By Jabu Khumalo (Candidate Attorney) and Andre M Halgryn (Director)
The rise of a digital revolution has dramatically influenced the manner in which we conduct business through electronic means today. In South Africa, this transformation is particularly evident in the realm of contract law. Prior to the implementation of the Electronic Communication and Transactions Act 25 of 2002 (commonly referred to as ECTA), the common law was initially used to determine the legal validity and enforceability of electronic agreements. However, due to the common law being unsuited for the modernization of legal concepts to allow for the use of more modern systems, ECTA was specifically drafted to remove such remaining uncertainty. It has done so by introducing a framework in which it aims to regulate contracts which are concluded electronically. Our law has previously already recognized data as a significant and important aspect of electronic contracting. It is for this reason that ECTA was enacted to adapt, amend and expand on the common law and provide a legal framework for the certainty of electronic contracts.
Traditional, paper-based contracts have gradually given way to easier and cheaper electronic alternatives which offers greater efficiency, convenience, and accessibility. Electronic contracting is generally more prevalent in online transactions, credit agreements and sale agreements. The banking industry relies more on electronic agreements where a certain regulated product and/or service will be advertised to the customer and will generally contain a “click-to-accept” button. In most instances, this would include a clickable link which directly reroutes the user to the company’s website. In certain instances, this could also establish a legally binding agreement between the parties, subject to terms and conditions which the consumer is deemed to have read and understood before accepting.
In terms of section 13 of ECTA, electronic signatures are specifically legally recognized in order for a contract to be valid. The case of First Bank Limited t/a Wesbank v Leon Grogory Govender is the proverbial locus classicus regulating online credit agreements and its interplay with potentially unsigned electronic contracts. The court emphasized that the conduct of the parties plays a vital role in the conclusion of a contract. For example, where an One Time Pin (OTP) with a direct link is sent to the customer to upload relevant documents and to allow the party access to the electronic contract on the website, such a contract will be valid unless proven to the contrary as the parties acted in a manner which would create the impression to an unbiased bystander that they wished to be bound to such agreement. The judgement correctly interpreted section 11 of ECTA in that any data message is legally enforceable and shall not be disregarded on basis that it is in a form of a data message only.
This generally positive development is not without its challenges. Despite the clear benefits of electronic contracting, we do not have sufficient legal clarity on every aspect thereof. Such uncertainty includes, inter alia, that as electronic contracts rely on the use of technology, they remain vulnerable to cyber threats and hacking attempts. As such, ECTA suggested that ensuring a robust security measure in every company would assist in preserving the integrity of such contracts. Secondly, the importance of verifying the identity of all parties involved (as mentioned in the Govender case) can be challenging when it comes to the authenticity of the agreements. Finally, electronic contracting raises significant concerns relating to the law of evidence during legal disputes. Adducing evidence using physical, paper based agreements is generally easier than establishing a legally binding agreement via electronic means. The rise of electronic contracting in South Africa is a reflection of the broader global trend towards digitalization. The benefits of effectiveness, cost reduction, accessibility, and enhanced security make electronic contracting an ideal choice for both businesses and individuals. With a robust legal framework in place, South Africa is therefore well-prepared to navigate the legal challenges and considerations that come with such inevitable transformation. As time progresses and as technology transforms, businesses are therefore encouraged to adhere to electronic contracting principles as a central standard practice.