CAUTION – AMENDMENTS TO EXISTING CONTRACTS BY MEANS OF ELECTRONIC COMMUNICATION AND WRITTEN CORRESPONDENCE

7 Sep 2015

Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and another

In the Supreme Court of Appeal case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and another [2015] JOL 32555 (SCA) Wilberry (Pty) Ltd’s (“Wilberry”) business involved washing cars in the parking lots of shopping malls, office parks, hotels and hospitals, in terms of a written agreement concluded with the Spring Forest Trading 599 CC (“Spring Forest”). The agreement contained a non-variation clause which provided that no variation or consensual cancellation would be effective unless reduced to writing and signed by both parties.
When Spring Forest was unable to meet its rental commitments under the rental agreements, the parties discussed the way forward. One of the options discussed by e-mail was to cancel the agreements. The appellant chose that option and communicated its election by return e-mail, but continued operating its car washing business at the locations covered by the rental agreements, claiming that it was entitled to do so as both the master and rental agreements between it and the respondent had been cancelled.
The court noted that the Electronic Communications and Transactions Act 25 of 2002, as amended (“ECTA”) distinguishes between instances where the law requires a signature and those in which the parties to a transaction impose this obligation upon themselves. In this case, the non-variation clauses were agreed upon by the parties and were not imposed by law. The court held section 13(1) to be inapplicable and section 13(3) to be applicable. Importantly the court held that the typewritten names of the parties at the foot of the emails, which were used to identify the users satisfied the requirement of a signature and had the effect of authenticating the information contained in the emails.
The court held that the e-mails stated unambiguously that once Spring Forest settled the arrear rental and returned the equipment it could walk away without any further legal obligation. The court held that as Spring Forest had complied with the requirements as set out in the non-variation clause, a consensual cancellation had occurred. 2

As a result of this recent development as to the interpretation and application of section 13 of ECTA it has become crucial for estate agents and contracting parties to be aware that proposals and counter-proposals exchanged by email correspondence may becoming binding on the parties once a proposal or counter proposal has been accepted even if the parties have a non-variation clause in place in their contract.
The conclusion of any sale of immovable property as envisaged within the Alienation of Land Act or otherwise required to be signed in law ( wills, bills of exchange and stamp duties) may not be concluded through electronic communication other than by means of an advanced electronic signature. However there is a risk that amendments to such contracts may be considered by the courts to fall within the ambit of section 11(3) and that email correspondence exchanged and agreements reached by the parties may be argued to be binding on the parties, irrespective of the requirements of an advanced electronic signature not having been complied with.

The following revised non-variation clause is proposed to be included in all contracts including offer to purchase agreements, lease agreements and mandate agreements. Please note that the parties, use of certain terms and the capitalisation of certain terms may need to be varied in accordance with the terms used and defined in your agreement:

“This agreement shall constitute the entire contract between the seller and the purchaser. The seller shall not be bound by any other preceding agreement, negotiations, terms or conditions, promises or statements, warranties or representations, express or implied made by the seller or any of its agents or any of its employees, or any other person purporting to act for or on behalf of the seller. No variation, amendment or consensual cancellation shall be of any force or effect unless reduced to writing and signed by the parties hereto by hand. For the avoidance of doubt the parties expressly agree that no variation, amendment or consensual cancellation shall arise pursuant to an exchange of “data” by means of an “electronic signature”, or an “advanced electronic signature” (as envisaged in the Electronic Communications and Transactions Act 25 of 2002, as amended “ECTA”), or otherwise by means of electronic and/or written signed correspondence. Further the parties agree, to the extent allowed in law, that section 13 of ECTA 25 of 2002 shall not apply to this agreement. For the purposes of this agreement, the parties agree that the fact that their name or the name of the entity that they represent appears at or near the end of any email, electronic correspondence or other written correspondence shall not in any way be deemed or considered to be their signature or electronic signature.”

This newsflash has been prepared for information purposes only and does not constitute legal advice, or a legal opinion, the practical application of the provisions of this newsflash will vary depending on the facts of each case.