Use of electronic signatures and the legal validity thereof

Written by: Pieter Walters and Beyers van Sittert

The rapid spread of COVID-19 and the regulations imposed by the government have highlighted the need for companies to have a remote work strategy to ensure the continuation of its business. Companies without such plan are suffering operationally under these strict regulations and this has emphasized the importance of using electronic/digital data. Companies with the ability to operate remotely could be the difference between those making it through these unpredictable time or failing to insolvency. The current business environment and lockdown regulations have necessitated individuals to use alternative measures to conclude agreements.

The use of electronic signature in South Africa is regulated by the Electronic Communications and Transactions Act, 25 of 2002 (hereinafter referred to as “the Act”) as well as the Common law. Section 1 of the Act defines electronic signatures as follow:
“ “electronic signature” means data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”

The purpose of the Act is to enable and facilitate electronic communications and transactions in the public interest.
Electronic signatures can be broadly defined and include digital signatures, images, manually drawn signature, etc. However, the use of a digital signature would be regarded as a more safe option in most cases. Digital signatures always rely on a crypto-based technology which means that the content of the document will always be locked and secured when placing a digital signature. By doing so, it guarantees that the content of the document cannot be changed after signing.

Electronic signatures used in agreements
Many agreements include so-called boilerplate clauses which are also referred to as standard, miscellaneous or general clauses and are usually found at the end of a contract. These clauses are in some instances considered secondary to what the Parties might deem being the significant parts of the document, however, these clauses can play an important role in establishing for example when payment needs to be made in terms of an agreement or how disputes between Parties are to be resolved. One of these boilerplate clauses that are often overlooked is referred to as a “counterparts clause”. A counterparts clause generally states that the Parties signing the agreement don’t need to sign the same copy of the agreement and that any copy of the agreement may be treated as an original.
During the current lockdown, a counterpart clause would accordingly assist the Parties in concluding an agreement as they could consider signing an agreement electronically.
The Act provides for two different types of electronic signature.
The first is defined as an “Ordinary Electronic Signature” which is defined as “data attached to, incorporated in or logically associated with other data which is intended by the user to serve as a signature”.
The second category of electronic signature is referred to as “Advanced Electronic Signatures” (AES) and is defined as “a signature which results from a process which has been accredited by the South African Accreditation Authority”.
Ordinary Electronic Signatures may be utilized where:
1. A method is used to identify the sender and to indicate the sender’s approval of the information communicated;
2. Having regard to all relevant circumstances at the time, the method was reliable and appropriate for the purposes for which the communication was intended.

An Advanced Electronic Signature (hereinafter referred to as “AES”) would be required for agreements and documents which specifically stipulates by law must be in writing and signed and must further be accessible in a manner usable for subsequent reference and is required to be signed by AES. Examples of such agreements or documents would include Suretyship Agreement and documents that are required to be signed by a Commissioner of Oaths. The position in South Africa is that data messages can have the same effect as a written document provided that the form of the data message qualifies as a data message as defined by the Act and is stored in a manner that is accessible for subsequent reference.
AES should be:
• able to identify the signatory;
• created by the signatory and must be in his/her sole control;
• based on the face-to-face identification of the signatory; and
• protected.

It is possible to conclude electronic contracts by way of e-mail or sms on condition that the data messages are generated, sent, received and stored by electronic means.
The main concern in using electronic signatures is whether the use thereof can be legally enforced. Section 13(1), (2) and (4) of the Act shed light on the aforementioned and read as follow:
“13. (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 subsection (I), an electronic signature is not without legal force and effect merely on the grounds that it is in electronic form.
(4) Where an advanced electronic signature has been used, such signature is regarded as being a valid electronic signature and to have been applied properly, unless the contrary is proved.”

Common law was used as the premise to develop the Act and should be read together to determine the validity of an electronic signature. According to the South African common law, the following is required for a signature to be valid:

1) the name or mark of the person signing must appear on the document;
2) the signature must be applied by the signatory; and
3) the signatory must have the intention of signing it.

Section 13 of the Act ensures that data messages satisfy the signature formality and gives legal recognition to electronic signatures.
It should, however, be noted that Section 4 of the Act does exclude specific agreements which may not be concluded by way of electronic signature whether it be Ordinary Electronic Signature of AES. These agreements include:

1. Agreements for the Sale of Immovable Property as provided for the Alienation of Land Act, 68 of 1981.
2. An agreement for the long term lease of land exceeding 20 (twenty) years.
3. The execution of a Bill of Exchange as provided for the Bills of Exchange Act, 34 of 1964.
4. The signing of a will as defined in the Wills Act, 7 of 1953.
5. The licensing of Intellectual Property, Intellectual Property transfers and Employee Invention Agreements.

An agreement wherein Parties have specifically stipulated that electronic signatures would not be accepted.
The use of electronic signatures leads the way in ensuring that electronic communication takes place confidentially, while at the same time ensuring authenticity. The impact this will have on the workplace is that a Commissioner of Oaths could sign an electronic copy of the original document with their electronic signature which then creates a certified electronic copy of the original. This will save time and effort in the workplace which results in a more efficient method by using the available technology.
Further to the above interventions with regard to the application of technology in the conclusion of agreements, there has also been more recent developments pertaining to the use of technology in our courts.

The following attorneys can be contacted in this regard:

Pieter Walters                                                             Nel de Jager
Cell: 0828583817                                                         Cell: 0826856212
E-mail: pieter@nvsinc.co.za                                       E-mail: dejager@nvsinc.co.za

Sources
1) Internet:
C Herd 2020 Every Company Needs a Remote Work Strategy to Survive https://www.linkedin.com/pulse/every-company-needs-remote-work-strategy-survive-chris-herd-1f/
Connective 2019 Three types of Electronic Signatures and how to choose the right type for your transactions https://connective.eu/three-types-of-electronic-signatures/
PandaDoc Inc 2020 Overview of electronic signature law and its legality in South Africa https://www.pandadoc.com/electronic-signature-law/south-africa/
Y Wong 2018 Understanding Electronic Signatures in South Africa https://dommisseattorneys.co.za/blog/understanding-electronic-signatures-in-south-africa/

2) Legislation
Electronic Communications and Transactions Act, 25 of 2002

3) Books
S Papadopoulos and S Snail Cyberlaw@SAIII (Van Schaik Pretoria 2018)