Contracting parties must carefully consider their communication

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In a world where inter-party communication occurs mainly via email, the question arises whether an exchange of emails between the parties to an agreement would meet the standard requirements imposed by non-variation clauses. This question was the subject of an appeal before the Supreme Court of Appeal (SCA) in the matter of Spring Forest Trading v Wilberry (725/13 [2014] ZASCA 178, 21 November 2014).

In summary, the facts of the matter were as follows: The appellant, Spring Forest Trading 599 CC and the respondent, Wilberry (Pty) Ltd, had entered into several agreements in terms of which Spring Forest leased certain mobile dispensing units from Wilberry for use in its car wash business. The agreements contained non-variation clauses which stated that "no variation ... or agreement to cancel shall be of any force and effect unless in writing and signed by both you and us".

Emails exchanged

After it became apparent that Spring Forest was not able to meet its rental commitments, the parties discussed a number of remedial options. Spring Forest opted to cancel the agreement and 'walk away'. The terms of the cancellation were recorded in emails exchanged between the parties in which the names of the parties appeared at the foot of the respective emails.

Spring Forest, believing that the agreements with Wilberry had been cancelled, entered into an agreement with another company to conduct the same business that had previously been conducted by Wilberry, in response to which Wilberry successfully launched proceedings in the court a quo and Spring Forest was interdicted from continuing its business under the new agreement.

Spring Forest lodged an appeal to the SCA on the basis that the agreements with Wilberry had been validly cancelled. The SCA held that the exchange of emails between the parties clearly and unambiguously demonstrated an intention by the parties to cancel the agreements concluded between them irrespective of a non-variation clause providing for cancellation to be in writing and signed by the parties.

Provisions of Act

In reaching its decision, the SCA examined the provisions of the Electronic Communications and Transactions Act, No 25 of 2002 (ECTA), which was enacted to "enable and facilitate electronic communications and transactions in the public interest". The SCA found that the requirement that the cancellation of the agreement be 'in writing' was satisfied by the chain of emails exchanged between the parties. 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.
With regards to the 'signed' requirement, the SCA had to consider whether the names of the parties at the foot of their respective emails constituted a 'signature' as contemplated by ss13(1) and 13(3) of ECTA. In this regard, it is important to note that ECTA differentiates between two kinds of signatures, namely:

i. an "electronic signature" being "data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature", and
ii. an "advanced electronic signature" being "an electronic signature which results from a process which has been accredited by the [Accreditation] Authority as provided for in s37", and is normally used where the signature of a person is required by law and such law does not specify the type of signature to be used.

In analysing the provisions, the SCA pointed out that s13 makes a distinction between a situation:

i. where a law/statute requires a signature, and
ii. where the parties themselves agree on the added formality of a signature.

In the first instance, s13(1) of ECTA requires an advanced electronic signature whereas in the latter instance only an electronic signature is required as contemplated by s13(3) of ECTA. Having regard to this analysis, the SCA:

• rejected Wilberry's contention that an advanced electronic signature was required as the requirement for signature was agreed between the parties as a mere formality and not required by law/statute; and
  
• found that names of the parties at the foot of the respective emails constituted electronic signatures as envisaged in s13(3) of the ECTA on the basis that the names of the parties were intended to identify the parties and constituted 'data' that was logically associated with the data in the body of the emails and therefore constituted an electronic signature.

Contracting parties need to be cognisant of this judgment and carefully consider their communications with each other, particularly when using electronic means, including not only by emails but also via instant messaging platforms such as Twitter, Facebook, Instagram, BBM and the like. It is advisable for the parties to include express provisions in the contract which clearly regulate how electronic communications will apply in order to avoid disputes and ambiguity.