The Validity of e-signatures in Sale Agreements for Land
Authors: Elam Matthews – Associate & Faatimah Essack – Candidate Attorney
*Supervised by: Penny Chenery – Director & Head of Real Estate
Currently in South Africa, electronic signatures are regulated by both the common law and the Electronic Communications and Transactions Act, 25 of 2002 (ECTA).
According to South African common law, for a signature to be valid:
the name or mark of the person signing must appear on the document,
the person signing must have applied it themselves, and
the person signing must have intended to sign the document.
This premise has been carried over to electronic signatures and, with the introduction of ECTA, South Africa is following a global trend in recognising the legality of electronic signatures, rendering the status of electronic signatures as a functional equivalent to traditional “wet” signatures.
DocuSign is an application that offers electronic signature or eSignature, a way to securely sign documents and agreements electronically on different devices. This is a fast and effective tool that is efficient and environmentally friendly. The documents are encrypted, and a complete audit trail is maintained as a safety measure.
In light of the devastating impacts of COVID-19, technological inventions that make provision for e-signatures greatly assist attorneys and clients who need to limit their in-person interactions with one another. However, e-signatures in respect of agreements of sale for immovable property are not recognised under South African law.
Agreements of sale of immovable property are governed by the Alienation of Land Act 68 of 1981 (ALA) and section 4(3) and 4(4) of ECTA explicitly excludes the provisions of ECTA to the laws of the ALA.
In the recent judgment of Borcherds and Another v Duxbury and Othershanded down by the Port Elizabeth High Court on 22 September 2020, one of the points raised related to the validity of the sale agreement of land and compliance with section 2(1) of the Alienation of Land Act. According to section 2(1) of the ALA, an agreement for the alienation of immovable property must be in writing and signed by the parties or their duly appointed representatives.
The purchaser signed the offer to purchase in traditional “wet ink”, and the document was scanned to the seller who received it on his mobile device. The document was then imported into the DocuSign Application (App) on the seller’s phone where it was initialled and signed. The App contained the sample signature and initials of the seller, which was derived from their “wet ink” signature and initials. This was then photographed and imported into the App.
The court held the following:
No evidence was placed before it that the parties intended this to be an electronic transaction.
The words “sign” or “signed” are not defined in the Alienation of Land Act.
The provisions of ECTA have no application in respect of transactions for the alienation of land by virtue of the provisions of section 4(3) of ECTA read with Schedule 1.
The approach of the courts to signatures has generally been pragmatic, not formalistic.
The Pragmatic Approach
The courts look to whether the method of the signature used satisfies the function of a signature, which is to authenticate the identity of the signatory as opposed to insisting on the precise form of signature to be used. Prior to the modern era of electronic communication, the courts were willing to accept any mark made by a person for the purpose of attesting a document, or identifying it as their act, to be a valid signature.
Considering the above, the court concluded that the signatures were validly appended for purposes of the Alienation of Land Act.
ECTA excludes the applicability of the Alienation of Land Act in sections 4(3) and 4(4) and there is no requirement that the provisions of ECTA will apply in instances where parties intended that the transaction should be concluded electronically. Intention is therefore not a relevant factor.
This is certainly not the last that we will hear of decisions relating to web-based applications like DocuSign and their admissibility in relation to immovable property, exceedingly so as the impacts of COVID-19 have accelerated the timeline for legislation to be amended and as our law continues to develop for all its changing circumstances.
For more information on e-signatures in relation to bond documents, please see our previous article here https://www.lawtonsafrica.com/post/electronic-signature-of-bond-documents-during-the-lockdown-and-beyond.
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