How can an electronic contract actually be valid?

As someone reading this blog post, it is obvious that you spend time online. And being someone who spends time online, it is highly likely that you have come across an electronic contract. Not sure? One simple example: Facebook. You are probably on Facebook, and to be part of Facebook, you have to agree to their terms and conditions. You might not have realised it, but if you joined Facebook, you entered into an electronic contract.

In this post, we will look at the idea of an electronic contract and how it can actually be valid.

 

Basis for an electronic contract

There is a general principle in our law that digital communications are no less valid than paper based communications. This principle comes from the Electronic Communications and Transactions Act (ECTA). Section 11(1) of ECTA states that information is not without legal force merely on the grounds that it is wholly or partly in the form of a data message. It is upon this basis, then, that an electronic contract is possible.

Essentials of an electronic contract

For an electronic contract to be valid, it must meet the requirements that all other contracts must meet in order to be valid and enforceable. There has to be a valid offer and acceptance and a consequent consensus between the contracting parties. Both parties must have contractual capacity. The contract itself must be lawful and capable of performance. Generally there are no prescribed formalities, but when formalities are prescribed, they must be followed.

Contracts that can’t be concluded electronically

Most contracts can be concluded electronically. Even where formalities such as writing or signature are required, these can generally be satisfied through electronic transactions. There are, however, exceptions where it is not possible to generate agreements electronically. These are the agreements for the sale of or long-term agreement for immovable property, wills, bills of exchange and stamp duties. This is what the Supreme Court of Appeal held in Spring Forest Trading CC v Wilberry t/a Ecowash, as drawing from the ECTA.

Electronic signatures

The ECTA defines an ordinary electronic signature as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature.” What it really means is that your electronic signature is anything that performs the function that your standard signature would, but in a digital form, and it is evident that it was intended to be a signature. So typing your name in an email might be identified as your electronic signature. Even clicking “I agree” to Facebook’s latest privacy policy can be identified as your electronic signature. If an electronic contract requires a signature, then the above requirements would need to be met.

Email and text messages

Email and text messages can play a significant role in electronic contracts. In the case of Jafta v Ezemvelo KZN Wildlife, these very ideas were in question. The Court found that despite the generally informal tone of email and text messages, they can still have legal effect. It held that SMS and email were as effective modes of communication as a written document. Contracts can therefore be concluded, varied or cancelled by email or text message.

Need help?

These are some aspects relating to the idea of an electronic contract and how it can actually be valid. If you require advice or assistance regarding any of the above or contracts in general, please do not hesitate to contact us at info@gunstons.com.

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