/ 23 December 2014

Contract amendments by email are binding

The 2006 forensic report prepared for Zuma's trial that never saw the light of day ... now made available in the public interest.
The outcome of the ANC’s long-awaited KwaZulu-Natal conference was a win for the Thuma Mina crowd. (Delwyn Verasamy/M&G)

The law pertaining to social media and emails remains undefined in many areas, which is why the recent judgment by the Supreme Court of Appeal (SCA) — which found an email can be used to cancel a contract and that names typed at the end of the email are binding — has important implications for business. 

The car wash company Spring Forest undertook to lease mobile dispensing units from Wilberry. 

The parties signed an agreement with clauses providing that cancellation could only be made in writing and must be signed by both parties.

When Spring Forest could no longer meet its rental commitments the parties met on February 25 last year and agreed to cancel their agreement.

The terms of the cancellation were recorded in an email exchange and the names of the parties appeared at the bottom of each email. The emails did not contain an electronic signature. 

Spring Forest, allegedly believing that the contract had been cancelled, entered into an agreement with another company to provide the same service. 

Wilberry then applied for an interdict to prevent Spring Forest from conducting its business, which was granted by the Durban high court. Spring Forest then lodged an appeal with the SCA, which it was granted. 

Before the SCA judgment in Spring Forest Trading vs Wilberry, issued late last month, there was uncertainty about how to interpret -section 3(1) and (3) of the Electronic Communications Act, which deals with the interpretation of a signature. 

The Act says: 

– Section 13 (1) — Where the signature of a person is required by law and such law does not specify the type of signature, requirement in relation to a data message is met only if an advanced electronic signature is used. 

– Section (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 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.

– Section (5) — Where an electronic signature is not required by the parties to an electronic transaction, an expression of intent or

other statement is not without legal force and effect merely on the grounds that:

– It is in the form of a data message; or

– It is not evidenced by an electronic signature but is evidenced by other means from which such person’s intent or other statement can be inferred.

The court said that the Act describes an electronic signature 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 SCA said in its judgment that the emails fulfilled the requirements that agreements must be in writing in terms of the Act. 

On appeal, the SCA said it was not in dispute that the emails between the parties fulfilled the requirement that the cancellation of the agreements must be “in writing” in terms of the Act. 

The real issue, it said, was whether the names of parties at the foot of their respective emails constituted signatures as contemplated by section 13. 

The court found it did. 

Robby Coelho, head of technology, media and telecommunications at Webber Wentzel, said companies should be careful when corresponding by email about changes to a contract. 

“Given the pervasive use of email in the workplace and in commercial interactions it is important to exercise caution,” he said. 

Adam and Adams Attorneys said in a statement that the question remains whether a court would consider a tweet or a Facebook message purporting to cancel an agreement in the same light. 

“It could conceivably be argued that a Twitter user’s Twitter handle may be data ‘logically associated’ with the content of the electronic message,” it said.