the names of the parties at the bottom of both their emails were:
1.intended to serve as signatures;
2.constituted “data” which was logically associated with the data in the body of the emails; and
3.identified the parties.
The requirements of Section 13(3) of the ECTA was therefore met and the court held that the agreements were cancelled through the emails.
The outcome of this case means that when corresponding by email, we need to be very cautious and consider very carefully what is being put into the email, in particular when the correspondence relates to the cancellation or variation of a contract.
What not to forget:
It is important not to forget that before any of the above relating to data messages or electronic signatures is to be considered, one must first ensure that the contract deemed to have been concluded meets the common law requirements of a contract for it to be legal and enforceable, such as there being a valid offer and acceptance; there being consensus between the parties and both parties having the contractual capacity (i.e. not being a minor) to be able to enter into a contract. One must also ensure that the contract being entered into online is not one that falls within the exceptions not being able to be signed electronically such as an agreement for sale of immovable property, a long-term agreement for immovable property which is in excess of a 20-year period, a will or a negotiable instrument such as a cheque.