On 21 November 2014,  the SCA handed down judgement in the case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash & Another. An important aspect dealt with in this judgment is the validity of a cancellation of a written agreement via email. 

Briefly, the facts were as follows: Spring Forest Trading 599 CC (“Spring Forest”) and Wilberry (Pty) Ltd (“Wilberry”) entered into several agreements in terms of which Spring Forest leased certain mobile machinery from Wilberry which Spring Forest required for use in its mobile car wash business. The agreements contained a cancellation clause combined with a non-variation clause which stated that any cancellation of the agreements must be in writing and signed by both parties.

Spring Forest was unable to meet its rental obligations in terms of these agreements and, following negotiations, verbally agreed to cancel the agreements. The terms of the cancellation, namely the payment of the arrear rental owed by Spring Forest and the return of the machinery to Wilberry, were recorded in an email chain between the representative of Wilberry and the representative of Spring Forest. The names of the parties appeared at the foot of each party’s respective email.

Spring Forest, believing that the contracts had been cancelled, entered into an agreement with another entity to conduct the same business. In response, Wilberry applied for an interdict preventing Spring Forest from conducting its business which interdict was granted by the Durban High Court. Spring Forest thereafter lodged an appeal to the SCA.

On appeal, the SCA stated that it was not in dispute that the emails between the parties fulfilled the requirement that the cancelation of the agreements must be “in writing”. This was because, in terms of s12(a) of the Electronic Communications and Transactions Act, 2002 (“ECTA”), a legal requirement for an agreement to be in writing is satisfied if it is in the form of a data message (subject to a number of exceptions, for example, a sale of immovable property or a will). Accordingly, the SCA held that the real issue in this case was whether the names of the parties at the foot of their respective emails constituted signatures as contemplated by s13(1) and S13(3) of ECTA.  Section 13 reads as follows:

“(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.

(2) ....

(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 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 a reliable as was appropriate for the purposes for which the information was communicated.”

The SCA pointed out that s13 of ECTA makes a distinction between a situation where a law, such as s6(12) of the Companies Act, 2008, requires a signature and where the parties between 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. The SCA rejected Wilberry’s contention that in this case an “advanced electronic signature” was required as the requirement was agreed between the parties and it could not be argued that the parties were involved in a business where an “advanced electronic signature” was necessary.

The SCA then turned to an analysis on s13(3) of ECTA. The court held that the approach of our courts to signatures in general has been pragmatic and not overly formalistic and cited numerous examples of where the courts have accepted any mark made by a person attesting to a document. In ECTA, 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 written names of the parties at the foot of the emails were intended to identify the parties, constituted data that was logically associated with the data in the body of the emails and therefore constituted an electronic signature. Accordingly, the SCA found that the cancellation of the agreements was valid and the appeal of Spring Forest was upheld.

While the SCA acknowledged that the intention of ECTA is to promote legal certainty and confidence in respect of electronic communications and transactions, it is submitted that the court may have missed an opportunity to define the exact extent of what would constitute an electronic signature. While it appears that the court was comfortable in treating email communication in a similar manner to written communication, the question remains as to whether a court would show the same comfort to a Tweet or to a Facebook message purporting to cancel an agreement. It could conceivably be argued that a Twitter user’s Twitter handle may be data “logically associated” with the content of the electronic message. This logic may even be extended to instant messaging services such as Whatsapp, BlackBerry Messenger or Mxit where a cancellation message could be sent merely with a typewritten name of the party contained in the message.

A further issue may arise where numerous people have access to a single email account. For example, if a personal assistant has “proxy” on a director’s email and regularly sends emails on her behalf, significant issues may arise from a cancellation contained in such an email, particularly if the director has no knowledge of such an email. Firstly, in the event of a dispute, evidence would need to be led as to whether the director knew about the email and secondly, there may be issues relating to whether the contract was cancelled by an authorised person. Accordingly, while this judgement intended to promote certainty, until these consequential issues are clarified it may, in fact, have done the opposite.

Prepared by Shmuel Moch, Candidate Attorney, Adams & Adams, Sandton.

The article was approved by Manisha Maganbhai-Mooloo, Partner, Adams & Adams, Sandton, and Danie Strachan, Partner, Adams & Adams, Pretoria.