The use of electronic signatures has been recognised for several years in South Africa due to the growing usage of digital communication the world over. With the ravages caused by the COVID-19 pandemic, South Africa has encouraged remote working arrangements for those businesses and entities which are able to do so in order to minimise the risk of infections. Naturally, this resulted in greater interaction between businesses and customers over digital platforms.

This article considers the attendant practical implications on the conclusion of contracts in South Africa in view of recent case law.

As a point of departure electronic signatures have the same force and effect as wet-ink traditional signatures unless provided otherwise or prohibited by law e.g. electronic signatures cannot be used to execute Wills, Codicils, sale of immovable property, signing as surety, lease of immovable property for periods exceeding 20 years etc.

The Electronic Communications and Transactions Act, 25 of 2002 (ECTA) governs electronic communication in South Africa. Section 13 (1) thereof provides that where a signature is required by law, whereas the type of such signature is not specified, only an advanced electronic signature (one which has been accredited and authenticated) is compliant in relation to a data message. Section 13 (3) read with (3) (a) provides that where parties require an unspecified electronic signature to a transaction, it suffices if method is used to identify the relevant party and their approval of the information being communicated e.g. e-mail exchanges.

The Court’s ruling in Global and Local Investments Advisors (Pty) Ltd vs Fouche 2021 (1) SA 371 (SCA) seems to be at odds with the provisions of Section 13 (3). In this matter Mr Fouche, a mining consultant, mandated Global to invest some money on his behalf and the mandate agreement provided that instructions must be accompanied by the client’s signature. It was not specified which type of signature is to be used. Later, Mr Fouche’s email account was hacked and instructions were sent to Global to distribute the funds to certain third parties which Global did to a total of R804 000. These fraudulent instructions were concluded by the words “Regards, Nick,” and another with “Thanks, Nick.” Mr Fouche then claimed the amount from Global citing that the fraudulent instructions failed to comply with the mandate agreement requiring his signature, although they were indeed sent from his e-mail address (by the hackers).

The High Court found in Mr Fouche’s favour. On appeal, the SCA held that the instructions had no signature, which in everyday context, is aimed at authenticating the party issuing or approving the communication. The Court also upheld that the mandate had no provision for electronic signature and hence Global cannot rely on Section 13 (3) particularly (a) and (b).

It is our humble view that the ruling has far reaching consequences which the honourable Court might not have anticipated. Given that the mandate agreement had provided that instructions are to be given by either fax to a specified number or by e-mail to a specific e-mail address, it follows that the signature required was to include an electronic signature.  Read with Section 13 (3), such signature could suffice with a method of identification of the party giving the instructions (3) (a) and as per (3) (b), such method is to be reliable as was appropriate, with this being sufficed as the instructions were sent from Mr Fouche’s correct e-mail address.

The resulting effect is that financial institutions will have to amend their agreements to specifically provide for specific electronic signatures. In any case a multitude of lawsuits might even arise where parties may claim for instructions lacking lawful mandate from financial institutions.

Our astute and experienced attorneys stand ready to assist with these and related matters as well as a wide range of other legal services. Our approach is inclusive and professional. Contact us at your earliest convenience. 

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter. One should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this site contain general information and may not reflect current legal developments or address one’s particular situation. We disclaim all liability for actions one may take or fail to take based on any content on this site.