On 26 March 2020, the President announced that South Africa would enter into a lockdown due to the Covid-19 pandemic. Prior to this, it was common practice for sale agreements to be signed in wet ink by the contracting parties at a physical meeting. However, following the Covid-19 pandemic, many South Africans work remotely and conduct their meetings electronically, including when signing sale agreements. It is important to understand how sale agreements should be signed electronically, to avoid any risk of invalidity.
The Electronic Communications and Transactions Act, 2002 (ECTA) regulates electronic communications and transactions in South Africa and defines an electronic signature to mean “data attached to, incorporated in or logically associated with other data and which is intended by the user to serve as a signature” (Electronic Signature). Examples of Electronic Signatures would be signatures by means of DocuSign and QuicklySign.
In most cases, agreements are not required to be in writing but, nevertheless, the contracting parties choose to record their agreement in writing. In such instances, an Electronic Signature is sufficient. However, where the signature of a person is required by law and such law does not specify the type of signature, ECTA requires a signature to be by means of an advanced electronic signature, which ECTA defines as “an electronic signature which results from a process which has been accredited by the [.za Domain Name Authority] as provided for in section 37 [of ECTA]” (Advanced Electronic Signature). Currently, LawTrust Party Services Proprietary Limited and the South African Post Office Limited are the only providers which have been accredited.
However, it should be noted that ECTA prohibits the following transactions from being concluded electronically:
· agreements for the alienation of immovable property as provided for in the Alienation of Land Act, 1981;
· agreements for the long term lease of immovable property in excess of 20 years as provided for in the Alienation of Land Act, 1981;
· the execution, retention and presentation of a will or codicil as defined in the Wills Act, 1953; and
· the execution of a bill of exchange as defined in the Bills of Exchange Act, 1964.
An example of where a signature is required by law is in the Copyright Act, 1978, which requires that an assignment of copyright or an exclusive licence to do any act which is subject to copyright must be in writing and signed by the assignor or licensor to be valid. Another example is in terms of the Trade Marks Act, 1993, which requires that an assignment of a registered trade mark or a trade mark which is the subject of an application for registration must be in writing and signed by the assignor to be valid.
If a sale agreement which contemplates such an assignment or exclusive licence has been signed by way of Electronic Signature (and not in wet ink or by way of an Advanced Electronic Signature), such assignment or exclusive licence (as the case may be) would not be valid.
Contracting parties should thus, at the outset, sign a sale agreement in wet ink or by way of an Advanced Electronic Signature, if required by law. Alternatively, the contracting parties could create a separate instrument of transfer to specifically deal with the aspects of a sale agreement which are required by law to be signed in wet ink or by way of an Advanced Electronic Signature.