In today’s digital age, business communications and negotiations are often conducted by e-mail, and electronic transactions with electronic signatures are common. In a recent case the question arose whether an agreement containing a clause requiring amendments and cancellation to be in writing and to be signed by the parties can be validly cancelled by e-mail.
Most written contracts contain a non-variation clause requiring that any variation (and sometimes also the cancellation) of the contract must be in writing and signed by all parties. Traditionally this has been understood to mean the variation or cancellation must be set out on paper and must be signed by the parties with a pen.
The Electronic Communications and Transactions Act, No. 25 of 2002 (ECTA), however, changes this.
Section 12 of ECTA provides as follows:
“A requirement in law that a document or information must be in writing is met if the document or information is —
(a) in the form of a data message; and
(b) accessible in a manner usable for subsequent reference.”
A data message is defined as —
“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;”
Section 13 of ECTA further provides:
“(1) Where the signature of a person is required by law and such law does not specify the type of signature, that requirement in relation to a data message is met only if an advanced electronic signature is used.
(3) Where an electronic signature is required by the parties to an electronic transaction and the parties have not agreed on the type of electronic signature to be used, that requirement is met in relation to a data message if —
(a) a method is used to identify the person and to indicate the person’s approval of the information communicated; and
(b) having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.”
An advanced electronic signature, as required by section 13(1), is an electronic signature which results from a process which has been accredited by the applicable authorities.
These provisions of ECTA became relevant in the case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and another [2015] JOL 32555 (SCA), where the Supreme Court of Appeal (SCA) had to answer the question whether an e-mail fulfilled the requirements of a non-variation clause.
The parties in this case had concluded various rental contracts which required that any agreement on cancellation had to be in writing and signed by both parties. The contracts also contained a non-variation clause requiring any other amendment to the contract to be in writing and to be signed by both parties.
The lessee ended up not being able to pay its rent, so the lessor put four proposals on the table for dealing with the situation. One of the proposals were that the parties “cancel the agreement and walk away”.
These proposals were discussed via e-mail and the last e-mail sent by the appellant contained the following statement:
“We confirm that we accept your second offer whereby we will return all equipment leased to us and that there shall be no further legal recourse from either party… Kind regards Greg”.
The parties went their separate ways, but later the lessor denied that the agreements were validly cancelled and sought to enforce them.
The lessor argued that the cancellation by e-mail was not valid, because the agreement contained a non-variation clause which required signature by both parties, and in terms of section 13(1) of ECTA this meant an advanced electronic signature, which the e-mails did not contain.
The court was satisfied that the cancellation was in writing, because an e-mail is a data message. The remaining question was whether the names at the foot of the e-mail constituted valid electronic signatures in terms of ECTA.
The court said that “the non-variation clauses were agreed upon by the parties: they were not imposed upon the parties by any law”. The court, therefore, decided that section 13(1) of ECTA is not applicable and an advanced electronic signature was, therefore, not required. Section 13(3) of ECTA, which requires only a reliable and appropriate method of identification, was applicable in this case.
In deciding whether the names at the end of the e-mails fulfilled the requirements of section 13(3), the court looked at the practical and non-formalistic way that courts generally approach signatures. The court concluded that “so long as the ‘data’ in an e-mail is intended by the user to serve as a signature and is logically connected with other data in the e-mail, the requirement for an electronic signature is satisfied.”
The name at the end of the e-mail therefore constituted a signature and the requirements for consensual cancellation were met.
The effect of the SCA’s decision is that a contract containing a non-variation clause can be validly amended or cancelled by e-mail. It is important to keep this in mind when communicating and negotiating by e-mail.