Grantham (Tenant) and Anthea (Landlord) concluded a written lease agreement in respect of a flat situated in Bellville. Grantham was unable to meet certain obligations in terms of the agreement and Anthea suggested in an email that they cancel the agreement. Grantham accepted her proposal and both parties ended their respective emails with their typewritten names at the end of the email. Anthea, however, could not get a new tenant in time and want to hold Grantham liable for the duration of the lease, because she is of the opinion that the cancellation by email is not valid since the agreement required cancellation and variation to be in writing and signed by both parties. She approached MHI Attorneys for advice.
Most standard contracts have a non-variation clause, stipulating that no variation or cancellation would be effective unless reduced to writing and signed by contracting parties. The effect thereof is, should you intend to cancel an agreement, all you have to do is ensure that it is in writing and signed by both parties. However we live in a modern era where electronic communication systems are becoming the standard form to conclude transactions, by utilising emails to negotiate and enter commercial agreements.
These electronic transactions had to be regulated by way of legislation and accordingly the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”) was promulgated to provide for the facilitation and regulations of electronic communications and transactions, and to promote universal access to electronic communications. The question that arises in this instance is whether the alleged cancellation of a contract by email is valid, if it is clearly stipulated in the non-variation clause that cancellation should be in writing and signed by both parties.
In Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and Another 2014 ZASCA 178, the parties entered into several written agreements in terms whereof Spring Forest would lease goods from Wilberry. The agreements contained a non-variation clause which provided that variation and cancellation would only be effective should it be reduced to writing and signed by both parties. Spring Forest was unable to meet the certain obligations in terms of the agreement and following negotiations, the parties verbally agreed to cancel the agreements.
The terms of the cancellation and return of the machinery were recorded in various emails between representatives of the parties, with their names appearing at the end of their respective emails. Spring Forest then entered into a new agreement with another entity (Combined Motor Holding Limited) to conduct the same business. Wilberry applied for an interdict to prevent Spring Forest from conducting its business and argued that the agreements were not validly cancelled. The High Court held that the email communications did not evince an intention to cancel the agreements, but only recorded the negotiations between the parties, and in any event the parties did not specify that their agreements could be cancelled by exchange of emails.
The Supreme Court of Appeal in considering the matter, took cognisance of the provisions of ECTA, specifically section 12 and 13 of the Act. Section 12(a) of ECTA stipulates that a legal requirement for an agreement to be in writing is satisfied if it is in the form of data messages, and data messages can be defined in terms of the ECTA as data generated, sent, received or stored by electronic means. Therefore the emails between the parties were governed by ECTA and the Supreme Court of Appeal held it was not in dispute that the emails between the parties fulfilled the requirement that the cancellation of the agreements must be “in writing”.
The real dispute and/or issue was whether the names of the parties at the end of their respective emails constituted signatures as contemplated by Section 13 of ECTA. Section 13(3) stipulates 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.
The Court held that the parties clearly manifested a written intention to cancel the agreement and it was evident from the respective emails between the parties. Neither the terms of the written agreement or the respective emails stipulated the form that the signature was to adopt, therefore Section 13(3) applied to the cancellation of the agreements. The Court concluded that the typewritten names of the parties at the foot of the emails, were sufficient to identify the users and complied with the provisions of Section 13(3) of ECTA, thereby constituting a signature by the parties.
In the Spring Forest case the court took the approach of being pragmatic and practical about the issue rather than being formalistic, in order to ensure effective interpretation and application of the law.
It is best to consult with your MHI Attorney before concluding written agreements to ensure that your rights are protected.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)