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Wednesday Dec 10, 2014

Are e-mail lease changes valid?

If parties were to conclude a lease contract or to change a lease term electronically, eg by communicating via e-mail, is the lease or the change valid?

What if a clause in a lease stipulates that no change to the contract is valid and binding unless parties mutually agree to it, and such agreement must be reduced to writing and signed by the parties?

This means that in terms of such a "non-variation" contractual clause, any information or discussion outside the agreement is not binding unless it is written down and signed by both parties.

A tenant informs the landlord's letting agent that she can no longer pay her rentals on the 1st day of the month and all future payments will be done on the 5th.

The agent, who is authorised by the landlord to manage the lease and to act on his behalf in all matters relating to the leased property, confirms via e-mail that as long as rentals are paid by the 5th, this would be in order.

A few months later, the landlord dismisses the agent and proceeds to cancel the lease for breach, on the grounds that the tenant failed to pay on the 1st.

The landlord rejects the tenant's e-mail communication with the agent. He argues that it does not constitute a written variation, mutually agreed and signed as required by the lease.

If the landlord issues summons to evict the tenant for breaching the lease agreement, he is likely to fail if the tenant's defence is the e-mail communication with the agent.

The Electronic Communications and Transactions Act 25 of 2002 ('ECTA'), defines an "electronic signature" as "data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature".

In this example, the agreement between the tenant and the agent regarding the change in the lease condition would be legally binding in terms of ECTA.

The names of the parties and the content of the e-mail would be sufficient for a valid variation of the lease as stipulated in the non-variation clause. The provision of ECTA would be satisfied, in that the parties can be identified, which would constitute their electronic signatures, and the approval of the information (variation agreement consented to).

ECTA would apply to all residential and commercial property leases when electronic communication is used to conclude a lease or for effecting changes.

But electronic signatures cannot be used for a long-term lease of land exceeding 20 years, signing of a will, an agreement for the sale of immovable property and bills of exchange.

Judge Azhar Cachalia of the Supreme Court of Appeal in Spring Forest Trading v Wilberry (725/13) [2014] ZASCA 178 (21 November 2014), held that the e-mails between the parties met the requirement of ECTA.

The dispute related to a nonvariation clause, Wilberry contending that the cancellation agreement to release Spring Forest Trading from the lease was not valid since the communication between the parties was through e-mail communication.

Judge Cachalia said that the legal requirement for an agreement to be in writing was satisfied in the form of a data message (in terms of section 12a of ECTA).

"The Act describes an electronic signature - which is not to be confused with an advanced electronic signature - as 'data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature'.

"Put simply, so long as the 'data' in an e-mail is intended by the user to serve as a signature and is logically connected with other data in the e-mail, the requirement for an electronic signature is satisfied. This description accords with the practical and non-formalistic way the courts have treated the signature requirement at common law."

The judge found that the names of the parties at the foot of the five e-mails exchanged between them were valid signatures and the variation confirming the cancellation was legally binding.

It would be beneficial to incorporate a clause in a lease that electronic communication in the form of e-mails, instant messaging by way of text messages or SMS (short message service) and WhatsApp messenger, including other data messaging, are acceptable means of written communication.

Parties, however, need to ensure that such communication is safely stored, can be retrieved when needed, and perhaps hard copies made for future reference.

Dr Sayed Iqbal Mohamed
Chairperson, Organisation of Civic Rights
Tenant Issues
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