E-Signatures and surety agreements
05 October 2022 09:00 by Nicolene Schoeman-Louw
Poor execution or contract management such as a belief by the parties that an electronic signature is binding, when in fact it does not meet the applicable legal provisions necessary for validity, may result in your businesses suffering an inability to remedy the consequences of a breach.
Written by Nicolene Schoeman-Louw, Managing Director SchoemanLaw Inc, for LexisNexis South Africa.
In a recent unreported case of Massbuild (Pty) Ltd t/a Builders Express, Builders Warehouse and Builders Trade Depot v Tikon Construction CC and another  JOL 48548 (GJ) (the "Tikon case"), a situation of an agreement signed electronically was again scrutinised. Some contracts, such as surety agreements as were in question in this particular case, have specific requirements to make them valid.
Under section 6 of the General Law of Amendment Act 50 of 1956, a valid suretyship must be:
(i) in writing and
(ii) signed by, or on behalf of, the surety.
Suretyship is a bilateral jural act. In Jurgens v Volkskas Bank 1993 (1) SA 214 (A), the Appellate Division explained as follows:
"Suretyship is a bilateral jural act. … It is a contract which arises from agreement between creditor and surety, and it involves the acceptance of an offer. An offer is a manifestation of the offeror's wiliness to contract, made with the intention that it shall become binding as soon as it is accepted by the offeree. It is trite that an offer cannot be accepted unless and until it has been brought to the attention of the offeree."
Facts of the Tikon case
The plaintiff sued the first defendant for what it claims is the outstanding balance on an account for goods sold and delivered, and the second defendant as surety for the first defendant's debt.
According to the second defendant and Ms Robbertze, the second defendant had a strict policy against standing surety for the debts of the first defendant.
To facilitate the signature of documents by the second defendant, Ms Robbertze utilised an electronic signature. The signature was in the form of a picture (scan) of a physical manuscript signature set up in a software programme for the reading, creation and manipulation of electronic documents in the pdf format. The software programme she used, Adobe Acrobat, allowed Ms Robbertze to place the picture of the second defendant's signature in a document, which was then incorporated and saved as part of the pdf document.
On 18 March, Ms Mohabir forwarded the email to Ms Nair. The latter, in turn, replied to Ms Robbertze, informing her that the application could not be processed because the application was not signed by witnesses and was not initialled. In addition, because of the high credit limit applied, she stipulated additional information that had to be provided. The application form attached to this chain of emails reflect that it was not only the initials and witness signatures that had been omitted but also the signature on behalf of the first respondent, and of the proposed surety, the second respondent, whose details had already been completed on the form.
Later that same day, Ms Robbertze replied, attaching the completed application form to her email, together with the additional information requested.
Applicable legal provisions
Section 13 of the 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. Accordingly, if a suretyship is embodied in a data message, the signature must meet the requirements for an advanced electronic signature.
An advanced electronic signature is defined in the ECTA as an electronic signature that results from a process (or use of a product) that has been accredited after meeting the prescribed requirements by the Accreditation Authority as provided for in sections 37 and 38.
A data message is defined in the ECTA as: "data generated, sent, received or stored by electronic means and includes –
(a) Voice, where the voice is used in an automated transaction; and
(b) A stored record."
In turn, data is defined as: "electronic representations of information in any form".
Jurgens v Volkskas Bank 1993 (1) SA 214 (A):
"As a general rule at common law, a person sufficiently 'signs' a document if it is signed in his name and with his authority by someone else. Thus, an agent may be appointed to subscribe the name of the principal to the memorandum of association of a company, or to the instrument of dissolution of a building society, and such a signature is sufficient compliance with [the relevant statutory provisions]."
The parties agree that the signature does not comply with section 13(1). It follows that the plaintiff has failed to establish a valid and enforceable suretyship. The result is that the suretyship claim could not succeed.
The result of poor execution or contract management is that your businesses may suffer an inability to remedy the consequences of breach. Therefore, it is critical to ensure that your contract management processes are robust and have integrity.
Managing Director SchoemanLaw Inc