The evolution of digital signatures: Does wet ink still hold water in the sale of immovable property?

May 1st, 2023
x
Bookmark

Picture source: Gallo Images/Getty

By Stefan Le Roux and Celine Bakker

When the Alienation of Land Act 68 of 1981 (ALA) was drawn up in 1981, the question as to what could possibly be encompassed by this troublesome concept of what a signature entails, would not have yet arisen, nor been comprehensible, because the only means of affixing one’s signature to a document in the early ’80s would have been by wet ink, handwritten signature.

Back in the ’80s, the use of technology to engage in business transactions and online contracting via an advanced electronic signature may have muddied the waters due to not only the legal sector but the whole of society being a little wet behind the ears in terms of technology. The requirement of physically ‘writing’ in the 1981 ALA for the alienation of immovable property, therefore, was justified – in those days, being the days where the height of technological development extended to electric typewriters and telexes. The rest was left to the imagination through television series like Star trek and Beyond 2000, and can we ever forget the predictions that the world would end in the year 2000?

Since the development of mobile technology in the mid ’90s (limited to 160 characters per SMS message), there since has been an exponential rise in technological innovation as well as society’s ability to adjust to these changes, making the transition to advanced electronic signatures more than possible in terms of contracting and other legally binding documents.

The Electronic Communications and Transactions Act 25 of 2002 (ECTA) has for two decades enabled and facilitated electronic communications and transactions online. Its aim being to promote legal certainty, to remove barriers to technological advancements and to ostensibly make it possible for more efficient, enhanced, and expeditious agreements and transactions to take place via online contracting and advanced electronic signatures. It may be said that the ECTA aimed to allow for businesses to develop along with the digital age that encompasses the 21st century.

While some previously shied away from embracing technology in the business world, the advent of COVID-19 lockdowns and protective regulations has heightened the Kuhnian paradigm shift from gradually to almost completely immersing the digital world with that of the business sector. While the ECTA has enabled such an adaptation, the ALA appears to place a hurdle in the way of modern-day business practices with the ECTA itself preventing its own provisions from granting advanced electronic signatures legal status to the sale of immovable property. It remains that the seller or buyer of an offer to purchase agreement still finds himself in the dark ages of having to grab pen and paper, rather than signing the document with an advanced electronic signature.

Any other legally binding contract not pertaining to immovable property, wills and estates or execution of bills of exchange, may be signed via advanced electronic signature according to the ECTA. Society has prospered through the help of technology and digital means of communication and transactions. It is perhaps about time for the law to adapt and adopt the stepchildren excluded by the ECTA by helping facilitate the modern world in enabling the use of advanced electronic signatures for the sale of immovable property.

Why wet ink does not hold water in the 21st century

Traditionally, wet ink, or a manuscript signature, was used to identify the signatory’s mark of consent and intention to be bound by the contents of an agreement or document. Since the ECTA, s 13 recognises an electronic signature as a legally valid means of binding oneself and having the same effect as that of a wet ink signature. However, s 4(3) excludes, inter alia, the use of an electronic signature for an agreement for alienation of immovable property in sch 1.

Taking the definition of the terms ‘sign’ or ‘signature’ into consideration, the ALA is silent in terms of a definition as to what such would encompass. The ALA at most states in s 2(1) that the deed of alienation needs to be in writing but unfortunately does not specify what exactly this means. The requirement of s 2(1) that it be in writing should under normal circumstances fall neatly within the s 12 definition of the ECTA that any document that refers to writing as a requirement will be considered valid should the writing be in the form of a data message, namely, an advanced electronic signature. The ALA leaves itself wide open to the favourable interpretation of recognising an electronic signature as a sufficient form of affixing one’s intention to be bound to an alienation of immovable property agreement and the ECTA’s exclusion of the ALA under s 4(3) appears all the more unfounded.

The divine online: Electronic contracts and electronic signatures
  • Electronic contracts

In terms of the law of contract, there are certain requirements that must be met for a contract to be valid, be it a physical copy or a data message. These are the so-called essentialia of a contract, which refer to –

  • there needing to be a valid offer and acceptance;
  • the parties must have animus contrahendi, namely, the intention to enter into an agreement, and there must be consensus between the contracting parties;
  • the parties must have the capacity to contract (they must be compos mentis and above 18 years of age);
  • the contents of the agreement must be clear and specific;
  • the agreement must be lawful; and
  • the obligations contained in the contract must be capable of performance.

On these requirements being met, the agreement will be considered valid, legally binding, and enforceable.

In addition, a contract may have naturalia and incidentalia. The naturalia are provisions of a contract that automatically flow from the specific type of contract. The parties do not necessarily need to agree on the naturalia prior to contract conclusion. Rather, because they result from the law, there is no express agreement, nor wet ink signature required for these to apply. The same counts for the incidentalia of a contract. The incidentalia are additional terms incorporated in a contract, which amend or limit the naturalia. However, these also do not require an explicit mention for the contract to be valid or have a particular wet ink signature signifying such.

  • Electronic signatures

According to s 13(2) of the ECTA, an electronic signature has legal force, equivalent to that of a manuscript signature. Notably, for electronic transactions with an electronic signature, s 12 states that an electronic signature meets the requirement of being in ‘writing’ if the document is –

‘(a) … a data message; and

(b) accessible in a manner usable for subsequent reference.’

Section 13(3) specifies that an electronic signature meets the requirement of a signature within a data message if –

‘(a) a method is used to identify the person and to indicate the person’s approval of the information communicated; and

(b) … the method was as reliable as was appropriate [at the time it was used] for the purpose for which the information was communicated.’

Importantly, it was highlighted by the SCA in Spring Forest Trading CC v Wilberry (Pty) Ltd t/a Ecowash and Another 2015 (2) SA 118 (SCA) that ‘the approach of the courts to signatures has, therefore, been pragmatic, not formalistic. They look to whether the method of the signature used fulfils the function of a signature – to authenticate the identity of the signatory – rather than insist on the form of the signature used.’

  • Exceptions

While advanced electronic signatures are permitted in most forms of contracts, there are certain agreements from which they are explicitly excluded, as set out in s 4(3) and listed in sch 1 of the ECTA. As such, ‘agreements for the sale of immovable property’ and ‘long-term leases of land exceeding 20 years’ provided for in the ALA, for example offer to purchase agreements which are ‘contained in a written deed of alienation’, must be reduced to writing and signed by hand with pen on paper by the respective parties (Marius van Rensburg ‘Electronic contracts and the sale of immovable property’ (www.schindlers.co.za, accessed 3-4-2023)).

For a contract to be valid, the essentialia must be met. In terms of a general or an electronic contract, such must be signed either by hand (manuscript signature) or via an advanced electronic signature. However, according to s 2(1) of the ALA and s 4(3) of the ECTA, when it comes to the alienation of immovable property, the said essentialia must be signed with wet ink on paper – this seems to militate against the Spring Forest judgment.

  • Borcherds v Duxbury: A step in the ‘write’ direction

An important case recently heard in the Eastern Cape Local Division of the High Court, Borcherds and Another v Duxbury and Others 2021 (1) SA 410 (ECP) makes an interesting finding regarding electronic signatures in terms of the alienation of immovable property. While only binding within the Eastern Cape jurisdiction, the High Court held that a signature signed using the DocuSign application, which could be the first step in the right direction to legalising advanced electronic signatures for the alienation of immovable property.

Unfortunately, the judgment did not give complete legal certainty regarding advanced electronic signatures. The case involved an electronic signature via the software application DocuSign, which was found as valid for the alienation of immovable property, but the signature used was one that had originally been written by hand with pen and paper and thereafter scanned into the application to be attached to electronic documents. Consequently, it sidestepped s 4(3) of the ECTA in that it was an originally wet ink signature and not one prepopulated or generated by a computer. According to the judge, it could, therefore, be construed as a manuscript signature rather than an electronic one. Thus, the legal question as to whether an electronic signature in terms of s 13 of the ECTA could be included in the ALA (as opposed to excluded in sch 2 of ECTA) was not answered per se.

Nonetheless, the Eastern Cape judgment has set an example for such scanned-in signatures to be legally binding regarding the sale of immovable property, but not ones electronically written into the relevant application or machine-generated, based on the signatory’s signature examples. The court indicated that there was no intention for the contract to be an electronic transaction. Because the signature amounted to a manuscript signature, it was a communication of wet ink signatures.

The replacing of an electronic signature with an originally wet ink signature ignores the specific provisions of the ECTA (ss 12 and 13), which give credence to advanced electronic signatures created via data message and through software applications. It also does not address the explicit exclusion of such applying to the ALA in s 4(3) read with sch 1.

What is nevertheless ground-breaking is that the court found the DocuSign electronic signature to convey sufficiently the signatory making his mark and, in that sense, it should have been recognised as having met the writing requirement of s 2(1) of the ALA. The judgment analyses the meaning of signature, which oddly has no definition within the ALA, and points out that in the ordinary usage of the word ‘signature’, previous case law has regarded such as being sufficiently effected by rubber stamp, symbol, writing, mark ‘or device one may choose to employ as representative of himself’ (para 32). It was also underlined that historically there has been a wide interpretation of what could be accepted as a ‘mark’ identifying the signatory’s intention to contract and be bound to the agreement, there being no formalities for the making of a mark.

Conclusion: Much ink has been spilled about nothing

As such, it remains that in terms of the alienation of immovable property, signatures ought to be done via wet ink signature and advanced electronic signatures refrained from. Nevertheless, in terms of the Eastern Cape judgment, should a signature be handwritten and scanned into electronic software, such should be upheld by a High Court as being a valid transaction and communication, which falls in line with the ECTA and ALA. Both s 13(3) of the ECTA should be met in terms of the advanced electronic signature meeting the requirements for a legally valid signature, which reflects the signatory’s intention to be bound by the contract, and s 2(1) of the ALA of being in writing. Borcherds shows the emergence of a positive change in our law towards incorporating technology into legally binding communications and transactions, and highlights that while the pen is mightier than the sword, digitalisation is mightier than both.

The ALA and ECTA ought thus to be amended to adequately reflect the times we live in and perhaps align the legal framework with the digital world to include within its repertoire the facilitation of the alienation of immovable property by way of an advanced electronic signature or to give recognition to the digital aids such as Docusign.

Stefan Le Roux BCom LLB PG Dip Tax Law (Stell) is a legal practitioner and Celine Bakker BA LLB (Stell) is a candidate legal practitioner at SL Law Inc in Cape Town.

This article was first published in De Rebus in 2023 (May) DR 20.

X