In terms of prevailing legislation, a suretyship agreement must be concluded in writing and signed (in manuscript), alternatively using an advanced electronic signature (as contemplated in section 13 of the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”)). An advanced electronic signature must be registered with an accredited authority. Electronic signatures commonly used through platforms (such as DocuSign etc) do NOT constitute an advanced electronic signature.
The validity of electronic signatures is regulated by ECTA. There is an important difference between an electronic signature that appears on, for example, a lease agreement and one that appears on a suretyship agreement (even if they are in the same document). There are two reasons for this distinction:
(i) Firstly, suretyships are regulated by section 6 of the General Law Amendment Act, 1956, (GLA Act”)”, which provides as follows:
“6. Formalities in respect of contracts of suretyship
No contract of suretyship entered into after the commencement of this Act, shall be valid, unless the terms thereof are embodied in a written document signed by or on behalf of the surety: Provided that nothing in this section contained shall affect the liability of the signer of an aval under the laws relating to negotiable instruments.” [own emphasis added]
(ii) Secondly, section 13(1) of ECTA provides that:
“Where the signature of a person is required by law and such law does not specify the type of signature, that requirement in relation to a data message is met only if an advanced electronic signature is used.” [own emphasis added]
Consequently, section 6 of the GLA makes it clear that a signature is required in a suretyship agreement. Section 13(1) of ECTA makes it clear that if a signature is required (by law), only an “advanced electronic signature” may be used (if it is not a manuscript signature). A typical image/picture/DocuSign signature does not meet this requirement.
An advanced electronic signature is a signature issued by an accredited authority in terms of section 37 of ECTA. There are a number of requirements for the issuing of an advanced electronic signature, including the accreditation by a registered issuer of the identity of the person to whom the signature is issued. Currently, only the South African Post Office and Law Trust are accredited to issue advanced electronic signatures.
The principles pertaining to suretyship agreements and electronic signatures were recently confirmed in the matter of Massbuild (Pty) Ltd t/a Builders Warehouse v Builders Warehouse and Builders Trade Depot v Tikon Construction CC and Another.[1] In this matter, the High Court considered whether a suretyship, which had been electronically signed, met the requirements for a valid suretyship. Massbuild sold and delivered goods to Tikon on credit. Mr Robbertze, being the sole member of Tikon, allegedly stood surety for certain of the amounts owing by Tikon in respect thereof. Due to Tikon being in liquidation at the time of the trial, Massbuild pursued a claim against Mr Robbertze for the outstanding balance owing by Tikon. Tikon’s financial manager and office administrator, Ms R, was responsible for, inter alia, completing forms on behalf of Tikon for purposes of having trading accounts opened with suppliers. Upon receipt of the credit application and suretyship from Massbuild in electronic form (PDF), Ms R claimed that she completed the form electronically, printed it and physically signed the form as witness, after which she scanned the form and appended an electronically scanned copy of Mr Robbertze’s signature thereto. Ms R had a standing authority to append Mr Robbertze’s signature on behalf of Tikon as required in the ordinary course of business. Mr Robbertze denied liability in respect of the suretyship on the basis that it had not met the requirements of a valid suretyship on account of it not having been signed with an advanced electronic signature in terms of section 13 of ECTA, as required in respect of data messages. Section 13 of ECTA provides that where a signature is required by law (as with suretyships) and such law does not specify the type of signature, such signature requirement, in respect of a data message, is only met if an “advanced electronic signature” is used. It therefore follows that where a suretyship is embodied in a data message, the signature must meet the requirements for an advanced electronic signature.
While Massbuild agreed that the suretyship lacked an advanced electronic signature, it disputed whether the suretyship constituted a data message and therefore, the requirement for an advanced electronic signature was irrelevant. A data message is defined in ECTA as data generated, sent, received or stored by electronic means. The court held that, despite the fact that Ms R printed the electronic form suretyship and signed it in manuscript, creating an original, physical document, her signature was applied as witness only (to the fact that Mr Robbertze’s signature was appended to the suretyship) and not on behalf of Mr Robbertze. Mr Robbertze’s signature was appended to the scanned suretyship electronically, whereafter the suretyship agreement was electronically transmitted to Massbuild. As such, it was held that Massbuild’s argument that an original, physical version of the suretyship was created by Ms R’s signature must fail and that the suretyship indeed constituted a data message, subject to the requirements of an advanced electronic signature. The suretyship in question was consequently held as invalid and unenforceable and the court dismissed Massbuild’s claim against Mr Robbertze, with costs.
The above highlights the importance of understanding the legal implications of electronic signatures and data messages in modern contractual agreements. In an era where digital communication and transactions are becoming increasingly common, parties must be aware of the legal requirements and standards that govern electronic documentation and signatures. Meeting the legal requirements for electronic signatures can be crucial in ensuring the validity and enforceability of agreements. The Massbuild case demonstrates that a failure to adhere to these requirements can result in significant legal consequences, including the invalidation of agreements and potential financial losses. Therefore, in order to safeguard their interest, both individuals and businesses should take steps to ensure they have sought adequate legal advice before signing electronically.
Feel free to contact us with any questions regarding the aforesaid or if you have any litigation or commercial drafting requirements. We are available to assist at short notice.
LANHAM-LOVE GALBRAITH-VAN REENEN INC
Per: MR E VAN DER MERWE
[1] [2020] JOL 48548 (GJ) (14 September 2020).
