Commercial Law

The ECT Act and Enforceability of Electronic Communications in Variation of Contracts

By 22/01/2015 June 9th, 2021 No Comments

The recent appeal case of Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and Another (725/13) [2014] ZASCA engaged with several issues in relation to the provisions of the Electronic Communications and Transactions Act 25 of 2002 (“the ECT Act”) and in particular the different forms of electronic signatures required by the legislation, that serve to impact on contemporary contractual agreements in the South African commercial landscape.
The ECT Act gives legal recognition to transactions concluded by electronic communication, such as e-mails.

The case related to a lease agreement that had been entered into between the Applicant and the Respondent, which had been varied by a series of emails purporting to consensually cancel the written agreements between the parties to the contract.

The crux of the dispute was whether the parties exchange of emails met the requirement of the non-variation clause within the contract, in that it was reduced to writing and signed by the parties.

FACTS OF THE CASE

The Respondent had provided the Applicant with an offer to cancel the contract in writing and conveyed the offer to the Applicant via email, who subsequently confirmed acceptance of the cancellation and confirmed so via email.

The Respondent subsequently denied that the agreements were validly cancelled, arguing that the email exchange was merely a negotiation between the parties as it did not comply with s 13(1) of the ECT Act which states that ‘an advanced electronic signature is to be used on an email when required by law’.

HIGH COURT DECISION

The High Court had previously found that the email communications between the parties did not demonstrate an intention to cancel the agreements between the parties, but merely recorded inconclusive negotiations between the parties. The High Court found that the ECT Act did not apply to the emails and that the purported cancellation of the agreements conflicted with the terms of the written agreements, namely the non-variation clause, between the parties.

SECTION 13 OF THE ECT ACT

Section 13 of the ECT Act reads as follows:

 

‘(1)       Where the signature of a person is required by law and such law does not specify the type of signature, that requirement in relation to a data message is met only if  an advanced electronic signature is used.

 

(2) . . .

 

(3)       Where an electronic signature is required by the parties to an electronic transaction                  and the parties have not agreed on the type of electronic signature to be used,                      that requirement is met in relation to a data message if

 

(a)       a method is used to identify the person and to indicate the person’s approval  of                              the information communicated; and

 

(b)       having regard to all the relevant circumstances at the time the method was used,                        the method was as reliable as was appropriate for the purposes for which the                            information was communicated.’

 

The above provisions of the Act distinguish between two situations:

 

  1. Where the law or statute requires a signature; and

 

  1. Where the parties to the transaction impose the obligation to sign electronically on themselves.

 

In the first situation, where the law requires an electronic signature, only an Advanced Electronic Signature in terms of the ECT Act will suffice as a signature.

 

In the second situation, where the parties to an electronic transaction have not specified the type of electronic signature to be used, the requirement in terms of the act will be met so long as the ‘data’ or signature in the email is intended to be used as a signature and is logically associated with the contents of the email.

SUPREME COURT OF APPEAL DECISION

On appeal the Court found that the written email correspondence between the parties did demonstrate a cancellation of the agreement between the parties. The agreement to vary had been reduced to writing between the parties and , thus, complied with this aspect of the non-variation clause contained in the original agreement. In the particular circumstances of the case the negotiations between the parties had been reduced to writing (in the form of emails) and constituted a written agreement to cancel. What the dispute now hinged on was an interpretation of ss 13(1) and (3) of the ECT Act, specifically, what constituted a signature in the circumstances and if the parties were required to apply an Advanced Electronic Signature.

 

The Court, in addressing the notion of signatures in SA law, stated that ‘a signature is a person’s name written in a distinctive form as a means of identification’, and that in the past SA law was willing to accept any mark made by a person for the purpose of attesting to a document.

 

The Court took a pragmatic approach to the interpretation of signatures, finding that so long as the ‘data’ (written mark) in the email is intended to be used as a signature and is logically associated with the contents of the electronic communication, it should be considered a signature.

The typewritten names of the parties at the foot of the emails, therefore, served to adequately identify the parties and were logically associated with the contents in the body of the emails, the agreement to cancel the contract.

CONCLUSION

The Courts have, therefore, upheld that in a situation where an electronic transaction is not prescribed by law and parties of their own volition conclude a transaction via electronic communication, typewritten names can satisfy the requirements for an electronic signature in terms of the ECT Act. So long as the signatories had the intention to authenticate the information contained in the electronic communications, agreements concluded via electronic communications will be binding on the parties to the agreement.

Adam Oken

Ian Mc Laren

Ian Mc Laren

Ian McLaren BA LLB (WITS) General Educated St Johns College, Houghton. BA LLB University of the Witwatersrand 1984 Founded McLarens Attorneys September 1986. Right of Appearance High Court, October 1996.ExpertiseLitigation, Labour Law, Commercial Law, Family Law, Pension and Provident Funds, Customs and Excise, Wills, Deceased Estates, Trusts, Commercial Agreements, Reviewing and Drafting Government Legislation, Information Technology.Committees/ TrustsLaw Society of South Africa Information Technology Committee. Trustee Verney College Educational TrustOtherTransvaal Provincial colours for Practical Shooting. Third degree Black Belt JKS Karate. Photographer and motor cyclist Lectured for Continuing Legal Education on Information Technology issues.