Generally there are no formalities for the formation of most contracts. It is quite common for people to conclude contracts orally and/or even by sealing the deal, so to speak, with a handshake.

Contracts can even be concluded tacitly through only conduct. For example: A customer in a supermarket, takes an item to the payment counter, offers cash to the shop assistant, who accepts the money and allows him to exit the store, without a word spoken.  

Take note that there are some special types of contracts, where formal requirements must be met, to conclude a valid and enforceable contract, for example: the sale of land.

However, there are many reasons why you should consider having a properly drafted contract in writing, such as to prevent fraud, to reduce uncertainties and evidential problems.

All that is generally needed for a valid and enforceable contract is:

• Consensus between the parties
• The parties must have legal capacity to perform juristic acts. A person may lack capacity to act or have limited capacity to act, or may need consent or assistance from another, if he is an insolvent, prodigal, under the influence of alcohol or drugs, certified as mentally deficient, minor, married in community of property or a minor etc.
• The agreement must be legally possible. Eg: A contract where you agree to murder someone .
• The agreement must be physically possible. Eg: A contract where you agree to go back in time.
• Comply with prescribed formalities for the conclusion of the contract (if applicable).

The general rule is there are no formalities for most type of contracts. They can be concluded either in writing, orally or tacitly.

However some special types of contracts do have formal requirements, such as:

• Sale agreements of land, must be in writing and signed by all contracting parties or their authorised representatives– Alienation of land act
• Credit agreements in terms of the National Credit Act must be reduced to writing and provided to the consumer.
• Rental agreements with a duration of 10 years or longer, must be reduced to writing, signed by the contracting parties, notarized and registered. Some rental agreements subject to the Consumer protection Act, must also be in writing.
• Surety Agreements

1.  Wet-ink signature

This is a traditional signature with an ink pen or pencil on paper or even a thumb print using an ink pad.

Pros: All documents can be legally signed using this method.

Cons: Can be cumbersome, not always fast or efficient, not environmentally friendly.

2. Ordinary electronic signature

Any electronic way of conveying a signature.

Eg: a digitally drawn signature with a stylus or finger on a touchscreen, a scanned image of a signature, a name at the bottom of an e-mail, a voice message, a thumbs-up emoji etc.

It can be difficult to verify the authenticity of ordinary electronic signatures. They are also vulnerable to hacking etc, leading to the possibility of fraud or identity theft. To mitigate the risk, several mechanisms may be employed by service providers:

For example, attaching to the signed document an audit trail with a myriad of information that can be used as evidence of authenticity, such as the IP address of the person signing, the GEO location, two-step authentication by ensuring the signatory also enters a one time pin sent to a mobile number and/or e-mail address or even by taking a selfie.

Pros: Convenient, efficient, faster, environmentally friendly, easily stored electronically

Cons: Security and authenticity risks associated with it as the data and authenticity of the signatory cannot be absolutely guaranteed. Whenever a signature is required by law, and such law does not specify the type of signature required, then an ordinary electronic signature will not suffice, an Advanced electronic signature is required.

3. Advanced electronic signature (AES)

When signing a document with an AES, a certificate is incorporated into the document with a public key. Through the use of cryptography, the data is encrypted and the integrity of the data and the authentication of the signatory can be absolutely guaranteed by the receiver.

So this is not your everyday electronic signature. You will have to apply for it at the providers that’s been specifically accredited by the SA Accreditation Authority (SAAA). The only accredited providers are the South African Post Office Ltd, Law Trusted Third Party Services (Pty) Ltd (LAWTrust) and TrustFactory. You will be authenticated by the provider, face-to-face, and then they will provide you with the tools necessary to sign a document with an AES.

Pros: In South Africa, AES generally bears the same weight as a traditional wet-ink signature. Only a handful of contracts are excluded, such as the sale of land.

Cons: Cumbersome to obtain, can be costly, not always well understood.

Please contact us for any other queries you may have.