5 Basic guidelines to contracting in the Digital Age

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WomanLaptop-freedigitalphotos.jpgThe use of technology in our daily lives has been growing rapidly. Electronic contracts initially caused a great legal uncertainty as to how and whether electronic contracts could be recognised as valid and enforceable agreements. The passing of the Electronic Communications and Transactions Act (ECT Act) in 2002 initiated the basic premise that digital communications are no less valid than paper based communications. It is now possible to enter into agreements (including their amendments or notices thereunder) not only through e-mail, but through other data messages such as SMSs.

1. Ensure the basics are in place. Electronic contracts must meet the common law requirements of contracts for it to be valid and enforceable. The minimum requirements for a valid contract under South African law include a valid offer and acceptance; or consensus between the contracting parties. All contracting parties must furthermore have contractual capacity. For example, a minor does not have sufficient capacity to incur binding obligations under a contract without assistance or consent of their guardian to do so. The contract must be legal and capable of performance for it to be valid. Finally, formalities are prescribed for certain contracts such as the sale of land and must be met for the contract to be enforceable.

2. Be aware of the exceptions. In the case of Spring Forest Trading CC v Wilberry t/a Ecowash and Another 2015 (2) SA 118 (SCA), the Court ruled that "…when there are formal requirements of writing and signature imposed by statute or the parties to the transaction, these can generally be satisfied through electronic transactions. There are, however, exceptions where agreements may not be generated electronically. These are the agreements for the sale of immovable property, wills, bills of exchange and stamp duties." Consequently, most agreements (with the exception of the few listed above) can be concluded electronically by means of data messages.

3. Contracting by e-mail and SMS: In the case of Jafta v Ezemvelo KZN Wildlife 2008 JOL 22096 (LC), the Court held that “(E)-mails and SMSs and the language of text messages they carry may seem informal, but treating them as having no legal effect would be a mistake.” It is thus possible, in terms of the ECT Act and case law, for a contract to be concluded, varied and cancelled by means of e-mail or SMS. Businesses should take cognisance of this and consider excluding the right to vary or cancel an agreement by way of electronic communication in some instances. Staff should also be made aware of the risks and consequences of e-mails and SMSs, particularly when dealing with contractual provisions.

4. Time and place of conclusion: The time and place of conclusion of contracts are important as they relate to jurisdiction and applicable law. The ECT Act adopts the reception theory for receipt of electronic communication, meaning that contracts are formed at the time when, and place where, the offeror receives acceptance of the offer, but acceptance of the offer does not have to come to the knowledge of the offeror for a contract to arise. This theory applies to prevent any disadvantage to the offeree by not knowing when the offeror knows about the acceptance.

When clicking on “I accept” or “I agree” on a website that offers goods for sale, a contract is concluded. However, this acceptance of the offer may not come to the attention of the seller if the thing sold is packaged and delivered automatically or through a dispatch service.

In terms of the ECT Act, data message (including and e-mail) is regarded as having been received when the data message, firstly, enters the addressee’s information system, and secondly, is capable of being retrieved. Therefore, an e-mail or SMS will be regarded as having been received even if the addressee has no knowledge of it being in his inbox. The data message merely has to be capable of being retrieved. 

5. Digital signatures:  The ECT Act defines an electronic signature as data attached to, incorporated in, or logically associated with other data and intended by the user to serve as a signature. This may include things such as typing your name at the end of an SMS or e-mail or clicking on an icon on a website to confirm your acceptance of terms and conditions. Should a contract therefore require something to “signed”, the requirement will be met if the mark inserted into the document or data message as signature is capable of demonstrating the intent of the signatory to authenticate the document.

Article provide by M. Prem Inc. M. Prem Inc. is a law firm specialising in business law and business development. We specialise in contract negotiation and preparation; mergers and acquisitions structuring and facilitation; regulatory and corporate governance compliance; enterprise and supplier development intervention. Our philosophy is to prevent dispute and resolve conflict thereby limiting financial loss and promoting business growth. www.mprem.co.za

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