Electronic signatures have been given the legal thumbs up, following a recent appeal court judgement.

“The decision provides long awaited certainty as to the effect of electronic communications in business, given technological developments in recent decades, and will no doubt be welcomed by both business and the legal profession”, comments Ian Chadwick of Shepstone & Wylie Attorneys. “It will certainly make electronic agreements and communication, in a number of instances, far easier and less cumbersome”.

In the very recent case of Spring Forest Trading versus Wilberry (Pty) Ltd (trading as Eco-wash), one of the questions to be decided was whether the requirements of a non-variation clause in a written agreement (the Shifren principle) are met by the exchange of email correspondence where the emails conclude with the name of the sender.

“In other words, does the printing of one's name at the foot of an email message constitute a signature in writing”, explains Chadwick.

The facts of the case were that the parties had concluded a master agreement plus a series of subsidiary rental agreements whereby Spring Forest Trading (the appellant) had leased a number of mobile dispensing units from Eco-Wash (the respondent). The appellant fell into arrears and the parties met to discuss the problem. A number of proposals were discussed at the meeting. The meeting ended with the appellant representative agreeing to consider the proposals and respond after the meeting.

Shortly thereafter a series of emails was exchanged between the parties' representatives clarifying the proposal. These emails ended with the name of the sender (in each case a representative of the parties). The last of the sequence of emails (from the appellant representative) read:

"Dear Henry and Nigel,

As per our discussion this morning and follow up emails, we thank you for the four options offered to us. We confirm that we accept your second offer whereby we will return all equipment leased to us and that there shall be no further legal recourse from either party. We would like all equipment picked up on or before 28 February 2013 so that we do not incur further lease costs for the following month.

Kind regards

Greg."

After dispatch of this email the appellant considered the contractual relationship between the parties to have been terminated by mutual agreement. It proceeded to continue its operation through another service provider. However, the respondent had other ideas. It launched an application for a temporary interdict. It succeeded in court, where the judge agreed with its contention that the exchange of email correspondence did not meet the requirements of the provision in the master agreement which stated that "no variation or agreement to cancel shall be of any force and effect unless in writing and signed by both you and us". In the trial court, and on appeal, the appellant argued that the requirements of the non-variation clause had been met because of the provisions of the Electronic Communications and Transactions Act (ECTA). In particular, reference was made to various definitions in the act which make it clear that an email exchange between parties is government by ECTA. It was also argued that the Act's aim is to promote legal certainty and confidence in respect of electronic communications and transactions. Further, that the Act provides that it is a requirement in law that a document or information must be in writing, this requirement is met if the document or information is in the form of a data message; and accessible in a manner usable for subsequent reference.

Chadwick explains that there are exceptions to the general endorsement of data messages, these being exclusions relating to a specified class of documents, namely agreements for alienation of immovable property, long term leases of immovable property, testamentary documents and the execution of a bill of exchange. These documents require what are described in ECTA as 'advanced electronic signature'. This is a type of electronic signature which results from a process accredited by authority.

The appeal court agreed with the submission of Appellant's counsel that the exchange of emails referred to above did indeed constitute an agreement in writing signed by the parties and accordingly met the requirements of the non-variation clause. The court rejected the Respondent's submission that an advanced electronic signature was "required by law" because the requirement for a signature stemmed not from the operation of law but from the agreement of the parties. In the course of the judgment the court further made reference to the fact that historically the approach of the courts to signatures has been "pragmatic, not formalistic". The court concluded that the requirements of the Shifren principle had been met, the contract had been effectively terminated by mutual consent and that the appeal should succeed.

“We have been waiting for certainty on electronic signatures for some time now. The judgement is entirely equitable and sensible given the technological developments which have occurred since the Shifren judgment was delivered in 1964. It is landmark decision for commercial law into the future”, adds Chadwick.