Can­cel­la­tion of con­tract by e-mail valid

Names on a mail lend legal weight to con­tract can­cel­la­tions via e-mail

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - KENMOUR SI­MANGO

IN THE case of Spring For­est Trad­ing v Wil­berry (Pty) Ltd (725/13) ZASCA 178 the ap­peal court ruled that e-mails be­tween par­ties to a valid con­tract can con­sti­tute a writ­ten agree­ment for can­cel­la­tion.

This mat­ter re­volves around a non­va­ri­a­tion clause in­serted in a con­tract pro­vid­ing for the can­cel­la­tion of the con­tract to be in writ­ing and signed by both par­ties. Can­cel­la­tion by e-mail, which was done by the par­ties, was ruled in­valid by the court from which the ap­peal was taken. The Elec­tronic Com­mu­ni­ca­tions and Trans­ac­tions Act 25 of 2002 gives legal recog­ni­tion to trans­ac­tions con­cluded elec­tron­i­cally. Its main ob­jec­tive is to en­able and fa­cil­i­tate elec­tronic com­mu­ni­ca­tions and trans­ac­tions in the public in­ter­est (see sec­tion 2(1)), as well as to pro­mote legal cer­tainty and con­fi­dence in re­spect of elec­tronic com­mu­ni­ca­tions and trans­ac­tions. In sec­tion 3 courts are in­structed to recog­nise and ac­com­mo­date elec­tronic trans­ac­tions and data mes­sages in the ap­pli­ca­tion of any statu­tory or com­mon law.

In this case, Spring For­est Trad­ing and Wil­berry (Pty) Ltd en­tered into a con­tract in which Wil­berry ap­pointed Spring For­est as its op­er­at­ing agent. The agree­ment con­tained a non-vari­a­tion clause pro­vid­ing that no vari­a­tion or con­sen­sual can­cel­la­tion would be ef­fec­tive un­less re­duced to writ­ing and signed by both par­ties. Spring For­est was un­able to meet its rental com­mit­ments un­der the agree­ment and a meet­ing was held in which Wil­berry gave Spring For­est the op­tion to ei­ther pay back the amount or cancel the agree­ment and walk away. Th­ese op­tions were later con­firmed via emails, as Spring For­est had cho­sen the op­tion of can­celling and walk­ing away. It then en­tered into an­other con­tract with a dif­fer­ent com­pany, CMH, who ap­pointed it as its agent, upon which Wil­berry sought an in­ter­dict, ar­gu­ing that its agree­ment with Spring For­est was not validly can­celled.

The ques­tion arose whether e-mails ex­changed be­tween the par­ties qual­i­fied as writ­ten agree­ments that could validly cancel the con­tract, es­pe­cially in light of the sig­na­ture re­quire­ment.

The Ap­peal Court noted that sec­tion 12(a) of the act pro­vides that any legal re­quire­ment for an agree­ment to be in writ­ing, sub­ject to the ex­cep­tions (wills, bills of ex­change, stamp du­ties and sale of im­mov­able prop­er­ties) is sat­is­fied if it is in the form of a data mes­sage. This left the is­sue of whether or not the names of the par­ties at the foot of their e-mails con­sti­tuted sig- na­tures as con­tem­plated in sec­tions 13(1) and (3) of the act.

Sec­tion 13(1) and (3) of the act pro­vide that: “(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 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 re­li­able as was ap­pro­pri­ate for the pur­poses for which the in­for­ma­tion was com­mu­ni­cated.”

The Ap­peal Court noted that sec­tion 13(1) should be in­ter­preted not only to in­clude for­mal­i­ties re­quired by statute, but must also in­cor­po­rate in­stances where par­ties to an agree­ment im­pose their own for­mal­i­ties on a con­tract. Although the par­ties re­quired their signatures for the con­tract to be can­celled, sec­tion 13(1) re­quires the use of an ad­vanced elec­tronic sig­na­ture (that is an elec­tronic sig­na­ture that is ac­cred­ited), which did not oc­cur in this case, hence sec­tion 13(1) did not ap­ply in this case.

Sec­tion 13(3)(a) on the other hand re­lates to an “elec­tronic sig­na­ture” and not an “ad­vanced elec­tronic sig­na­ture”. A mere elec­tronic sig­na­ture refers to data at­tached to, in­cor­po­rated in, or log­i­cally as­so­ci­ated with other data and which is in­tended by the user to serve as a sig­na­ture. In this case, the par­ties did re­quire a sig­na­ture to cancel the agree­ment, but had not spec­i­fied the type of elec­tronic sig­na­ture re­quired for can­cel­la­tion by e-mail. Be­cause type­writ­ten names at the foot of emails, which are used to iden­tify users, con­sti­tute data that is log­i­cally as­so­ci­ated with “data” in the body of the emails, the names be­came valid signatures for the can­cel­la­tion.

The ac­cu­racy of the in­for­ma­tion com­mu­ni­cated or iden­ti­ties of the per­sons who ap­pended their names to the e-mails was not in dis­pute, which al­lowed for the ap­pli­ca­tion of sec­tion 13(b). In this case the e-mails clearly and un­am­bigu­ously showed an in­ten­tion by the par­ties to cancel their agree­ments. The agree­ments made were not mere ne­go­ti­a­tions, but agree­ments later con­firmed in writ­ing by e-mail.

Sub­se­quently the court found that sec­tion 13(3) was ap­pli­ca­ble to the case, the par­ties re­quired a sig­na­ture, and an elec­tronic sig­na­ture that re­sem­bled the names of the par­ties at the foot of the e-mails was sat­is­fac­tory; hence the con­tract was in­deed validly can­celled.

The Spring For­est case had a huge im­pact on elec­tronic com­merce, clar­i­fy­ing the recog­ni­tion and va­lid­ity of elec­tronic com­mu­ni­ca­tions and trans­ac­tions in con­tracts. The con­tract be­tween the par­ties in­volved did not spec­ify “ad­vanced signatures”, which meant an elec­tronic sig­na­ture was good enough.

Con­sid­er­ing the his­tory of signatures, in which marks and sym­bols have been recog­nised as valid signatures by the courts, more at­ten­tion is now given to the pur­pose and func­tion of a sig­na­ture, which is to au­then­ti­cate the iden­tity of the sig­na­tory. Hence the names of the par­ties writ­ten at the end of the e-mails ful­fil the func­tion of a sig­na­ture, thereby con­sti­tut­ing valid signatures for a con­tract’s can­cel­la­tion.

The Elec­tronic Com­mu­ni­ca­tions and Trans­ac­tions Act gives legal recog­ni­tion to trans­ac­tions con­cluded elec­tron­i­cally



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