Electronic Communications Act Article

You can cancel a contract by email

The Appeal Court in the case of Spring Forest Trading v Wilberry (Pty) Ltd (725/13) ZASCA 178 ruled that emails exchanged between parties to a valid contract can constitute written agreement for cancellation.

This matter revolves around a non-variation clause inserted in a contract providing for the cancellation of the contract to be in writing and signed by both parties. Cancellation by email, which was done by the parties, was ruled invalid by the court a quo. This ruling, taken up by the Appeal Court, brought about the application of the Electronic Communications and Transactions Act 25 of 2002 (hereinafter the Act).

The Act gives legal recognition to transactions concluded electronically. Its main objective is to enable and facilitate electronic communications and transactions in the public interest (see section 2(1)), as well as to promote legal certainty and confidence in respect of electronic communications and transactions. In section 3 courts are instructed to recognise and accommodate electronic transactions and data messages in the application of any statutory or common law.

In this case, Spring Forest Trading and Wilberry (Pty) Ltd entered into a contract in which Wilberry appointed Spring Forest as its operating agent. The agreement contained a non-variation clause providing that no variation or consensual cancellation would be effective unless reduced to writing and signed by both parties. Spring Forest was unable to meet its rental commitments under the agreement and a meeting was held in which Wilberry gave Spring Forest the option to either pay back the amount or cancel the agreement and walk away. These options were later confirmed by a series of emails, as Spring Forest had chosen the option of cancelling the agreement and walking away. It then entered into another contract with a different company, CMH, who appointed it as its agent, upon which Wilberry sought interdictory relief, arguing that its agreement with Spring Forest was not validly cancelled.

The question arose whether emails exchanged between the parties qualified as written agreements that could validly cancel the contract, especially in light of the requirement of signatures of the parties involved. The Appeal Court noted that section 12(a) of the Act provides that any legal requirement for an agreement to be in writing, subject to the exceptions (wills, bills of exchange, stamp duties and sale of immovable properties) is satisfied if it is in the form of a data message. Which left the issue on whether or not the names of the parties at the foot of their emails constituted signatures as contemplated in sections 13(1) and (3) of the Act.

Section 13(1) and (3) of the Act provide that:

“(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.

  1. 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 data message if – (a) a method is used to identify the person and to indicate the persons approval of the information communicated and; (b) having regard to all the relevant circumstances at the time the method was used, the method was reliable as was appropriate for the purposes for which the information was communicated.”

The Appeal Court noted that section 13(1) should be interpreted not only to include formalities required by statute, but must also incorporate instances where parties to an agreement impose their own formalities on a contract. Although the parties required their signatures for the contract to be cancelled, section 13(1) requires the use of an advanced electronic signature (that is an electric signature which results from a process that has been accredited by the authority as provided for in section 37), which did not occur in this case, hence section 13(1) did not apply in this case.

Section 13(3)(a) on the other hand relates to an “electronic signature” and not an “advanced electronic signature”. A mere electronic signature refers to data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature (see section 1 of the Act). In this case, the parties did require a signature to cancel the agreement, but had not specified the type of electronic signature required for cancellation by email. Because type written names at the foot of emails, which are used to identify users, constitute data that is logically associated with “data” in the body of the emails, as envisaged in the definition of an electronic signature, the names became valid signatures for the cancellation.

The accuracy of the information communicated or identities of the persons who appended their names to the emails was not in dispute, which allowed for the application of section 13(b), which provides that having regard to all the relevant circumstances at the time the method was used, the method was reliable as was appropriate for the purposes for which the information was communicated. In this case the emails clearly and unambiguously showed an intention by the parties to cancel their agreements. The agreements made were not mere negotiations, but agreements later confirmed in writing by email.

Subsequently the court found that section 13(3) was applicable to the case, the parties required a signature, and an electronic signature that resembled the names of the parties at the foot of the emails was satisfactory; hence the contract was indeed validly cancelled.

In conclusion, however, it can be stated that the Spring Forest case had a huge impact on electronic commerce, clarifying the recognition and validity of electronic communications and transactions in legal agreements, ie contracts. My opinion based on the law and facts of this case on which judgment was given, is that I agree with the reasoning of the Appeal Court. In consideration of “the Act” an agreement to be written is satisfied if it is in the form of a data message, regardless of it being concluded partly or wholly by means of data messages (section 22 of the Act). The contract between the parties involved did not specify “advanced signatures”, which meant an electronic signature was good enough.

Considering the history of signatures, in which marks and symbols have been recognised as valid signatures by the courts, more attention is now given to the purpose and function of a signature, which is to authenticate the identity of the signatory. Hence the names of the parties written at the end of the emails fulfil the function of a signature, thereby constituting valid signatures for cancellation of a contract.

As published in Business Law & Tax Review on 9 February 2015