In the recent Supreme Court of Appeal ("SCA") judgment of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and another, the SCA had to deal with the issue of whether or not an agreement could validly be cancelled via a chain of emails.  In arriving at its decision, the Court had to consider the emails in light of the agreements between the parties and certain provisions of the Electronic Communications and Transactions Act, 25 of 2002 ("the Act").

The Respondent ("Wilberry"), entered into a written agreement with the Appellant ("Spring Forest"), in terms of which Spring Forest was appointed as Wilberry's operating agent for its 'Ecowash' mobile car washing units.  The written agreement contained a non-variation clause which provided that no variation or consensual cancellation of the agreement would be valid, unless reduced to writing and signed by both parties.  The parties later entered into a number of rental agreements for the car washing units, which were subject to the terms set out in the main written agreement.  Spring Forest was subsequently unable to meet its obligations under the rental agreements and the parties had to meet to discuss the way forward.

Various options were discussed between the parties at a meeting and later confirmed via email, one of which was the option to cancel the agreements.  The terms of the cancellation, namely that Spring Forest would pay the arrear rentals and return the units to Wilberry, were conveyed in the chain of emails between the two parties.  Spring Forest chose the option to cancel, and communicated its election in a return email.  The names of the parties appeared at the foot of each of their respective emails. 

Having satisfied the terms of the cancellation and believing the agreements were cancelled, Spring Forest continued its car washing business in partnership with a new company.  Wilberry, alleging that Spring Forest was in breach of the agreements, denied that there was a valid cancellation and applied for an interdict preventing Spring Forest from conducting its business, which interdict was granted by the Durban High Court.  As a result, Spring Forest, represented by Shepstone & Wylie, took the matter on appeal to the SCA.

Regarding the first requirement, that the cancellation must be "in writing", the SCA held that this was not in dispute, as, in terms of section 12(a) of the Act, the legal requirement for an agreement to be in writing is satisfied if it is in the form of a data message, such as an email.  The real issue before the court was whether or not the names of the parties at the foot of the emails constituted signatures as contemplated in section 13(1) and (3) of the Act.  The SCA noted that section 13 of the Act distinguishes between instances where the law requires a signature and those in which parties to a transaction simply impose the obligation upon themselves.

In terms of section 13(1) of the Act, where a signature is required by law (e.g. section 6(12) of the Companies Act, 2008) and that law does not specify what type of signature is to be used, this requirement will only be met by the use of an "advanced electronic signature".  An "advanced electronic signature" is one which requires authentication before it can be used.  Section 13(3), on the other hand, provides that, where the parties to an electronic transaction require an "electronic signature", but have not specified the type of signature that should be used, the requirement will simply be met if a reliable method is used to identify that person and to indicate the person’s approval of the information communicated.  The Act defines 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”.

In this case, the SCA held that the non-variation clauses used were agreed upon by the parties and were not imposed by law.  The SCA looked at the purpose for which "advanced electronic signatures" were required, and held that it was apparent that such signatures should not be required for private agreements between parties and it could not be argued that an "advanced electronic signature" was necessary in this situation.  Section 13(1) was therefore held to be inapplicable while section 13(3) was held to apply.  The typewritten names at the end of the emails satisfied the requirement of an "electronic signature" and effectively authenticated the information contained in the emails.  Accordingly, the SCA found that the cancellation of the agreements was valid and the appeal was upheld.

In the circumstances, if parties wish to exclude possible variation by way of emails, it will be necessary to specifically do so in the written agreement.