This document provides an introduction to electronic contracting under South African law. It discusses key concepts like the requirements for a valid contract, the Electronic Communications and Transactions Act, and when electronic contracts are formed. It also covers types of electronic contracts like shrinkwrap and clickwrap agreements, and issues around standard terms and conditions in electronic contracts, including cases that address incorporating terms by reference and enforcing exemption clauses.

1. INTRODUCTION TO ELECTRONIC CONTRACTING
KOMESHNI PATRICK
ENDCODER/ ENDCODE.ORG

2. CONTEXT:
Tenets of South African Contract Law
The Electronic Communications and Transactions Act 25 of 2002
Time and Place of electronic contracting
Recognition of electronic contracts
Types of electronic contracts
Standard Terms and Conditions
Enforcing Standard Terms and Conditions
Automated Transactions
Contractual Protection
Mitigating Enterprise Risk
Enhancing the Brand

3. Tenets of South African Contract Law
Essentials of contracts
• Offer - Meeting of minds/consensus between parties
• Acceptance – unconditional and unequivocal acceptance of the offer
• The parties must have contractual capacity
• The agreement must be both legally and physically possible
• The agreement must comply with any formalities prescribed by law
Validity may be affected by misrepresentation, mistake or duress

4. Electronic Transactions and
Communications Act 25 of 2002
• makes provision for the recognition and regulation of electronic commerce and its
provisions deal specifically with how, when and where an agreement concluded
electronically, comes into existence.
• Section 11 entrenches the recognition of data messages for the purposes of
conducting legally relevant acts
• Article 5 of the UNICTRAL Model Law on Electronic Commerce
• Signature of the parties electronically is given recognition

5. Electronic Transactions and
Communications Act 25 of 2002
Before After
http://www.fotosearch.com/photos-images/contracts_2.html http://www.canstockphoto.com/images-photos/contract.html#start:375

6. Time and Place of conclusion of contract
Information theory
• a contract is concluded once the offeror has knowledge of acceptance
• the expression of acceptance and its communication to the offeror occurs
simultaneously
• direct communication
Expedition theory
• applies when there is an interval between the expression of the acceptance of the
offer and its communication to the offeror
• this is applicable to contracts concluded by post which is indirect communication
• Applies where the offer and acceptance are posted

7. Time and Place of electronic contracts
Section 22 ECT Act:
• (1) An agreement is not without legal force and effect merely because it was
concluded partly or in whole by means of data messages.
• (2) An agreement concluded between parties by means of data messages is
concluded at the time when and place where the acceptance of the offer was
received by the offeror.
Section 26(1): the agreement is valid upon receipt of the acceptance and it is not
necessary for the offeror to acknowledge receipt.
Reception theory
• The contract is concluded at the time and place when the offeror receives the
message of acceptance
• applies to electronic transactions including contracts concluded by email and SMS
• Section 22(2) applies only where the parties have not expressly agreed to vary the
terms

8. Proving the Time and Place of conclusion
of electronic contracts
Sending: s23(a) :
a data message, must be regarded as having been sent by the originator, when it
enters an information system outside the control of the originator or, if the
originator and addressee are in the same information system, when it is capable of
being retrieved by the addressee.
Reception: s23(b) :
a data message must be regarded as having been received by the addressee when
the complete data message enters an information system designated or used for
that purpose by the addressee and is capable of being retrieved and processed by
the addressee.
Important Elements
• Receipt occurs when the transmitted data message enters the information system of
the recipient mail box
• Data message must be capable of being retrieved and processed
Section 25 - The risk is borne by the sender of the electronic communication

9. Recognition of electronic contracts
Jafta v Ezemvelo KZN Wildlife [2008] JOL 22096 (LC)
• Jafta’s emailed letter of acceptance of a job offer was a data message, which he sent
via a World Wide Web-based information system that was outside his control.
• Evidence showed that Jafta’s email neither entered Ezemvelo’s information system
nor was capable of being retrieved and processed by Ezemvelo.
• Ezemvelo could not be regarded as having received under Section 23 of the ECT Act
as one or other information systems had malfunctioned.
• The Court held that SMS (short message service) is as effective a mode of
communication as any written document or email, and that Jafta did communicate
his acceptance of the job offer via SMS.
• Accordingly a contract of employment came into existence which Ezemvelo
repudiated by denying receipt of the acceptance.
• Court held that Section 23 does not require an acceptance of an offer to come to the
knowledge of the offeror for a contract to arise.

10. Recognition of electronic contracts
Mafika v SABC Ltd
• Court had to decide whether an SMS sent by an employee tendering a resignation
was valid and fulfilled a requirement that resignations had to be in writing
• Section 37(4)(a) of the Basic Conditions of Employment Act requires that notice of
termination of a contract of employment be in writing except where the employee is
illiterate
• SABC personnel regulations stipulated that termination notices be “in writing”
• Court held that “a communication by SMS is a communication in writing”

11. Types of electronic contracts
• Shrink wrap agreements
• Click wrap agreements
• All refer to the way in which the contracts are concluded more so than the content
thereof

12. Shrink wrap agreements
• Terms of the agreement become valid and enforceable when the plastic shrink wrap
is broken or when the software is installed
• software licenses placed within the shrink-wrap of the software package itself
• May be voidable if buyer’s attention not drawn to terms and conditions

13. Click wrap agreements
• Agreements built into web pages that you accept by clicking on certain icons or the
“Accept” or “Agree” dialogue box and this incorporates terms into the agreement
• The purpose of these agreements are wide ranging, but they are commonly used for:
o Accepting terms of use,(regulating access to websites, regulating use of the
website)
o Containing exclusion clauses, in an effort to limit or deflect liability from the
site owners or administrators
o Accepting license agreements
o Online purchases

14. Click wrap agreements
https://www.google.co.za/search?q=pic+of+globe+background+for+electronic+contracting&biw=1518&bih=714&source=lnms&tbm=isch&sa
=X&ei=TKpgVLKcCYq-PNa7gPAE&ved=0CAYQ_AUoAQ#tbm=isch&q=shrink+wrap+agreement&imgdii=_

15. Standard terms and conditions
• ECT Act section 11 ensures that shrink wrap and click wrap agreements are
enforceable
• Section 11(1) Information is not without legal force and effect merely on the grounds
that it is wholly or partly in the form of a data message.
• Section 11(3) information is incorporated into an agreement or data message, even
though it is not in the public domain only if the information is:
o referred to in a way in which a reasonable person would have noticed it; and
o Accessible in a form that can be read, stored and retrieved by a contracting party,
either electronically or as a computer printout
• Standard terms and conditions are therefore incorporated by reference into
electronic agreements on websites
• These are the standard terms and conditions that a business would use in all
transactions
• Usually address exemptions, limits on liability and disclaimers

16. Standard terms and conditions
• South African position on the incorporation of standard terms and conditions
Durban’s Water Wonderland (Pty) Ltd v Botha and Another 1999
• A mother and her two-and-a-half-year-old daughter were on a ride at an amusement
park when something malfunctioned in the hydraulics, throwing them off the ride.
Durban's Water Wonderland found its defence in contract - claiming an exemption
clause attached to the ticket. This clause was also displayed clearly on the window of
the ticket office. As there was no ambiguity in the scope of the exemption, the
exemption clause applied.
o Did the contracting party know that certain words appeared on the document or ticket? Did
they read it?
o Did the contracting party know that these terms and conditions referred to a contract or to
contract terms and conditions?
o Did the party issuing the contract or ticket do everything in their power to draw the
attention of the contracting party to the fact that the words refer to the terms of the
contract or would a reasonable customer have taken notice of the terms and conditions?

17. Standard terms and conditions
Naidoo v Birchwood Hotel 2012
• The entrance gate of the Birchwood Hotel fell onto Naidoo who was a coach
driver who had driven a busload of passengers to the hotel from Durban. He
sustained fractures of the lumbar spine and ankle as a result and sued the hotel in
delict for damages. The hotel, basing its defence on the law of contract, relied on
the disclaimers it had posted at the gate and around the premises which Naidoo
would have seen. It also relied on the fact that he signed the register upon the
reverse of which were printed various terms and conditions including and exemption
clause.
• The court found that the hotel had not discharged the onus of proving that there
were disclaimers posted in various locations on the hotel premises at the time the
incident occurred. It said that even if it was wrong, Naidoo had entered the hotel
premises for the first time at night and did not see any disclaimers. None of the
disclaimers were brought to his attention.

18. Enforcing standard terms and conditions
Section 11(3) requirements for terms and conditions incorporated by reference for
website owners, electronic traders and issuers:
• can be read;
• can be printed out;
• can be stored electronically; and
• must be retrievable for enforcement.

19. Contracts are everywhere
https://www.google.co.za/search?q=pic+of+globe+background+for+electronic+contracting&biw=1518&bih=714&source=lnms&tbm=isch&sa=X&ei=TKpgVLKcCYq-
PNa7gPAE&ved=0CAYQ_AUoAQ#tbm=isch&q=free+pics+of+social+media&imgdii=_

20. Social Networking sites
• Social network sites have standard terms and conditions regarding the following:
• Age is specified to hold an account
• Business accounts must be registered in the name of the business
• password protection is always specified as the user’s responsibility
• Unacceptable conduct is specified
• Disclaimers for liability - third-party sites, information, materials, products, or
services
• Licence to use intellectual property like posts and photos
• Privacy policies and sharing of information
• Advertising
• Disputes

21. Contracts are everywhere
https://www.google.co.za/search?q=pic+of+globe+background+for+electronic+contracting&biw=1518&bih=714&source=lnms&tbm=isch&sa=X&ei=TKpgVLKcCYq-
PNa7gPAE&ved=0CAYQ_AUoAQ#tbm=isch&q=free+pics+of+online+shopping

22. Shopping online
• Shopping sites have standard terms and conditions regarding the following:
• Online registration
• Product sales and availability
• No alcohol for sale to persons under 18 years
• Pricing policy
• Methods of payment
• Stock availability
• Confirmation of orders
• Delivery, locations- no deliveries on Sundays and Public Holidays.
• Refunds and returns policy
• Cancellation
• Risk and ownership

23. Automated Transactions
• Section 20 of the ECT Act addresses electronic contracting in automated transactions
• Section 20(e) no agreement is formed where a natural person interacts directly with
the electronic agent of another person and has made a material error during the
creation of a data message and –
o The electronic agent did not provide that person with the opportunity to prevent or
correct the error
o That party notifies the other party of the error as soon as practicable after learning of the
error
o That person takes reasonable steps, including steps that conform to the other person’s
instructions to return any performance received, or if instructed to do so, to destroy that
performance
o That person has not used or received any material benefit or value from any performance
received from the other person.
• Onus on the consumer to prove there was an error and that all steps were taken

24. Contractual Protection
• Section 43(2) the consumer must be provided with an opportunity to:
o Review the entire electronic transaction;
o To correct any mistakes; and
o To withdraw from any transaction, before finally placing any order.
• Section 43 (3) the consumer may cancel the transaction within 14 days of receiving
the goods or services
• Section 43(4) where the consumer has cancelled as above, the consumer must be
refunded
• Section 43(5) – consumer must be compensated for any damages or loss incurred
due to the payment system of supplier
• Section 44 – cancellation without reason during cooling off period of 7 days

25. Mitigating Enterprise Risk
1
• Electronic Signature Policy
2
• Signature Matrix
3
• Authorised signatories

26. Enhancing the Brand
• Well implemented internal policies
• Well-managed, responsible brand
• Negates disclosures and complaints regarding contractual practices
• Negates defamatory comments about the company’s contract management
practices
• Improves relationships between suppliers and business partners
• Upholds the duty to shareholders
= building trust in the brand

27. Komeshni Patrick
komeshni.patrick@endcode.org
endcode.org
QUESTIONS?