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Cancelling a contract via email

Cancelling a contract via email

8th September 2016

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Most contracts have a standard “non-variation” clause incorporated towards the end of the contract. This clause normally states that no variation or consensual cancellation of the agreement entered into will be of any legal force or effect unless it is reduced to writing and signed by all parties to the agreement. 

From the get-go this clause seems simple enough and basically means that if you intend cancelling the agreement, all you have to do is ensure that it is in writing and signed. But we live in a day and age where electronic technology has become the primary platform for all our communication. Emails, Facebook, Instagram and instant messaging services such as Whatsapp are electronic platforms we are all familiar with. The question that arises, however, is whether an email would meet the standard requirements of a non-variation clause requiring any variation or cancellation of an agreement to be reduced to writing and signed by both parties to the agreement.

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Case law

In the case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and Another (SCA), the Supreme Court of Appeal ruled that a contract between two businesses was lawfully cancelled through emails they sent each other. This judgment has set a precedent in the validity of the cancellation of a written agreement via email.

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The court had to consider whether contracts could validly be consensually cancelled by the exchange of emails between the parties where the contracts in question contained a "standard" non-variation clause.
The parties had exchanged a series of emails in terms of which they agreed a certain course of action, in this case, cancellation of the contracts. The SCA found that the exchange of emails between the parties to an agreement, with each of the parties typing their first names at the end of the emails, was sufficient to cancel an agreement, which could only be cancelled in writing and signed by both parties.

The court relied heavily on the Electronic Communications and Transactions Act 25 of 2002 (“the Act”) and found that the requirement that an agreement had to be cancelled in “writing”, is satisfied if it is in the form of data messages and in this case the email met this requirement. With regards to the “signed” requirement, the court had to consider whether the parties’ names at the end of the emails, constituted a signature in terms of the Act, which provides that where an electronic signature is required by the parties and the parties have not agreed on the type of electronic signature to be used, that requirement is met if:–

•  a method is used to identify the person and to indicate the person’s approval of the information communicated;  and

•  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.

In terms of the Act, an electronic signature is defined as ‘data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature’. The court held that the typed names of the parties at the end of the emails were intended to identify the parties and therefore constituted data that was logically associated with the data in the body of the email correspondence and accordingly constituted an electronic signature and this satisfied the requirement of a signature.


Repercussions of the judgement

We all use email in the workplace and in commercial interactions and it is important to bear in mind the possible legal consequences (whether intended or not) of agreeing to amendments made to contracts or to the termination of contracts by way of email exchanges. 

There could also be broader implications where agreements require notices or consents to be given in writing. These principles extend to other technology, such as correspondence which takes place by way of Short Message Service (SMS) and the like.

While our courts treat email communication in a similar manner to written communication, we cannot help but wonder whether a court will also be comfortable with a Tweet, Facebook message or Whatsapp whereby a cancellation message is sent merely with a typewritten name at the end.

Conclusion

A non-variation clause is not necessarily as simple as it may seem. To avoid any dispute regarding the terms of the variation or the cancellation, and the identity of the parties authorised to make such changes, contracts should expressly regulate whether electronic communications (or "data messages", as defined in ECTA) are permitted.

We therefore recommend obtaining legal advice to gain certainty before signing any agreement or if you wish to cancel an agreement.

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