How you sign a contract can determine the recourse available if things go wrong

28 Jan 2022

Introduction

In the recent unreported case of Massbuild (Pty) Ltd t/a Builders Express, Builders Warehouse and Builders Trade Depot v Tikon Construction CC and another [2020] JOL 48548 (GJ) (the “Tikon case”), the court looked at the validity of a suretyship agreement that was signed electronically. Some agreements have very specific requirements to make them valid.

Under section 6 of the General Law of Amendment Act 50 of 1956, for a suretyship to be valid, it must be (i) in writing and (ii) signed by, or on behalf of, the surety.

A 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 willingness 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 claimed was 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. This was in the form of a picture (scan) of a physical manuscript signature that had been 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, who 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 initialed. In addition, because of the high credit limit applied for, she stipulated additional information that had to be provided. The application form attached to this chain of emails reflected 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 Electronic Communications and Transactions Act (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 which results from a process (or use of a product) which 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 a sufficient compliance with [the relevant statutory provisions].”

The parties agreed that the signature did not comply with section 13(1). It follows that the plaintiff had failed to establish a valid and enforceable suretyship. The result was that the suretyship claim could not succeed.

The end result of poor execution or contract management is that your business may suffer an inability to remedy the consequences of breach. It is therefore critical to ensure that your contract management processes are robust and have integrity. Contact an expert at SchoemanLaw Inc for assistance today.

See also:

• Digital signatures – Latest case law concerning sale of land
• The use of electronic or digital signatures in tax matters
• The write stuff – Electronic signature of sale of property agreements – a sign of the times
• Should you sign surety? Think carefully!

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)