UNIT 7

ONLINE CONTRACTS AND E-COMMERCE

Textbook
K Pillay and R Duplessis, Commercial Law: Fresh
th
Perspectives 4 edition by (Maskew Miller
Learning) pp. 317-329 (Unit 7).

Case summaries cited in the chapter.

Extracts from legislation cited in the chapter.

Additional Instructions and notes from the

Lecturer.

Information uploaded in Blackboard.

Learning outcomes
■ Apply your knowledge of contracts in the physical world
to electronic contracts.
■ Map out the relevant legal framework that governs
electronic contracts.
■ Apply your knowledge of the law to resolve the unique
challenges of e-commerce.

Nature of e-commerce
Electronic commerce is where business is conducted using
the internet and the World Wide Web.
The internet and the World Wide Web together form what
we call cyberspace. Transactions concluded in cyberspace
have resulted in what we term electronic commerce, more
commonly known as e-commerce.
Cyberspace allows us to enter into e-contracts in many
different ways, which have contributed to the boom in e-
commerce. Examples of e-commerce is where you buy
goods online, conclude contracts via email or via an app on
your mobile phone.
E-commerce also lends itself to contracts for the supply of
products and services.
The legal framework governing e-commerce
Electronic contracts, or e-contracts, are subject to the same
general requirements and rules of the law of contract that
you find under the common law and, where applicable, the
Consumer Protection Act 68 of 2008 (CPA).
While most of these requirements and rules remain the
same, some of them have been adapted for e-commerce
by way of specific legislation. The most important of these
are the Electronic Communications and Transactions
Act 25 of 2002 (ECTA) and the Protection of Personal
Information Act 4 of 2013 (POPIA).

The ECTA was enacted to ‘provide a national framework for

the facilitation and regulation of electronic communications
and transactions’ and contains various sections to deal with
some of the unique challenges that arise within e-contracts.

The POPIA contains various provisions to protect the

privacy of personal information. However, for purposes of
this chapter, we will focus on the provisions relating to
electronic spam.

The validity of electronic contracts

While e-commerce brought many advantages, such as the
ability to trade internationally without leaving your
country of origin to conduct business, there were also
uncertainties around the validity of these electronic
contracts. The biggest question was whether the
electronic representation of a contract could be
considered a valid contract, as it did not take the form of
a contract in the physical world. The ECTA has now
brought clarity in this regard. Sections 11(1) and 22(1) of
the ECTA explicitly states that a contract will not be
without legal force and effect merely because it is wholly
or partly in the form of a data message
(Data in terms of the ECTA means any form of electronic
representation of information. Therefore, a data message
means ‘data generated, sent, received, or stored by
electronic means and includes: (a) voice, where the voice
is used in an automated transaction; and (b) a stored
record’.)

These two sections (Sections 11(1) and 22(1)) ultimately

confirm that if a contract is formed electronically, such a
contract will be valid and binding. While the ECTA may
give an electronic contract legal force, however, you must
not forget that an electronic contract is still a contract and
is subject to the common law rules. As such, an electronic
contract must meet all the common law requirements for
a valid contract.
For example, if Thabo places an advertisement on a
website to sell their car for R100 000 and Suzie sends them
an email to say that they ‘Accept Thabo’s offer’, there will
not be a legally binding contract. The reason is that the
advertisement was not a valid offer. Instead, Suzie is
making an offer that Thabo can accept or reject. The
parties have therefore not reached agreement on the
contract. Refer back to the discussion of valid offers in
Chapter 5.
Data in terms of the ECTA means any form of electronic
representation of information. Therefore, a data message
means ‘data generated, sent, received, or stored by
electronic means and includes: (a) voice, where the voice
is used in an automated transaction; and (b) a stored
record’.

Compliance with formalities

In Chapter 7, you learnt that most contracts do not have
to comply with a particular form or format. However,
there are specific contracts where the law requires the
agreement to comply with prescribed formalities.

In addition, the parties may themselves decide to adopt

certain formalities for a contract. The same rules apply to
electronic contracts. According to section 13(5) of the
ECTA, where formalities are not required by law or by the
parties, an expression of intent is still valid even if it was
not signed electronically, provided it evidences the party’s
intent by some means. However, in those cases where
formalities are required, the challenge is how to comply
with formalities, such as writing and signature in
electronic contracts. This is regulated by sections 12 and
13 of the ECTA.

Writing
Section 12 of the ECTA states that the requirement of
writing is met when it is in the form of a data message and
is ‘accessible in a manner usable for future reference’.
Essentially, this means that the data message must be
stored in such a way that it can be retrieved and read at a
later stage.
Mafika v SA Broadcasting Corporation Ltd [2010] 5 BLLR
542 (LC)
Principle
An employee’s resignation via a Short Message Service
(SMS) constitutes written notice.
Facts
In this case, Mafika was employed on a fixed-term
contract as the head of the legal department at SABC
Broadcasting Corporation (SABC) for a period of three
years. The contract provided that any termination of the
contract had to be done in writing. After the relationship
between the parties soured, Mafika sent an SMS to the
chief executive officer that he ‘quit with immediate
effect’. Six weeks later, Mafika changed his mind and
wished to withdraw his resignation. Mafika claimed that
an SMS does not constitute written notice.
The court’s finding
The court held that an SMS is a data message as defined
by section 12 of the ECTA and the employee therefore met
the requirement for notice to be given in writing.

Signature
The ECTA distinguishes between two situations where
signature may be required as a formality: 1. where
legislation requires signature (statutory formality) 2.
where the parties choose signature as a formality.
Where legislation requires signature (statutory formality)
In such cases, an electronic signature will only be valid if it
is an ‘advanced electronic signature’. This is a
technologically advanced electronic signature that has
been accredited with an accrediting authority according to
a prescribed process.
An advanced electronic signature has strong security
mechanisms built into it, so it cannot be easily replicated,
and contains distinct identifying features when attached
to a contract. For example, for some accrediting
authorities you need fingerprints and/or face recognition
before the authority will attach your signature to an
electronic contract.
Where the parties choose signature as a formality. If the
parties have not agreed on a specific form of electronic
signature, a simple electronic signature that does not have
additional security built into it, will be sufficient. A simple
electronic signature is ‘data attached to, incorporated in
or logically associated with other data and intended by the
user to serve as a signature’. In other words, any type of
data can serve as a signature if so intended. In terms of
section 13(3) of the ECTA, the signature must identify the
relevant party, and indicate their approval of the
associated data message. The method used for signature
must also be suitably reliable for its purpose. This
requirement is illustrated in the case law below.
Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a
Ecowash and Another 2015 (2) SA 118 (SCA)
Principle
Where a party adds their name at the bottom of an
exchange of emails, the name can be a valid signature by
the party in terms of the ECTA.
Facts
Ecowash System entered an agreement with Spring Forest
Trading to be their operating agent. The agreement
contained a non-variation clause stating that any
agreement to vary or cancel the contract would only be
effective once it has been reduced to writing and signed
by both parties. After a dispute arose between the parties,
they exchanged a series of emails in which they agreed to
cancel the contract. The relevant emails ended with the
name of the parties, but no other method of signature was
used. The main issue was whether the emails had been
validly ‘signed’ as required by the non-variation clause.
The court’s finding
Since signature was not a statutory formality in this case,
but rather a formality that was required by the parties, a
simple electronic signature in terms of section 13(3) would
be sufficient. The court held that that the typed-out
names of the parties at the bottom of emails met the
requirements for signature in terms of section 13(3), as it
identified the user and the user’s approval of the email’s
information, and the method used was sufficiently reliable
in the circumstances. The emails therefore complied with
the formalities required by the parties and the
cancellation was valid.

Incorporation by reference
Click-wrap and browse-wrap agreements are often
combined with incorporation by reference. Incorporation
by reference occurs when a party refers to terms
contained in a separate document, without repeating
them in the contract itself. The principles applicable to
tickets and notices also apply to incorporation by
reference. For In the context of electronic contracts,
incorporation by reference frequently takes place
by way of hyperlinks. Section 11 of the ECTA confirms that
the terms referred to will form part of the electronic
contract, provided the reference was made in a way that
a reasonable person would have noticed and that the
terms referred to were ‘accessible in a form in which it
may be read, stored and retrieved’. The last requirement
will be met if the standard terms can be accessed
electronically on the website or by way of printing out the
terms and conditions in hard copy. Whether the reference
to the terms and conditions was made in a way that a
reasonable person would notice depends on how
conspicuous and legible the reference was.

For example, a website makes use of a click-wrap

agreement, referring the user to the terms and conditions
contained on a separate webpage by way of a hyperlink.
(hyperlink is an electronic link that takes the user to a
different webpage (or place in an electronic document) by
clicking on it).

The hyperlink is underlined and in a different colour than

the rest of the text. In this example, the customer would
almost certainly be bound to the terms referred to in the
hyperlink, since the reference was made conspicuous by
the different font, and the customer can only proceed
with the transaction once they have clicked on the icon to
accept the terms. The customer will therefore find it
difficult to argue that they were not aware of the
reference.

Contrast this with an example of a website making use of

a browse-wrap agreement, where the hyperlink referring
to the terms and conditions is placed at the bottom of the
webpage, together with other information, such as the
contact information of the supplier and in the same font
as the rest of the information.

In this example, the court will likely find that the customer
is not bound by the terms and conditions referred to, since
the reference was not made sufficiently conspicuous for a
reasonable person to notice it.
Email disclaimers
An email disclaimer contains terms and conditions, usually
at the bottom of the email, which aims to exclude or
minimise the legal liability of the company sending the
Email disclaimer:
“This email is intended solely for the use of the individual
or entity to who it is addressed. If you have received this
email in error, please delete the email from your system.
If you are not the intended recipient, you are notified that
disclosing, copying, distributing or taking any action in
reliance on the contents of this information is strictly
prohibited.”
The problem with an email disclaimer is that the person
opening the email has no knowledge that there may be a
disclaimer before opening the email. In other words, there
cannot be a contract binding them to the disclaimer
before they open it. They will only be bound to the
disclaimer if there is some conduct after they become
aware of the disclaimer, which demonstrates their
willingness to consent to it. If the disclaimer is placed at
the bottom of the email, merely reading the email will not
amount to consent, since most people will read an email
from top to bottom and will therefore only become aware
of the disclaimer after they have already read the email. If
a party wishes to bind the recipient to the disclaimer, they
will therefore, at the very least, have to place it at the top
of the email in a conspicuous font, and specify that
reading the rest of the email will be regarded as consent
to the disclaimer.

Spam
Due to the ease with which technology can generate mass
electronic communications, spam (unsolicited electronic
communication) has become a major headache for
consumers.
On a daily basis, consumers receive uninvited emails,
SMSes, and automated voice calls, which eat into their
time and can feel like an invasion of their privacy.
The POPIA contains some measures to reduce spam. It
applies to the use of a consumer’s personal information
for purposes of direct marketing by way of electronic
communications, and distinguishes between two
situations, namely: 1. direct marketing to existing
customers 2. direct marketing to consumers who are not
existing customers.
Spam can be loosely defined as unsolicited electronic
communications.
Personal information is widely defined in the Act, and
includes email addresses, phone numbers, personal
preferences, race, gender, medical and employment
history.
Direct marketing to existing customers If a consumer gave
their contact details to the supplier for purposes of direct
electronic marketing in the context of a previous sale of
goods or services, the supplier may use these details for
direct marketing. However, the consumer can end this at
any time by informing the supplier (opt-out system). For
example, you bought goods from Makealot.com. When
buying the goods, you provided your email address and
consented to them sending you marketing emails.
Makealot.com can send you emails regarding special
offers and promotions. However, if you inform
Makealot.com at any time that you no longer wish to
receive these emails, Makealot.com must stop sending
them to you.
Direct marketing to consumers who are not existing
customers If the consumer is not an existing customer, the
supplier may not use their personal information for
purposes of electronic direct marketing to the consumer,
unless the consumer has consented to this in advance
(opt-in system). The consent must be ‘voluntary, specific,
and informed’. For example, you receive a direct
marketing email from a supplier you have never done
business

with before. This is not allowed in terms of the POPIA,

since you did not consent to them using your email
address for direct marketing. While the provisions of the
POPIA affords some protection to consumers, it has been
questioned how effective it is in practice. For example,
consumers may not know the processes to report or stop

TUTORIAL QUESTION
1. Discuss the formalities of writing and signature in
respect of the ECTA Act and in your answer refer to
applicable ECTA provisions and case law. [15]
2. Distinguish between a signature in terms of ECTA
where its required as a statutory formality and where
the parties choose signature as a formality.
3. Discuss being bound by a hyperlink and give example
when bound /not bound [5]
4. Spam – listen to the article and discuss the facts and
the information regulator enforcement action against
the company [8].
https://www.cliffedekkerhofmeyr.com/news/publications/2024/Sector/Technology/technology-and-communications-alert-6-march-
from-spam-to-slam-first-enforcement-notice-issued-by-the-information-
regulator#:~:text=The%20Information%20Regulator%20of%20South%20Africa%20(Information%20Regulator)%20issued%20its,out
%20of%20receiving%20such%20communication.
 UNIT 8
INSOLVENCY
Textbook
K Pillay and R Duplessis, Commercial Law: Fresh
th
Perspectives 4 edition by (Maskew Miller
Learning) Chapter 22 pp. 358-383 (Unit 8).

Case summaries cited in the chapter.

Extracts from legislation cited in the chapter.

Additional Instructions and notes from the

Lecturer.

Information uploaded in Blackboard.

What is insolvency?
In early Roman law, creditors were allowed to seize a
debtor who was unable to pay their debts and sell
them into slavery.
They also had the option of cutting the debtor into
pieces according to the size of their respective debts.

A person’s estate comprises of assets and liabilities.

For the purposes of insolvency law, a debtor who only
has liabilities may be regarded as having an estate.
However, a debtor who is unable to pay their debts is
not treated as an insolvent until their estate is
sequestrated by an order of court.

Sequestration is the process whereby the court

formally declares that a debtor’s estate is insolvent.
Sequestration applies to a person’s estate and not to
the person’s self. This means that we say that a
To sequestrate means to take legal possession of a
debtor’s estate until their debts are paid.

debtor is insolvent, and their estate is sequestrated,

and not that the debtor is sequestrated. Note that
only a natural person’s estate can be sequestrated. A
juristic person, such as a company, that is unable to
pay its debts will not be sequestrated – it will be
liquidated or wound-up. Once a debtor’s estate is
sequestrated, they are no longer called a debtor –
their legal status changes insolvent.

The Insolvency Act 24 of 1936 (Insolvency Act)

regulates and governs the sequestration of a debtor’s
estate. Let us look at some of the main principles that
apply to the sequestration of a debtor’s estate.
The parties to insolvency proceedings

Debtor Creditor

The debtors - A debtor is a person The creditors

who owes money, or some other A creditor is a person to whom you
performance, to someone else – a owe money or other performance.
creditor. Under South African law, Again, not every person will qualify as
the following persons qualify as a creditor in South African law.
debtors: Only those people who meet certain
■ a natural person requirements will be able to call
■ a deceased person (his/her estate) themselves creditors and claim money
■ a person incapable of handling from the insolvent. All the people
their own affairs Olivia owes money to will qualify as
■ a trust creditors.
■a partnership
■certain companies.
 Different kinds of creditors are ranked
The insolvent according to the order in which the
Once the court has granted a insolvent estate pays them:
sequestration order against a debtor, ■ Secured creditors are creditors who
their status in law changes to that of hold security over their claims, such as
insolvent. a mortgage bond. Here, the security –
If the debtor was married in the house that is mortgaged – can be
community of property at the time of liquidated upon insolvency. A secured
sequestration, then both spouses’ creditor is paid out of the profits of the
statuses will change to that of property after certain expenses are
insolvent. The insolvent will remain paid. If the profits of the property are
as such until they are rehabilitated insufficient to cover the claim, the
under the Insolvency Act. secured creditor has a concurrent
Duties of the insolvent claim for the outstanding balance. A
secured creditor has the option of
The Insolvency Act imposes the relying entirely on their security, which
following important duties on the comes with its own advantages and
insolvent: disadvantages.
■ The insolvent must deliver all ■ Preferent creditors are entitled to
financial records to the sheriff. payment after secure creditors have
been paid, but before all the other
■ Within seven days of being served creditors. They are said to have a
with the final sequestration order, preferential claim. Preferent creditors
they must lodge, in duplicate, a are, therefore, unsecured creditors,
statement of affairs at the office of which means that they will get paid
the Master of the High Court only if there is enough free residue in
(Master), which must be verified by the estate after secured creditors have
an affidavit. been paid. Examples of these claims
■ Once the trustee has been are funeral expenses, costs of
appointed, the insolvent has sequestration, income tax, and the
fourteen days to deliver any property salaries of the insolvent’s employees.
in the insolvent estate to the trustee. The Insolvency Act ranks preferent
creditors according to a
■ When called upon by the trustee, predetermined order of preference.
the insolvent is required to assist in Some preferent claims have a
the collection of property that maximum limit under the Insolvency
Act, in which case the creditor has a
belongs to the insolvent estate. concurrent claim for the balance.

■ The insolvent must provide a full ■ Concurrent creditors are paid out of
and frank disclosure to the trustee or the free residue after preferent
the Master on all relevant matters creditors have been paid.
relating to the insolvent estate, such
as details of the location of any
property that is not in the insolvent’s
possession.

■ The insolvent must inform the

trustee of their residential and postal
addresses, including any changes to
their addresses.

■ The insolvent must keep a detailed

statement of all transactions, such as
assets that they receive from their
debtors and payments that they
make to employees.

■ The insolvent must attend the

meetings of creditors, and give
evidence, when called upon to do so,
on matters relating to the insolvent
estate during the interrogation
process and/or in any legal
proceedings relating to the insolvent
estate.In many instances, a failure by
the insolvent to carry out their duties
will lead to them committing a
criminal offence under the
Insolvency Act.
 Tutorial questions
1. Rank the creditors according to the order in which the
insolvent estate pays them and also give examples of
these creditors [10]