Sign of the times: Electronic signatures in South Africa

Are electronic signatures valid? It depends: the parties must explicitly agree to the use of electronic signatures and must agree a signing method which complies with the requirements in the Electronic Communications and Transactions Act 2002 (ECTA).

What constitutes an electronic signature and whether such signatures are valid in South Africa has become a question of increasing importance given the high likelihood of restricted movement for the coming future.

The ECTA differentiates between ‘advanced electronic signatures’ and ‘electronic signatures’. Advanced electronic signatures must be used where legislation requires a ‘signature’. Advanced electronic signatures (also referred to as digital signatures in other countries such as the United States) make use of a Public Key Infrastructure, which uses two keys and an authorised cryptography provider to verify the authenticity of the signature. In South Africa, an advanced electronic signature must be issued by an accredited provider, which are appointed and published by the South African Accreditation Authority. To date there are only two accredited providers, the South African Post Office and LAWtrust.

In all other cases where an advanced electronic signature is not required, parties may agree to the use of electronic signatures. The ECTA defines an ‘electronic signature’ as ‘data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature’. The court in Spring Forest Trading CC v Wilberry (Pty) Ltd t/a Ecowash and Another held that if there is intention for the data to constitute a signature, and such data is attached to or logically connected with other data, then it would amount to an electronic signature. If the parties require a signature but have not agreed on the method, the signature requirement is met under the ECTA if the electronic signature method used:

• identifies the person;
• indicates the person’s approval of the information communicated; and
• is reliable and appropriate for the purposes for which the information was communicated, having regard to the circumstances.

The court in Spring Forest Trading held that an email signature affixed to an email was a valid electronic signature.

However, in the case of Global & Local Investments Advisors (Pty) Ltd v Fouche which dealt with payments made based on fraudulent emails, the court held that the mandate between the parties did not explicitly refer to an ‘electronic signature’. Thus, the court in Fouche held that the email signature did not constitute a signature as required by the mandate.

Therefore the parties must explicitly agree to the use of electronic signatures and must agree a signing method which complies with the requirements in ECTA.

There is a wide range of electronic signing software available with varying degrees of cost, security features and customer support which parties may agree to use. However, in order to avoid disputes, it is recommended that where a specific electronic signing software is used, the contract must specifically deem such software or process to be compliant with the ECTA. Parties may also agree to a separate electronic signature process for performances which require a higher level of verification, such as payment instructions, which process may include a verbal verification and/or a specific format of electronic instruction. Other issues to consider when drafting include the apportionment of liability, indemnification for loss occasioned by fraudulent signature and the use of electronic communications.

First published by: Financial Institutions Legal Snapshot