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    • The world is constantly evolving to allow for the continual progression of technological advancements, and with the advent of the internet the law has become more accessible than ever. The introduction of online legal agreements initially resulted in global legal uncertainty regarding whether electronic contracts concluded by electronic means can be recognized as valid and enforceable agreements. This article will provide a broad overview of the requirements necessary for an effective agreement concluded electronically as well as the extent to which the existing rules of the legal system are applicable to the formation of an electronic agreement.

  • 1. Introduction

    • 1.1 The formation of valid legal agreements

      • There are numerous websites on the internet that provides for contract/agreement templates that can be used in either the business or personal environment. Most of these websites cater for countries outside South Africa and at a cost. The FREE contracts provided on this website is specifically for South African's by South Africans. With no cost to download and use as per your requirements. These boiler-plate forms appear to be a cost effective means of avoiding hefty legal fees. However, you must be cognisant of whether the online agreement you enter into is in fact legally binding upon any and all parties involved thereto. To confirm this for your specific requirements, ask one of our attorneys to assist you with your contract. Download the contract and submit it online to an attorney by selecting the specific legal authority category and location for further assistance, on www.LawyersEzyFind.co.za

        Consequently it is important to understand what the core essence of an agreement is, without which, it would be rendered invalid. This is conveyed by briefly exploring the elements of a valid agreement1, as follows:

        1.1.1 An agreement consists of an offer by the offerer (seller/ service provider) to the offeree (buyer/client) to buy goods or services for an agreed price or fee;
        1.1.2 The agreement becomes binding when the offeree accepts the offer;
        1.1.3 There must be an intention to contract freely and voluntarily;
        1.1.4 The parties wishing to conclude a contract must have the necessary mental and contractual capacity, and the parties must be 18 years or older (unless assisted by parent/guardian);
        1.1.5 The agreement must be lawful and not prohibited by statute or common law; and
        1.1.6 The agreement must have definite or determinable content so that the obligations thereto can be ascertained and enforced.
        Provided that the abovementioned elements are fulfilled the contract/agreement you wish to conclude, whether written or electronically, should be considered valid and enforceable in law.
        ___________________________________________________________
        1 Hutchison and Pretorius The Law of Contract in South Africa (2012 ) 6

  • 2. The legal validity of e-commerce/online legal agreements

    • The term e-commerce or electronic commerce is defined as an agreement/contract concluded wholly or in part through communications over computer networks, by email, through websites, by electronic data interchange and other electronic combinations2.

      This type of agreement falls into three broad categories. Firstly, the sale of physical goods, which mostly arise when a website on the internet is used as a modern day cyber shopping mall. The second category is the contract for the supply of digitized products, such as software or multimedia products. The last category is the supply of services and/or facilities, such as video conferencing or giving of professional advice over the internet.
      The principles of contract law apply to these online agreements and to be valid, they must comply with the elements of a valid agreement as outlined in paragraph 1.1 above.
      ___________________________________________________________
      2Smedinghoff Online Law: The SPA’s Legal Guide to doing business on the internet (1996) 79

  • 3. The basic structure of a contract

    • A contract will typically contain the following clauses3:
      3.1 parties to the contract – identify and describe the parties accurately to avoid any uncertainty;
      3.2 the nature of the contract and the heading – the content of the contract will indicate its nature;
      3.3 recitals and preambles – this is not compulsory but it may be helpful to explain the background of the contract;
      3.4 date of agreement – the date on which the agreement was signed;
      3.5 sequence of clauses – this will affect how the contract is understood;
      3.6 specific clauses – the breach clause, exemption clause, guarantees and warranties, suspensive clause (contract is suspended until an obligation is fulfilled) and resolutive clause (contract is terminated upon fulfilment of the obligation);
      3.7 general clauses – amendments, delegation (transfer of rights), waiver, domicilia citande et executandi (address where legal notices can be sent), jurisdiction, alternative dispute resolution;
      3.8 signatures – signature blocks for both parties and the witnesses should be used at the end of the contract.
      Generally, there are no set legal rules or requirements that require contracts to be drafted in a particular way. Therefore, it must be noted that the format and structure of a contract, as set out above, will merely serve as a guideline to providing contractual documents with a clear and logical framework.
      ___________________________________________________________
      3 Hutchison and Pretorius The Law of Contract in South Africa (2012 ) 395

  • 4. Online media statistics in South Africa4

    • 4.1 The table below depicts the percentage of internet users in the South African population for the current year as well as internet users who search for products and templates online.

      Item

       

      Percentage

      Year

       

      Internet users

       

       

      71.4% of the population

       

      2020

      Internet users searching products and templates online

       

      43% of the population

       

      2020

      4.2 The diagram below depicts the statistics of the average website that provides online templates for either business or personal use. The diagram shows us the sheer volume of templates that have been downloaded, and this number continually elevates.
      When using these online templates there are a few considerations to keep in mind. Firstly, reading through a template will highlight most of the important issues that need to be addressed. However, there are key provisions that should be prepared by an attorney that is not provided for in the template.
      Secondly, you need to be cautious when changing any clause in the template. Generally, changing one clause in the template will require additional changes to be implemented, and a failure to make such changes could result in the agreement becoming ambiguous, contradictory or even unenforceable.
      ___________________________________________________________
      4www.statista.com

  • 5. Online contracting: Germany vs. United States vs. South Africa

    •  

       

      Governed by:

      Requires:

      Restrictions on electronic contracting

      Germany

       

      German Law

      Valid offer and acceptance

      ·       Acquiring shares in a company

      ·       Purchasing property

      United States

      Uniform Electronic Transactions Act, 1999

      Valid offer and acceptance

      ·       Purchasing property

      ·       Suretyship agreements

      South Africa

      Electronic Communications

      and Transactions Act 25 of 2002

      Valid offer and acceptance

      ·       Purchasing property

      ·       Execution of a will

      The table above provides us with a basic understanding of a few similarities we share with other countries in the e-commerce field. The alignment of the South African law with international law and instruments will ensure global legal compliance. The adoption of useful legal principles from other jurisdictions, such as the United States, may be a way forward from our rigid approach to electronic contracting.

  • 6. Electronic Communications and Transactions Act

    • The passing of the legislation of Electronic Communications and Transactions Act5(hereinafter referred to as “the ECTA”) initiated the basic premise that digital communications are no less valid than paper-based communications.
      The main aim of the ECTA is to promote legal certainty in respect of electronic communications and transactions. It has fully entrenched the position that digitally negotiated and electronically signed contracts are fully valid and enforceable.6
      However, it needs to be noted that the ECTA provides for four different instances where the electronic signing of an agreement would be invalid:
      6.1 Concluding an agreement for the alienation (disposal) of immovable property;7
      6.2 Concluding an agreement for a long term lease of immovable property in excess of 20 years;
      6.3 The execution of a bill of exchange as defined in the Bills of Exchange Act;8
      6.4 The execution, retention and presentation of a will or codicil as defined in the Wills Act.9
      South African courts and commentators still have the obligation of exploring the issue and restrictions of an electronic signature as contained in the ECTA and whether the stringent requirements of an advanced electronic signature may have to be done away with. If there is one thing that the national lockdown has highlighted, it is the need for South African law to recognize electronic signatures to authenticate important legal documents.
      ___________________________________________________________
      5 Act 25 of 2002
      6S. Mason Electronic Signatures in Law (2012)
      7Alienation of Land Act 68 of 1981
      8 Act 7 of 1953
      9 Act 34 of 1964
      10 Hance and Balz Business and Law on the Internet (1997) 164

  • 7. Shrink-wrap, Click-wrap and Web-wrap Agreements

    • As a result of the leaps we have taken in the development of technology we are required to take note of special procedures that have been established on the internet for purposes of contract formation. One of these procedures is the electronic data interchange (“EDI”).
      EDI was developed by trade partners who wished to trade in a secure environment using specialised computer networks.10EDI entails a highly structured form of messaging and pre-determined fields as well as an ongoing relationship whereby the parties usually have an interchange agreement in place which sets out the basis for the exchange. Hence EDI contracts are undoubtedly valid contracts and are binding on both parties.11
      More recent developments include agreements with an electronic agent: shrink-wrap, click-wrap and web-wrap agreements. Often when a contract is concluded online, either through a website or by e-mail, terms are incorporated into it through the use of these so-called click-wrap and web-wrap agreements.
      A shrink-wrap agreement, also known as ‘blister pack’ agreements become valid and enforceable when the plastic shrink wrap is broken and/or the software package is installed.
      Akin to the concept of shrink-wrap agreements are the click-wrap agreements, which are also known as ‘web wrap’ agreements. If an online consumer wishes to purchase products offered through an e-shop he/she will be instructed to ‘click’ on certain icons indicating his/her acceptance of the terms.
      Despite the fact that no common law exists to confirm the validity and enforceability of such agreements section 22(1) of the ECTA states that an agreement is not without legal force and effect merely because it was concluded partly or in whole by means of data messages.
      Furthermore, Section 24 of the ECTA provides for the valid expression of intent to make an offer or acceptance by means of a data message (information generated, sent, received or stored by electronic means) and is not without legal force merely because it is in data form and without an electronic signature.
      In practical terms, you can download an electronic contract from a website and use the “sign and scan” approach whereby the parties sign, scan and email the contract in order to have a physical copy on hand. Our law allows for electronic signatures and electronic records to have the same legal effect as physical (or wet ink) signatures and physical records.
      The recognition of online agreements has paved the way for organizations to move towards operating in a paperless environment and take advantage of the simplicity that comes with concluding contracts electronically.
      ___________________________________________________________
      10 Hance and Balz Business and Law on the Internet (1997) 164
      11 Hofman J. Cyber Law: a guide for South Africans doing business online (1999)

  • 8. Jurisdiction over online legal agreements

    • Jurisdiction is the legal term used to describe the power or competency of a court to hear and decide disputes.12 In order for the court to exercise jurisdiction there are two requirements that must be satisfied. Firstly, the court must have the authority to hear the matter (a link between the court and the parties in the matter or the cause of the matter), and secondly the court must have the power to enforce its judgment (the court should only exercise jurisdiction if compliance with its judgment can be expected).
      Electronic commerce, however, by its very nature is transborder. It does not acknowledge geographical borders or jurisdictional principles that recognise state, unions and trade areas but only networks, domains, servers and clouds.
      The general rule is that a contract must be determined according to the lex loci contractus (law of the place where the contract is made)of the last legally relevant act.
      The ECTA 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 legally binding contract to arise. This theory applies to prevent any disadvantages to the offeree.
      However, it is important to note that jurisdiction will remain a worldwide legal uncertainty as there may be instances where one or more parties to the online agreement are in different jurisdictions.
      It would be in the interest of all states in the world to draft another model law that specifically deals with disputes arising from contracts concluded or delicts committed on the internet.
      ___________________________________________________________
      12Ewing Mcdonald & Co v M & M Products Co 1991 (1) SA 252 (A)

  • 9. Model Law on Electronic Commerce (1996)

    • The Model Law on Electronic Commerce (hereinafter referred to as “MLEC”) was the first legislative text to adopt the fundamental principles of non-discrimination, technological neutrality and functional equivalence that are widely regarded as the founding elements of modern electronic commerce law.
      The principle of non-discrimination ensures that a document would not be denied legal effect, validity or enforceability solely on the grounds that it is in electronic form.
      The principle of technological neutrality mandates the adoption of provisions that are neutral with respect to technology used, which aims to accommodate any future development without further legislative work.
      The functional equivalence principle lays out criteria under which electronic communications may be considered equivalent to paper- based communications. It sets out the specific requirements that electronic communications need to meet in order to fulfil the same purposes and functions of the traditional paper-based system.
      The MLEC aims to facilitate the use of e-commerce by removing legal barriers to electronic transacting. It prescribes the procedures that may be interchanged into national laws to provide equal treatment for both paper-based document users as well as computer-based information users.

  • 10. Conclusion

    • In our technologically advanced era the law has now entrenched the recognition of electronically concluded agreements which is in line with the execution of valid legal acts. However, these new paradigms give rise to legal challenges which are caused by legal aspects of electronic commerce and thereby necessitates the need for legal regulation.
      It would be most beneficial to draft a standardized model law based on electronic contracts which would be applicable to all the different jurisdictions of the world. This would lead to a reasonable structure of contract formation in e-commerce with respect to the borderless nature of the internet.

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