Getting an offer to purchase signed may seem like a simple matter, but issues arise from time to time, and they need to be addressed. In this letter, I will deal with witnessing an OTP, initialling on each page, and whether an OTP can be signed electronically.
- Witnessing a Sale Agreement
When conveyancers draw private sale agreements, they usually ensure that two witnesses sign the agreement for both the seller and the buyer. Alternatively, the signature and stamp of a commissioner of oaths suffice for this purpose as well.
Is it necessary for property practitioners to do the same? Traditionally, most property practitioners do provide for the signature of one witness to attest each party’s signature, but this is not a universal practice, and many sale agreements are concluded without any corresponding witnesses.
Legally, no sale agreement needs to be witnessed.
Any power of attorney arising out of a sale (to register a transfer or a bond) must be signed before two witnesses, but the contract itself can be concluded without any witnesses and be perfectly valid even though it contains only the signatures of the seller and buyer. Section 2(1) of the Alienation of Land Act No. 68 of 1981 provides only that no alienation of land shall be valid unless it is contained in a deed of alienation and is signed by the parties or their practitioners acting on their written authority. There is no provision for witnesses being obliged to sign it as well.
Nonetheless, in recent times, some commercial banks granting loans have begun insisting on a sale contract being witnessed by at least one other person.
This is the result of the extent of fraudulent practices in South Africa and the unpleasant discovery now and then that the signatures of the original contract have either been forged or have not been signed by one of the parties purporting to sign it. Banks stand to possibly lose millions of rands in mortgage loans in such cases if a High Court in South Africa declares the contract invalid.
Property practitioners are accordingly advised to get the signature of both the seller and the buyer witnessed separately by at least one witness on each sale agreement.
It is not essential for the witness to initial each page, but this should also be done so that individual pages of the sale contract can be proved to have been part of the original contract. Local banks are making it clear that home loan applications will not be considered unless the contract has been properly witnessed, and, even though this is not a requirement in law, practitioners are strongly urged to get their OTPs witnessed by at least one witness for the seller and a separate witness for the buyer.
- Initialling Sale Contracts
Legally, it is also not necessary for a party to a sale agreement to initial each page of the contract, but this has become a universal practice and should be continued. The only exception is a single-page document which many practitioners use where four pages constituting the contract are incorporated into one single 4-page A5-sized contract. In such cases, it is not strictly necessary for each page to be initialled.
What has been a common practice for many years and which I must expressly discourage is the initialling of each and every written portion of a sale contract.
The logic behind this is that each party is confirming the written portion in each case, but in law, whatever is written into a blank section of a contract is presumed to be the terms of an agreement between the parties. The problem with initialling every instance where something has been inserted in writing is that the contract ends up looking like a lit-up Christmas tree with initials virtually everywhere down the right side of each page. In this event, it is difficult to determine exactly what the purpose of the initials is in each case.
All alterations must be initialled by both parties, and the ideal practice is to ensure that nothing else is initialled other than the initials at the bottom of each page.
Then there can be no doubt as to what the initials are representing – each party is confirming the alterations in each case. By alterations, we mean principally anything on a contract that has been crossed out and replaced with other details.
Some contracts have many alterations on each page and clauses which have been crossed out, and if there are initials all over the side of each page for everything written into blank spaces or altered in any way, it can become almost impossible to determine exactly what each initial actually covers.
Keep all initialling to actual alterations of any clause.
Practitioners are also urged to delete in their entirety all printed clauses not relevant to the contract they are concluding (such as suspensive conditions which do not apply to the present sale) and to have these clearly initialled as well.
Don’t leave suspensive conditional clauses in a sale contract when they do not apply to it – they will still be valid, and the sale could be declared void for vagueness (e.g. when the redundant clauses contradict the terms of a sale, such as a 100% cash sale unintentionally still made subject to the acquisition of a mortgage loan). It is also crucial to complete any blank sections in clauses that are left in – far too often, OTPs are concluded with portions left blank, and this can cause problems later as well.
- Can Offers to Purchase be signed Electronically?
I have been recently asked whether parties to a property sale contract can insert their electronic signatures on it rather than signing it with their original signatures. Would the sale still be valid? Let me give a bit of background here before giving a final answer.
Electronic signatures are covered by the Electronic Communications and Transactions Act No. 25 of 2002, more commonly referred to as ECTA. The Act provides for the legality of the use of electronic signatures and their binding effect on the deponent and generally allows for this practice in the cases of most commercial agreements, provided the provisions of the Act for the inclusion of an electronic signature are properly followed. The Act also provides, however, that only accredited signatories as defined by the Act, or others who have applied for accreditation and have duly received approval for their appointment, may use electronic signatures on general agreements.
There are, however, some exceptions to this rule, and Section 4(4) of the Act provides that ‘This Act must not be construed as giving validity to any transaction mentioned in Schedule 2.’ The very first exception recorded in Schedule 2 is ‘An agreement for alienation of immovable property as provided for in the Alienation of Land Act 1981 Act No. 68 of 1981.’ This means that all property sale contracts must incorporate the original signature of each party.
Electronic signatures on sale contracts (and contracts incorporating cessions of exclusive use areas, property donations, etc.) are accordingly unlawful.
The common practice, especially where one or both of the parties lives in some distant city, of getting the buyer to sign an OTP and the seller to sign a copy of the same contract (either with the copy of the buyer’s signature or just a separate blank duplicate original which is the same as the one signed by the buyer) remains perfectly valid. The definition of a ‘deed of alienation’ in the Act (meaning your normal OTP) includes a document or documents under which a property has been alienated, and it is perfectly acceptable for the original signatures of the buyer and seller to be on different copies of the same contract.
