27 May 2020

The Validity of e-Signatures in Property Transactions

by Sifiso Msomi, Partner, Durban,
Practice Area(s): Property & Conveyancing |

There has been a prevalence of the use of electronic signatures for legally binding documents particularly during the COVID-19 lockdown. The Electronic Communications and Transactions Act 25 of 2002 (“ECTA”) allows for the use of electronic signatures in our daily businesses and transactions. This has been positive in keeping our economy stimulated as parties have been able to conclude transactions electronically especially when it has been difficult to obtain handwritten signatures during this time. It is however important to establish whether electronic signatures are legally binding before concluding a transaction. This is particularly pertinent for property transactions.

What is an electronic signature?

An electronic signature is used to identify a person’s identity and constitutes proof of consent to information contained in a document. The signature is an indication of a person’s intention to accept the content of the document or the collection of data linked to the signature. Section 13(2) of the ECTA states that an electronic signature is not without legal force and effect merely on the grounds that it is in electronic form.

The ECTA provides for two types of signatures namely, electronic signatures and advanced electronic signatures. The former is intended to serve as a signature to documents which are attached to data and can be used to sign documents such as agreements and letters which do not require advanced signatures. Standard electronic signatures are normally used where the method of signing has not been agreed upon by the parties; this for example includes signing an agreement using a device or signing and scanning the document.

An advanced electronic signature refers to a normal signature which has more security, as it can only be issued by an authenticated service provider which is accredited by the South African Accreditation Authority. An advanced signature is only applicable to electronic documents. The signature is mandatory for documents that are required by law to be in writing and signed by the parties and such documents must be electronically accessible for subsequent reference. In terms of section 18 of the ECTA, advanced electronic signatures are required for a suretyship agreement and signing as a Commissioner of Oaths.

Can an electronic signature be used to sign a sale agreement in respect of immovable property?

Schedule 4 of the ECTA expressly excludes the following:

  • an agreement for the alienation of immovable property in terms of the Alienation of Land Act 68 of 1981;
  • an agreement for the long-term lease of immovable property. In terms of the Deeds Registries Act 47 of 1937, a long lease is for a period of 10 years and above;
  • the execution, retention and presentation of a will or codicil as defined in the Wills Act 7 of 1953;
  • the execution of a bill of exchange as defined in the Bills of Exchange Act 34 of 1964.

Thus, any sale agreement for immovable property or a long lease cannot be legally binding if it has been signed electronically. This means that parties to property transactions must find other methods during the lockdown to ensure that their agreements are signed by hand. Such methods could include inter alia couriering the sale agreement to the interested parties to ensure that their agreement complies with the requirements of the Alienation of Land Act.

Can short lease agreements be cancelled or varied electronically?

A valid short lease agreement can be concluded either orally or in writing. Where a lease agreement has been concluded in writing, parties may validly cancel or vary the terms of the lease agreement electronically. In Spring Forest Trading 599 v Wilberry (Pty) Ltd[1] the Supreme Court of Appeal (“SCA”) held that the email signatures in emails between the parties met the requirements of an ordinary signature in terms of the ECTA. The SCA held that electronic signatures were binding and that the parties had validly cancelled a contract by email in terms of a non-variation clause requiring any changes to the contract to be in writing and signed. The ECTA does not provide how a digital signature can be achieved therefore, it could include:

  • drawing your finger using your signature on a touch screen device directly on the document;
  • using the cursor of your mouse to draw the signature;
  • uploading an image of your signature;
  • using your keyboard to type your signature.

With the advancement of technology, electronic signatures have increasingly become vital in our daily transactions. It is however important to seek legal advice on whether electronic signatures will give rise to a legally binding agreement, as well as the legal consequences of our electronic acts.

[1] 2015 (2) SA 118 (SCA).

Written by Sinenhlanhla Nene- Candidate Attorney

Overseen by Sifiso Msomi- Partner