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INTERPRETING NON-VARIATION CLAUSES OF A CONTRACT ALONGSIDE THE ELECTRONIC COMMUNICATIONS AND TRANSACTIONS ACT 25 OF 2002 (“ECTA”)

Having been promulgated in April of 2006 the ECTA is by no means a novel piece of legislation. The ECTA seeks, among other things, to provide for the facilitation and regulation of electronic communications and transactions; to promote universal access to electronic communications and transactions and to provide for matters connected therewith.

It is furthermore fairly common place for contractual parties to agree to standard or general terms in their written contracts, which include a Non-Variation Clause, which typically stipulates that, no variation of an agreement shall be valid or enforceable unless reduced to writing and signed by the parties thereto.

On 21 November 2014 the Supreme Court of Appeal (“SCA”) delivered judgment in the matter of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash & Another 2014 ZASCA 178 (“Spring Forest Judgment”) which has had a far reaching consequences with respect to the variation of contractual terms in an agreement by way of exchanged email correspondence.

Background to the Spring Forest Judgment:

The facts of the matter in casu are fairly common place, whereby the contracting parties concluded a written agreement which agreement included a non-variation clause, prohibiting the variation or consensual cancellation of the agreement unless reduced to writing and signed by the parties.

As fate would have it, the Appellant (Spring Forest) was unable to meet its obligations in terms of the agreement, and negotiations ensued between the parties via email. One of the options discussed was the cancellation of the agreement. This option was duly accepted by Spring Forest who tendered their monetary obligations in terms of the agreement, and returned such equipment subject thereunder.

A dispute later emerged as to the validity of the cancellation, specifically with respect to the manner of the cancellation being specifically delineated in the agreement, whereby the parties were obliged to reduce the variation or cancellation to writing and for same to be signed by the parties.

Application to the facts at hand:

The SCA in considering the matter, took cognisance of the provisions of ECTA, specifically section 13(3) which provides that where electronic signature is required by the parties to an electronic transaction, and the parties have not agreed to the type of signature required, the signature requirement will be met if a method is used to identify the person and indicate the person’s approval of the information communicated and that such method is reliable and appropriate given the circumstances.

In applying section 13 of the ECTA to the factual matrix at hand, the SCA distinguished between circumstances where a signature is required by law and where signature is required by the parties. Section 13(1) of the ECTA stipulates that where signature is required by law and such law does not specify the type of signature required, such requirement is only met by an advanced signature (being an accredited signature in terms of the section 1 definitions). However the facts in casu did not require such advanced signature, accordingly the parties must merely employ an identification method of the person indicating approval.

Accordingly, the Court held that given the private nature of the agreement in question, and that no statute or external law compelled the parties thereto to include a Non-Variation clause, the provisions of section 13(1) of ECTA were not applicable and turned their enquiry to section 13(3) of ECTA.

In the circumstances, the parties had clearly manifested a written intention to cancel the agreement which was ex facie evident from the ensuing email trail between the parties. Furthermore, neither the terms of the written agreement nor the email chains themselves stipulated the form that the signature was to take. Thus the provision of section 13(3) of ECTA applied to the cancellation therein, and the SCA ruled at paragraph 28 of the Judgment, that the typewritten names of the parties at the foot of the email, were sufficient to identify the users and complied with the provisions of section 13(3) of ECTA, thereby constituting a signature by the parties.

In view of this judgment, contracting parties would be well advised that exercise caution in corresponding via email, and must take necessary measures to ensure that their written agreements are carefully drafted to fully express the intention of the parties.

Prepared by:

Kshethra Naidoo | Associate | Dispute Resolution: Litigation & Arbitration

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)