A scanned signature renders certain agreements invalid

By Dérick Swart on 9 December 2020

Earlier this year, the Gauteng High Court was asked to rule whether a scanned copy of a hand-written signature applied by someone other than the signatory to a deed of surety was binding on the signatory.

In Massbuild (Pty) Ltd t/a Builders Express, Builders Warehouse and Builders Trade Depot v Tikon Construction CC and another [2020] JOL 48548 (GJ), Tikon Construction CC (herein "Tikon") purchased certain goods from Massbuild (Pty) Ltd (herein "Massbuild") on credit.  Massbuild argued that one Christiaan Robbertse (herein "Robbertse") agreed to stand surety for the proper payment of all amounts owing by Tikon and accordingly when Tikon went into liquidation, Massbuild sought to recover the outstanding amounts from him as surety.

At trial
The parties formulated the issues to be decided by the court with a focus on whether the initial credit application, incorporating a deed of surety, was validly entered into with specific reference to sections 13(1) and 13(2) of the Electronic Communications and Transactions Act, 25 of 2002 (herein "ECT Act"), given that all documents were exchanged electronically.

It appeared from the evidence that Robbertse's sister, who worked as an office assistant for Tikon, had a standing authority to apply his scanned signature to documents requiring signature in the ordinary course of business.

Robbertse did not allege that his sister did not have the authority to bind him to the deed of surety – he simply denied having signed it at all.  Specifically, he alleged that an electronic signature was applied and that such signature had to comply with the provisions of the ECT Act.

The law
Section 6 of the General Law Amendment Act 50 of 1956, stipulates the formalities required for a valid contract of suretyship in the following terms:

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…

Section 13(1) of the ECT Act in turn stipulates as follows:

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.

Finally, section 37 of ECT Act sets out specific requirements for an electronic signature to qualify as an advanced electronic signature (herein "AES"), including that an accreditation authority must certify the signature as such.

The parties were agreed that an AES was not applied to the deed of surety.  

Acting Judge Bester did not deem it necessary to consider the issue of authority, actual or ostensible.  He concluded that since all documents were exchanged electronically and those documents constituted data messages for purposes of the ECT Act, an AES was required for Robbertse to be bound.

The claim against the surety was accordingly dismissed, since Massbuild could not prove the existence of a signed deed of surety within the requirements of the law.

In the current case, one might ask whether an argument based on estoppel (i.e. Robbertse created the impression that he was bound on which Massbuild acted to their detriment) might not have had merit?  One does feel sympathy for Massbuild here as they appeared to have been completely bona fide in their reliance on the documents presented to them – something that surely happens many times per day in South Africa.  

However, where legislation sets out specific formal requirements as preconditions to binding agreements, we should expect such requirements are typically enforced strictly by our courts – and rightly so.  Often these requirements serve to protect consumers and facilitate legal certainty.

We should bear in mind that this case does not only affect suretyships, but any other case where a signature is required by law.  For instance, following the precedent set here, applying a scanned copy of a signature to a copyright assignment agreement will render it invalid, as the Copyright Act requires signature for a valid assignment.  

Invalidity will not always be an all-or-nothing situation.  For instance, if a copyright assignment is contained in a services agreement, only the assignment will likely be impacted.  Often agreements contain simplistic and mechanical severability clauses, which could have the effect of simply striking the offending clauses from the agreement (i.e. pro non scripto), whereas a more elegant approach might have at least imposed an obligation on the relevant signatory to remedy the issue.

What can then be done in the face of such a precedent?  At first glance the following could have merit if properly implemented:
  1. Impose a contractual duty to submit the original documents where possible and scrutinise them for handwritten signatures if this was required.
  2. Extend the clause that typically warrants the personal authority to sign to also include a personal warranty that the signature was originally made on the document with a handwritten signature or otherwise a legally compliant and binding electronic signature.  
  3. Include clauses that impose a severable, personal duty on the signatories to conclude a confirmatory, binding agreement by handwritten signature if called upon to do so, perhaps with an irrevocable mandate to do so on a signatory's behalf if they fail to adhere.
In conclusion, I would argue that the ECT Act is in desperate need of review insofar as it pertains to electronic signatures.  We need to bring it in line with developments in technology, international precedent and practice.  Until then, the promise that electronic signatures hold in terms of reliability, security and efficiency will continue to escape South Africans.  

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