Electronic communications and legal agreements

Electronic communications and legal agreements
02 Nov 2017

Living in the age of electronics may have far reaching consequences on legal agreements. In the past, the physical writing and signing of an agreement was generally accepted as being the only method in which a written agreement could be varied or cancelled.

Many written agreements, if not all, still contain a general clause which provides, in one form or another, that in order to vary or mutually cancel the terms of the agreement, the parties must do so in writing. As such, the parties would need to reduce any such changes or such cancelation to writing, accompanied by the respective parties’ physical signatures evidencing acceptance of the proposed addition, variation, modification or cancellation.

As a result of the introduction of the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”) which essentially extends “writing” and “signatures” to electronic forms, uncertainty has arisen as to whether emails constitute an acceptable form of writing and whether “email signatures” constitute an acceptable form of signing in circumstances where a written agreement contains a general variation and cancellation clause as aforesaid.  This uncertainty was finally dealt with in the case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash & Another 2015 (2) SA 118 (SCA).

Spring Forest Trading 599 CC (“Spring Forest”) and Wilberry (Pty) Ltd t/a Ecowash & Another (“Wilberry”) entered into several written agreements (“the Agreements”), in terms of which Spring Forest leased from Wilberry certain mobile cleaning units for use in its car wash business. Each of the Agreements contained a clause that provided that they may only be varied and/or cancelled if such variation/cancellation was reduced to writing and signed by Wilberry and Spring Forrest.

Spring Forest was not able to meet its rental obligations to Wilberry and each mutually agreed to cancel the Agreements. The terms of the cancellation were recorded in emails and the names of the representatives of each of Wilberry and Spring Forrest appeared at the foot of each email. Wilberry, denying that the Agreements were validly cancelled, instituted proceedings in the High Court of KwaZulu-Natal (“High Court”) to interdict Spring Forest from continuing its business (based on new leasing agreements concluded between Spring Forest and a third party) on the grounds that this was in breach of the Agreements. The High Court granted the interdict after which Spring Forest appealed to the Supreme Court of Appeal (“SCA”). The SCA upheld the appeal against the decision of the High Court on the basis that-

  1. the email exchanges between the Parties met the requirements for the cancellation of the Agreements to be in “writing” in terms of section 12(a) of ECTA, which states that when there is a legal requirement for an agreement to be in writing, subject to certain exceptions, it is satisfied if it is in the form of a data message, which an email is considered to be; and
  1. the typewritten names of the parties at the foot of the emails constituted data that was logically associated with the data in the body of the emails, as envisaged in the definition of an electronic signature in ECTA, and they therefore constituted signatures as contemplated in sections 13(1) and 13(3) of ECTA and accordingly satisfied the requirement of a “signature” in terms of the Agreements.

Section 13(1) of the ECTA requires a signature to be in the form of an ‘advanced electronic signature’, which results from a process accredited by an Accreditation Authority.

Section 13(3) of the ECTA, states that the requirements of an electronic signature are met when:

  1. the person is identified in the method of communication and the person’s approval is indicated therein; and
  2. the method (in this case emails) was as reliable as was appropriate for which the information was communicated.

The SCA held that sections 13(1) and 13(3) of ECTA can be distinguished in that subsection (1) applies in the instances where a signature is required by law, whereas subsection (3) applies in the instances where a signature is required by the parties and the parties have not agreed on the type thereof to be used.

The court found that a signature is commonly understood to reflect a person’s name written in a distinctive way as a form of identification. The approach should therefore be to look whether the method of the signature used fulfils the function of a signature, which is to authenticate the identity of the signatory. Accordingly, where the parties to an agreement impose the obligation of a signature and the type of signature to be used is not specified, the requirement will have been complied with if a method is used to identify the person and to indicate the person’s approval of the information communicated, as envisaged in section 13(3)(a) of ECTA.

In addition, one must have regard to the circumstances when a particular method is used and whether it is appropriately reliable for the purpose for which the information was communicated, as envisaged in s13(3)(b) of ECTA.

As a result of the case, and having regard to the fact that all too often clients will send emails to the counterparties regarding their written agreements, we propose an amendment to the general non-cancellation/non-variation clause, in order to fully protect clients from inadvertently cancelling or varying the terms of their written agreements, as follows:

No addition to, variation, modification or consensual cancellation of this Agreement shall be of any force or effect unless in writing and signed by or on behalf of all of the Parties. It is specifically recorded that physical writing and signature of the Parties is required for the purposes of any such variation, modification and/or cancellation and all electronic forms of writing or signature as contemplated in section 13 of the Electronic Communications and Transactions Act 25 of 2002, are expressly excluded.

Tanya Pollak
Tanya Pollak

Tanya is a partner at Eversheds Sutherland. She specialises in corporate and commercial law bringing her own unique brand of practising law with a personal touch. Her main areas of expertise comprise mergers and acquisitions, joint ventures, BEE transactions, cross border transactions, corporate structuring and restructuring, conducting legal due diligences and advising on regulatory compliance.

Send a legal query to Tanya Pollak
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