E-Signatures and sale agreements

A need highlighted by the lockdown
The coronavirus lockdown has prompted many queries about how can an offer to purchase sale agreement be signed, when social distancing has prevented face-to-face meetings and prohibited the physical signing of signatures to contracts?

At the time of writing, estate agents are not allowed to meet face-to-face with their clients, in order to have an offer to purchase sale agreement signed.

Despite this, they have made great headway in providing virtual tours of properties, which can be viewed on the Internet. Everyone must have heard about a purchase of property taking place without any visits and physical inspections. The trend towards digitisation is relentless.

At this time, the real estate industry is more or less in a state of collapse, because agreements of sale still cannot benefit from the use of digital signatures and/or Electronic signatures on contracts for the sale of land.

The lockdown has highlighted the fact that many people do not have access to a printer and a scanner and that when a draft offer to purchase contract has been emailed to the recipient, they cannot print out the document to physically sign it and then scan a facsimile thereof for acceptance.

Various proposals have been made, such as visiting Postnet offices for assistance with a printout, signing it and then scanning and emailing the document to the recipient.

Others have mentioned a previously imaged JPEG digital signature being cut and pasted into a Word document without the use of a scanner and printer.

But the reality is that the lockdown has highlighted the need to validate digital signatures and/or Electronic signatures.

Physical signatures are still required today
The requirement of a physical signature was first legislated as far back as Section 30 of Proclamation 8 of 1902 (Transvaal). Obviously at that time, nobody would have imagined that personal computers, emails, and the Internet would have digitised our landscape forever.

Even today, despite the Electronic Communications and Transactions Act, 2002 No. 25 of 2002, (ECT) physical signatures are still required for Immovable Property Sale Agreements, Long-Term Leases, Wills and Bills of Exchange.

Section 4 (4) of ECT read together with Schedule 2 at the very end of the ECT Act, expressly reinforces the provisions of Section 2 of the Alienation of Land Act 68  of 1981; which still requires that all contracts for the sale of immovable property must be contained in a document, (A Deed of Alienation), which is to be signed by the parties thereto.”

So therefore, contracts for the sale of land still cannot be validly executed by an exchange of WhatsApp messages, SMS’s, and emails.

It is really interesting to read how the courts have grappled with our ever-changing technology in the past and how at the time, they dealt with the validity of agreements.

Amazingly, as far back as 1869 it was ruled that a telegraphed contract was sufficient writing, under The Statute of Frauds”. In the New Hampshire Supreme Court of the United States:

The forward thinking judge proclaimed that:

“it makes no difference whether the operator writes the offer or the acceptance,…and his pen be a copper wire a thousand miles long. In either case the thought was communicated to the paper, by use of the finger resting on the pen; nor does it make any difference that in one case, common record ink is used, while in the other case a more subtle fluid, known as electricity, performs the same office”

Then in 1996, the next new technology - Fax Machines - faced the courts. The judge held that the:

“…. transmission of beeps and chirps along the telephone line is not a writing…”.

It was in the Georgia Court in the matter of Department of Transport vs Norris 1996, that the judge determined that:

“a facsimile transmission does not satisfy the statutory requirement that notice be given in writing. Because such a transmission is an audio signal via a telephone line.”

Despite the initial uncertainties and misunderstandings of how Fax Machines operated: these days - nobody worries about faxing and scanning of documents around the world.

Rule 63 : Authentication of documents executed outside of the Republic for use within the Republic
Practically speaking Rule 63 is probably the most problematic piece of legislation that conveyancers have to face.

The requirement of having your client travel to an Embassy to physically sign documents in the presence of an authenticating officer, who must also physically counter-sign, and then attaches a hardcopy seal of Authentication is complicated and cumbersome.

Generally speaking, Rule 63, is more often than not, not properly complied with. Every conveyancer must have experienced receiving incomplete or defective Rule 63 Authenticated documents.

We have had the High Commission at Trafalgar Square refusing to authenticate a set of bond documents because there were too many pages. There have been delays in simply making an appointment with an authenticating officer.

Unfortunately, many Diplomatic staff are not fully aware of and trained in the requirements of what an Authentication Certificate should state. We have had to return the documents to Senegal; together with our own drafted precedent of an Authentication Certificate for the official to sign. There are many other examples of problematic and non-compliant Rule 63 attempts to properly authenticate.

We also have had clients having to fly right across Australia from Perth to Canberra to have their documents authenticated by a diplomatic or consular official.

It appears that Notary Publics in England are scarce and not easily found and their services are extremely expensive, causing much unhappiness to our clients. Travelling to London is also costly and time-consuming.

The bottom line is that most clients do not read our elaborate instructions and directions on how to have their documents authenticated in a South African Embassy. We even had one client who signed every page in advance; before arriving at the Embassy for them to refuse to authenticate his incorrectly signed signatures.

If only we could have enabling legislation that would allow Authentication by digital and or Electronic signatures.

The dangers of fraudulent signatures: Physical and electronic
Obviously, there is no panacea in using handwritten signatures, as we have all come across the forgery of signatures. Some have even escaped the notice of the Deeds Office, resulting in fraudulent and unlawful transfers of ownership.

Interestingly many of those articles pushing for digitisation have failed to mention the dangers of Electronic signatures, cyber fraud, email interceptions and the impersonation of Electronic signatures.

The recent case of Local and Global Investments Advisers (Pty) Ltd vs Fouche (71/2019) [2019] Zasca demonstrates how easy it is for an unknown fraudster to impersonate an Electronic signature and hijack R804,000.00.

I am sure that the widespread forgery of signatures on cheques must have accelerated the Banks’s move towards Electronic Funds Transfer (EFT) payments, rendering our cheque books completely obsolete.

Initially, I had never heard of anyone who has complained about making EFT payments. But now the interception of emails and the substitution of bank details has made simple EFT payments very risky.

On the other hand, it seems as though there are more secure forms of software that would protect the integrity of Electronic signatures and this would be welcomed.

Some commentators say that Electronic signatures are much safer and easier to use. Signature of the documents does not have to be delayed by tracking down key signatories and Electronic signatures can be borderless.

Electronic or digital wills?
I am surprised to read about various states in America passing enabling legislation that will validate Electronic Wills, under existing state laws. These are Nevada, Indiana, and Arizona.

In February 2019, The California Assembly passed the Electronic Wills Act. The following features apply.

  • An Electronic Will is defined as a textual record with the intent that the textual record be the testators Electronic will….;
  • It refers to the testator’s “conscious presence at the testator’s direction”.
  • It also allows 2 or more witnesses to sign electronically “in the physical and Electronic presence of the testator. “The Electronic presence is defined as individuals in different locations who are able to communicate in real-time by sight and sound (e.g. via Skype).
  • There is no requirement that the witnesses reside in California nor even in the United States.
  • It also allows for the revocation of a will on a preponderance of evidence that the testator performed the act with the intention of revoking the will.
  • The record is defined as information that is inscribed on a tangible medium that is stored in an Electronic or other medium and is retrievable in a perceivable form.

In Taylor vs Holt the Tennessee court found that the Electronic signatures complied with Tennessee Law allowing a signature to be made by “any other symbol or methodology executed or adopted by a party with the intention to authenticate a writing or record”.

In the Estate Javier Castro, the Ohio trial court ruled that a signature on an Electronic will made by a testator using a stylus on a Samsung Galaxy note tablet was valid. The Electronic Will itself was found to be valid under Ohio’s “Harmless Error” legislation.

All of the above sounds really precarious; but then the devil must be in the detail or rather, there must be no devilish detail.

Technology will catch up with us sometime
Clearly technology will catch up with us sometime and some say our lives will be changed forever by the coronavirus.

The longer we wait, the more the imperfections of the past will continue to plague us and our clients.

The paralysed Real Estate Industry could have benefited enormously if Electronic signatures had been previously enabled as Estate Agents would have been able to work remotely.

It is clear that the implementation of Rule 63 Authentications is haphazard and inconsistent. We have to move forward and streamline this cumbersome legislation.

Is it not time now to embark on a process of validating Electronic signatures for the sale of Immovable Property, Wills, Negotiable Instruments and also doing away with the need for Rule 63 Authentications?

Denoon Sampson

Reader Comments:

GEETA MAHARAJ 31/05/2020:


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