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Clarity on electronic signatures are even more important today

This original article appeared a couple of years ago in Standard Bank’s Biz Connect online publication.  We’ve seen a number of changes to our working and social environments since then.  Furthermore, there has been a High Court case that dealt specifically with the legality and enforceability of scanned signatures when used to sign certain contracts.

The court found that such contracts, when signed and exchanged electronically (in this case a suretyship), are unenforceable if an advanced electronic signature is required in terms of the Electronic Communications Act   Various work-arounds are proposed, including the submission of the signed original documents and the extension of a personal warranty clause confirming signature.  Unfortunately, such additions add complexity to standard transactions, the confirmation of which should be simplified by the use of technology.

Notwithstanding the above there are certain terms, definitions and concepts that FSPs and advisors should be aware of when transacting digitally with clients. The first concept is the difference between the types of electronic signatures as defined in South African law, and the second is contract legality.

Definitions of electronic signatures

The Electronic Communications Act (ECTA) 25 of 2002 identifies and defines two different types of electronic signatures.

The first – comprises data attached to or associated with other data which is intended to be a signature and has a relationship with that data. This means that a standard electronic signature, such as an email signature, is a piece of data attached to an electronic document or communication that verifies both the signee’s identity and his/her intent to sign said document or communication.

The second type of electronic signature is the Advanced Electronic Signature. This is an electronic signature with high levels of authentication, encryption and certification required on specific contracts and agreements, and accredited by the South African Accreditation Authority as defined by the Act. These specified contracts range from donation agreements and suretyships to antenuptial agreements and franchise contracts. They are quite particular and not nearly as general as standard electronic signatures. If you are unsure as to the nature of an agreement you are signing with clients, it is worth obtaining legal advice.

Most solutions, applications and articles, both local and international, refer to digital signatures rather than electronic or e-signatures. While the ECTA makes no reference to digital signatures, a digital signature is an accepted way to ensure that an electronic document is authentic. Authentic means that you know who created the document and that it has not been altered in any way since that person created it.

Authenticity, however, does not imply contract liability, which brings us to the next important concept – contract legality.

Contract legality

The second concept relevant to the application and use of electronic signatures is that of contract legality. Any contracts signed via electronic signatures must comply with the requirements for a valid and legal contract, namely:

  • There must be consensus or agreement between the parties
  • The parties must have the capacity and legal standing to enter into a contract – for example, they cannot be minors
  • The contract must be lawful
  • The contract must specify performance at a given time – a contract cannot specify performance at an undefined time
  • The contract must be legally enforceable – for example, contract performance cannot be ensured through intimidation
  • The contract must abide by set formalities whether set in law or between the parties – an example of this is the use of witnesses to prove the identity of the contracting parties.

There are several solutions in the marketplace that allow for electronic signature capture and agreement. Of these, Videosign offers a balanced platform which manages technology, mobile functionality, process, access and legality. While most of these applications require the use of one-time password technology or the distribution of an email link to verify identity, Videosign has an  embedded digital signing option linked to video and voice recording across all devices.

Such functionality makes it very difficult for any of the contracting parties to raise a dispute in relation to an agreement. It adds an additional layer of security, compliance, legal certainty and risk management to the contracting process and is a worthy investment in today’s complex business environment.

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