Cancelling a contract via email

May 11, 2017

Most contracts have a standard “non-variation” clause incorporated towards the end of the document. This clause normally states that no variation or consensual cancellation of the agreement entered into will be of any legal force or effect unless it is reduced to writing and signed by all parties to the agreement.

The clause seems simple and means that, if you intend to cancel the agreement, you must ensure that it is in writing and signed. But electronic technology has become the preferred primary platform for communication. E-mails, Facebook, Instagram and instant messaging services such as Whatsapp are all familiar electronic platforms. The question is whether an e-mail would meet the standard requirements of a non-variation clause requiring any variation or cancellation of an agreement to be reduced to writing and signed by both parties to the agreement.

Case law

In the case of Spring Forest Trading 599 CC versus Wilberry (Pty) Ltd trading as Ecowash and Another, the Supreme Court of Appeal (SCA) ruled that a contract between two businesses was lawfully cancelled via e-mails. This judgment has set a precedent in the validity of the cancellation of a written agreement via e-mail.

The court had to consider whether contracts could validly be cancelled consensually by the exchange of e-mails between the parties where the contracts in question contained a “standard” non-variation clause.

The parties had exchanged a series of e-mails in which they agreed to a certain course of action, in this case, cancellation of the contracts. The court found that the exchange of e-mails between the parties to an agreement, with each of the parties typing their first names at the end of the e-mails, was sufficient to cancel an agreement, which could only be cancelled in writing and signed by both parties.

The court relied heavily on the Electronic Communications and Transactions Act 25 of 2002 and found that the requirement that an agreement should be cancelled in writing is satisfied if it is in the form of data messages and, in this case, the e-mail met this requirement. With regards to the “signed” requirement, the court had to consider whether the parties’ names at the end of the e-mails constituted a signature in terms of the Act, which provides that, where an electronic signature is required by the parties and the parties have not agreed on the type of electronic signature to be used, that requirement is met if:

  • A method is used to identify the person and to indicate the person’s approval of the information communicated.
  • Having regard to all the relevant circumstances at the time the method was used, the method was as reliable as far as the purposes for which the information was communicated.

In terms of the act, an electronic signature is defined as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. The court held that the typed names of the parties at the end of the e-mails were intended to identify the parties and therefore constituted data that was logically associated with the data in the body of the e-mail correspondence and, accordingly, constituted an electronic signature and this satisfied the requirement of a signature.

Repercussions of the judgement

It is important to bear in mind the possible legal consequences of agreeing to amendments made to contracts or to the termination of contracts by way of e-mail exchanges.

There could also be broader implications where agreements require notices or consents to be given in writing. These principles extend to other technology, such as correspondence which takes place by way of Short Message Service (SMS) and others.

While our courts treat e-mail communication in a similar manner to written communication, we cannot help but wonder whether a court will also be comfortable with a Tweet, Facebook message or Whatsapp whereby a cancellation message is sent merely with a typewritten name at the end.

A non-variation clause is not necessarily as simple as it may seem. To avoid a dispute regarding the terms of the variation or the cancellation, and the identity of the parties authorised to make such changes, contracts should expressly regulate whether electronic communications are permitted.

We therefore recommend obtaining legal advice to gain certainty before signing any agreement or if you wish to cancel an agreement.

Lucas Bowles, ECA regional director, East/South Cape