Attorneys and agents cautioned to read and act diligently in a recent ‘electronic signature’ case.
This was one of the opening remarks of Judge AJ Ronaasen on 22 September 2020 intended for both estate agents and attorneys / conveyancers to take heed of, during judgement in the High Court of Port Elizabeth on a by now well-known case that focused on the validity of electronic signatures when signing documents for the purchase of immovable property.
Background
The events that led to the case Borcherds and Another v Duxbury and Others (1522/2020) [2020] ZAECPEHC 37 are well known by now, but just to recap in short:
The seller (and his wife, who were married in community of property) both placed their initials and signatures electronically via an application that used their “wet signatures” as its origin, on an offer to purchase, to indicate their acceptance thereof. It had been e-mailed to them by the estate agent and they subsequently sent it back with the said application after signing thereof electronically.
The seller then received a higher offer, whereupon his attorney notified the purchasers “to grant (them) the opportunity to increase (their) offer and obtain (their) final bond approval within 72 hours from date (thereof)”, as per a notification entitled: “Notification of the 3 Day Clause”.
It was pointed out in the judgement that upon scrutiny of the purported “72-hour ratification” clause in this specific contract, it did not allow the seller to call on the initial purchasers to increase the price they were prepared to pay for the property, to meet or improve on a subsequent offer. It only allows the seller “to call on the purchasers to make their offer unconditional through the fulfilment or waiver of the suspensive condition (contained therein)”.
It was undisputed that the initial purchasers had indeed satisfied the suspensive condition.
Don’t assume all ‘standard’ clauses read the same
The caveat here is surely for attorneys and conveyancers to scrutinise ‘standard’ and ‘known’ clauses in contracts and not to assume that these read the same in each contract. Judge Ronaasen specifically pointed out that had the attorney taken more time to carefully consider the terms of the contract, the litigation could have been avoided.
Unfortunately, the matter did not end here. It seems that when this was indeed pointed out to the seller and his attorneys, they opted for calling on the invalidity of the contract, based on several other grounds, including those listed in the discussion below. -
Non-compliance with Alienation of Land Act (ALA) defence
The seller and his attorneys claimed that the OTP was invalid in terms of section 2(1) of the Alienation of Land Act, 68 of 1981 (ALA) by claiming that:
- the fact that various blank spaces in the contract were only completed after signing by both the seller(s) and initial purchasers, by an “employee” of the estate agents involved;
- the requirement of signature was not fulfilled, based on the seller (and his wife’s) ‘electronic signatures’ to the contract, thus rendering the agreement void.
Blank spaces - It was contended that as the whole agreement was thus not reduced to writing at the time of signature, that the contract was therefore void. However, Judge Ronaasen found that “not one of the pieces of absent information feature(d) as a requirement to constitute a valid alienation of land in terms of Section 2(1) of the ALA”; and also, that “the absent information could not be elevated to be described as (actual) terms of the contract, which had been omitted,” as the absent information merely related to aspects such as the place where and date of affixing the respective signatures; the physical addresses of the parties; the identity of the conveyancing attorneys and the agent who had introduced the property, had not yet signed the contract.
The judge found the omission of these terms were not material to the contract.
Signature of the contract - The Seller and his wife ‘signed’ the OTP by means of a cellular phone application, called “DocuSign”, which photographed the original ‘wet’ signatures and initials and imported this into the application.
The seller and his wife argued that the contract was void because they had applied ‘electronic signatures’ where-as the Electronic Communications and Transactions Act (ECTA) specifically makes provision that such ‘electronic signatures’ do not have application for the Alienation of Land.
However, the judge ruled in short that:
- the courts always take a pragmatic approach, as opposed to a formalistic one (whether the method of the signature fulfils the function thereof, which is to authenticate the identity of the signatory, rather than insisting on the form thereof).
- no evidence was submitted that the parties indeed intended this to be an ‘electronic transaction’ as envisaged in the ECTA.
- the words ‘sign’ or ‘signed’ are not defined in the ALA and in the ordinary use of the word it means ‘signature by name or signature by mark’ (the latter of which had been accepted by courts long before electronic communication).
Based on this, Judge Ronaasen held that this case clearly bore no suggestion of abuse. Also, that both the seller and his wife clearly had the intention of being bound to it, when they affixed their initials and signatures by means of the DocuSign application. Lastly, that there was no evidence placed before the Court contradicting any of the aforesaid findings. Therefore, the seller and his wife were indeed bound to the contract, emphasising again the pragmatic approach of the courts to the concept of ‘signature’.
What does this mean going forward?
Judge Ronaasen unfortunately did not refer to considerations regarding the fact that Schedule 2 of the ECTA specifically lists land sale agreements as one of only four types of documents that may not be signed electronically. Was this considered in depth, or at all? Did the judge err in not considering that “electronic / scanned images of physical signatures”, certainly falls within the meaning intended by the ECTA as an electronic signature, which is, as stated above, intended to be expressly excluded as per section 4.4 thereof?
In the light of the above, it would thus be interesting to see if further case law emerges in this regard, especially since certain levels of lockdown did and may again continue to create challenges to obtain ‘personal’ signatures for sales agreements as envisaged in terms of the Alienation of Land Act.
This judgement was certainly not intended to open the floodgate for various forms of ‘electronic signatures’ now suddenly approved by Court for property transactions. As mentioned before, Judge Ronaasen made this clear in the judgement, by sternly rebuking the estate agent for failing to “make an effort” to obtain signatures personally. The judge said if this been done, “this litigation could have been avoided or substantially reduced in its scope”.
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SONJA JANSE VAN RENSBURG
ATTORNEY, NOTARY & CONVEYANCER
PROKUREUR, NOTARIS & AKTEVERVAARDIGER
VAN ZYL KRUGER INC
CELL NR: 082 781 3600
E-MAIL ADRRESS: sonja@vzk.co.za
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