A recent decision of the Supreme Court of Appeal (SCA) serves as a reminder that the use of e-mails can have material legal consequences for businesses.
In the recent case of Spring Forest Trading v Wilberry of 21 November 2014, the SCA had to consider whether contracts could validly be consensually cancelled by exchange of emails between the parties.
The contracts in question contained a "standard" non-variation clause which provided that no variation or consensual cancellation would be effective unless reduced to writing and signed by both parties. 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 question was whether the email exchange met the standard requirements imposed by the non-variation clauses of being "in writing" and "signed". The SCA referred to the provisions of the Electronic Communications and Transactions Act, 25 of 2002 (ECTA) and found that the emails satisfied both these requirements. With regards to the signature requirement, the SCA held that the onerous requirements of "advanced electronic signature" imposed by ECTA did not apply to private agreements, but only in instances where a statute or law required a signature. Accordingly, the typewritten names of the parties at the foot of the emails, which were used to identify the parties, were sufficient to satisfy the requirements of the non-variation clause and constituted an "electronic signature" in terms of ECTA.
Given the pervasive use of e-mail in the workplace and in commercial interactions, it is important that caution is exercised when using e-mail correspondence. It is essential 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.
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.