Last month we discussed the need for a “non-variation” clause in every agreement you sign, and the dangers of not having one.
This month we turn to the related danger of inadvertently concluding, amending and/or cancelling agreements by email or other electronic (“data”) messaging.
The car-wash contract that died in cyberspace
Take for example the facts of a case recently before the Supreme Court of Appeal –
- The owner of car-washing units rented them out to an “operating agent” in terms of agreements with non-variation clauses. Any “consensual cancellation” had to be in writing and signed by both parties.
- The agent, in financial difficulty, discussed cancellation with the owner in an exchange of emails, each of which ended with the sender’s typed name (mostly first names only).
- The agent, held the Court, had validly cancelled the agreements electronically by means of these emails.
Were the emails “written”?
Our law is clear: “A requirement in law that a document or information must be in writing is met if the document or information is –
- In the form of a data message; and
- Accessible in a manner usable for subsequent reference.”
Clearly the emails in this case complied and were therefore indeed “written”.
Were the emails “signed”?
Two types of electronic signature are recognised in our law –
First, an “advance electronic signature”, which carries a digital certificate from an accredited authority, is required where any law imposes on parties the requirement for a signature.
Secondly, where the signature requirement is not imposed by any law but is rather something agreed by the parties (as in this case, via the non-variation clauses), all that is required is an “ordinary” electronic signature, which doesn’t need to have any form of certificate. Simply put it is just data “intended by the user to serve as a signature”.
A sender’s typed name at the end of an email (or other “data message”) will, unless the parties have agreed on another specific type of electronic signature, suffice provided that it –
- Identifies the sender,
- Indicates the sender’s “approval of the information communicated”, and
- “Was as reliable as was appropriate for the purposes for which the information was communicated”.
The Court found on the facts of this case that only an “ordinary” electronic signature was required, the emails complied with the above requirements and thus were indeed “signed”.
Accordingly the contracts were validly cancelled.
What contracts cannot be electronic?
Certain types of agreement/document – most importantly property sales and wills – are specifically excluded and must be written and signed in physical form.
The bottom line – three things to remember
- Remember that in most cases agreements are binding even when they are verbal – a recipe for confusion and dispute. First step therefore is to always insist that every contract you enter into is both written and signed, with a non-variation clause as discussed last month.
- That said, always be careful what you agree to, not just via email, but via any type of data message (think SMSes, What’s App messages, Social Media messages and so on).
- Make sure that any agreement you are party to specifies – (a) Whether electronic recordal, signature, variation and/or cancellation will be valid and binding, and (b) If so, specify the required format.