To vary or not to vary, that is the (digital age) question

13 Mar 2020

Before the advent of electronic emails, online shopping and the digital communication platforms that we know and widely use today, the process for negotiating and concluding a transaction was largely achieved in person by the parties shaking hands and signing pieces of paper with wet ink indicating their agreement to the terms and conditions contained therein.[1] These pieces of paper were often cherished possessions kept by each party as evidence of the terms to which they could each hold the other party bound, and any variation to these terms (such as price) would again require the formalities of a meeting by the parties in person and signing pieces of paper with wet ink indicating the specific amendments to the main agreement on which they have settled.

Since the coming of age of the internet, online transactions have become rapid and voluminous,[2] but this mainly relates to retail transactions between merchants and consumers. Larger transactions undertaken by corporations are sought to be negotiated by their representatives in person around a table and formally concluded by the antiquate method of affixing their signatures to paper with wet ink.[3] If these representatives wished to amend the agreement, they would ordinarily (again) follow the same procedure by preparing a written amendment agreement to be signed by each of them in person.

For purposes of regulating the conclusion of electronic transactions and the facilitation of electronic communications, the legislature created and passed the Electronic Communications and Transactions Act[4] (“ECTA”), which directly affects e-commerce and the manner in which parties can conclude or amend agreements.[5]

Without being immune to the digitalisation of communications, there are various communications exchanged between parties (be it via e‑mail or WhatsApp) relating to their transaction, and these communications could be deemed to form part of their written agreement or even amend an agreement already in place. What if the written agreement includes a ‘non‑variation’ clause, in terms of which the parties expressly agree that any modification, cancellation or alteration to the agreement will only be in force if in writing and signed by both parties?

This was the fundamental question presented to the Supreme Court of Appeal in Spring Forest Trading 599 CC v Wilberry (Pty) Ltd, [6] in which case a series of e‑mails purportedly led to a consensual cancellation by the parties of an agreement containing a ‘non‑variation’ clause (which required any cancellation to be in writing and signed by both parties). In terms of section 12(a) of ECTA, a requirement that a document must be in writing is met if the document is in the form of a data message (which includes a message sent by e‑mail or WhatsApp), and therefore the real dispute in this case was whether or not the names of the parties at the foot of their emails could constitute signatures by such parties.

In terms of section 13(3) of ECTA, where a signature is required by the parties to a transaction and the parties have not agreed on the type of signature to be used, that requirement is met in relation to a data message if a method is used to identify the person and to indicate the person’s approval of the information communicated. It is commonly understood that a signature is a person’s name written in a distinctive way as a form of identification, however, in the days before electronic communication, the courts were willing to accept any mark made by a person for the purpose of attesting a document, or identifying it as his act, to be a valid signature. They went even further and accepted a mark made by a magistrate for a witness, whose participation went only as far as symbolically touching the magistrate’s pen. The approach of the courts to signatures has therefore been pragmatic, not formalistic.

Having regard to the above, the Supreme Court of Appeal held that as long as the ‘data’ in an email is intended by the user to serve as a signature and is logically connected with other data in the email, the requirement for a signature is satisfied. This approach by the Court observes the practical and non-formalistic way the courts have treated the signature requirement at common law. The Court therefore held that the agreement was consensually cancelled by the parties by way of e‑mail.

The effect of the above judgment is that parties will find difficulty in claiming that an agreement entered into between them by way of data messages is not of force and effect by merely relying upon a ‘non‑variation’ clause contained in the main agreement to which it relates or, in fact, any formality imposed by them requiring the agreement to be in writing and signed by each of them.

Whilst corporations will (for now at least) continue to use their representatives to conclude any transaction documents by affixing their signatures to paper with wet ink, they should keep in mind that their representatives may be amending (or even concluding) agreements by way of e‑mail or WhatsApp communications.

Appropriate wording should be used in the drafting of the agreements to avoid electronic communications spilling into the terms of a written agreement or representatives of a corporation inadvertently amending terms that were hard fought over at the negotiating table. Caution should therefore be used when entering into any agreement by consulting with your legal advisors before concluding a written agreement. As such, please do not hesitate to contact us the next time you are planning to put pen to paper.

[1] Contracts were even (and can still be) concluded by post, where an offer was sent by post (or even made public by publication in a newspaper, such as a reward for a lost pet), the contract would be deemed to have been concluded upon the third party accepting same (either by return post, or by returning a lost pet to its owner in response to a reward published by such owner).
[2] In 2019, consumers spent $601.75 billion online with U.S. merchants (up 14.9% from $523.64 billion in 2018), according to the United States Department of Commerce quarterly ecommerce figures.
[3] This may change with the development of, and advances made by, block‑chain technology.
[4] 25 of 2002.
[5] In terms of section 22(1) of ECTA, an agreement is not without legal force and effect merely because it was concluded partly or in whole by means of data messages.
[6] Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and another [2015] JOL 32555 (SCA).

See also:

• Could shareholders inadvertently cancel their Shareholders Agreement?
• Electronic communications and legal agreements
• Can your email disclaimer get you out of an unintended contract?
• The age-old question: When is a written agreement validly amended or varied

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)