Modern technology has revolutionised how we communicate. From WhatsApp to email, the methods of communication are easier and allow for immediate access to information. Many contracts usually include non-variation clauses providing that cancellation or variation of the contract must be reduced to writing. Due to the fact that instant messaging use is so widespread, do these communications then comply with the requirements as envisaged in the non-variation clause?

In the case of Spring Forest Trading v Wilberry1 the above had to be decided. The ruling has far-reaching effects. In this matter, the Supreme Court of Appeal (SCA) needed to establish whether a contract between the parties was lawfully cancelled via an exchange of emails between the parties. The Appellant argued that the email exchange met the requirement for the information to be recorded and signed by the parties. The Respondent argued that the email exchange was merely a negotiation and did not amount to a consensual cancellation of the agreements.

In dealing with this matter, the SCA turned to the provisions of the Electronic Communications and Transactions Act 25 of 2002 (“the Act”). The Act deals with the relevant legal provisions pertaining to the exchange of electronic communication. The Court found that, in terms of Section 12(a) of the Act, a legal requirement for an agreement to be in writing, subject to exceptions, is satisfied if it is in the form of a data message. A data message is defined as electronic representations of information in any form generated, sent, received or stored by electronic means. There was no dispute that the e-mails met the “in writing” requirement.

The Court found that the requirement that an agreement be cancelled in writing, is satisfied if it is in the form of data messages. An exchange of emails is considered to be an exchange of data messages and accordingly this requirement was met. Insofar as the second requirement that a notice of cancellation must be signed, the Court had to consider whether the parties’ names at the bottom of the emails constituted a signature in terms of the Act.

If a type of electronic signature isn’t agreed upon by both parties when transacting electronically, a person’s name at the end of an email or data message is enough to satisfy the requirements set out by the Act – namely:
• It identifies the person.
• It indicates the person’s approval of the information.
• It is reliable and appropriate for the purpose it was communicating, with regard to the circumstances.

However, the real dispute in this matter was whether or not the representatives’ names, placed at the foot of the e-mails, constituted “signatures” as contemplated by the Act. In terms of Section 13(1) of the Act, where an electronic signature is required by law and such law does not specify the type of signature, that requirement is met only if an advanced electronic signature is used. Section 13(3) states that where an electronic signature is required by the parties and the parties have not agreed on the type of electronic signature to be used, that requirement is met if:
• A method is used to identify the person and to indicate the person’s approval of the information communicated; and
• Having regard to all the relevant circumstances at the time the method was used, the method was as reliable as far as the purposes for which the information was communicated.

The Court found that Section 13(1) did not apply as the electronic signature was not required by law and the Section is not applicable to private agreements between these parties. Therefore, it was held that cancellation by way of email correspondence was valid.

This judgment has profound implications for commercial transactions and the manner in which agreements are concluded, varied and/or cancelled. It is clear from this judgement that e-mails will be taken as complying with the “in writing” requirement; and placing names at the foot of such emails will be accepted as “signatures” required in terms of non-variation clauses to vary or cancel contracts.

It is advised to include in a non-variation clause that only an “advanced electronic signature” will be acceptable as an electronic signature in terms of the clause and hence the agreement. This will require accreditation of the electronic signature by an Accreditation Authority before being accepted thereby providing greater protection. Those wishing to pursue this route must comply with Section 37 up to and including Section41 of the Act. Contact us at SchoemanLaw today if you need assistance in contract drafting.

(725/13) [2014] ZASCA 178; 2015 (2) SA 118 (SCA) (21 November 2014)

Article by Sixolile Timothy – Schoemanlaw Inc.