Part 3 of 3: How to sign your will

In our previous two posts, we considered who may play a role in your will, and what the roles involve. In this post, we explain the correct way to sign your last will and testament.

Our law has simple but strict requirements for the signing of a will. If a will is incorrectly signed, it can be rejected after you die, leading to possible strife amongst your potential heirs (those in the will and outside of it), and the prospect of expensive High Court litigation to have the will accepted despite its shortcomings.

You, as the TESTATOR (the person making the will), must sign it with your signature. You must sign each and every page. Too large a gap between the text and the signature on any page could invalidate the will. Thus it is important to sign close to the end of the text and not simply at the bottom of each page.

You should sign the will in the presence of two WITNESSES. The witnesses should be aged at least 14 years old and not mentally impaired. They should not be anyone who is named in the will as executor, trustee, heir or any other roleplayer, or the spouse of such a person. Such a person’s signature of the will could disqualify them from being appointed or inheriting, as the case may be. The witnesses must sign the will in your presence and each other’s. Witnesses are required to sign the last page of the will, but as a check on fraud it is good practice for them to sign each and every page. They should sign the will after you do, as by their signature they are confirming that you signed the will in their presence.

A will must be made in writing. As yet no provision has been made for wills to be signed digitally. As a result, a will must be written out or printed on paper and signed with ink. The ORIGINAL signed document is very important and must be kept safely. Many people will lodge the document with their attorney or other advisor for safekeeping. The Master will not accept a photocopy of a will, or an unsigned version, unless the High Court orders them to, after application by an interested party such as an heir, leading persuasive evidence as to the testator’s intentions.

Special procedures apply when a person making a will is unable personally to sign the document despite understanding its contents and wishing to make the will – for example due to illiteracy or physical hurdles affecting the hands. In these cases, the person may sign the will by making a mark (such as an X or thumbprint), or another person may sign at his or her direction. A commissioner of oaths must assist in confirming that the person making the will has been identified and that the will is indeed their will. Special advice should be sought in such a case, as the procedures are more complex than detailed here.

For advice on any matter concerning a last will and testament, you can contact us at camilla@roseattorneys.co.za.

Part 2 of 3: WHO ELSE? Making a will as a parent or caregiver

In our previous post we looked at the main parties involved in any last will and testament. There will be other parties too, if you include in your will a minor child, or another beneficiary who needs assistance in managing their share in your estate. In this post, we consider these people and the roles they play.

Guardian – As the parent of a child aged under 18 years (a “minor” child), you can nominate one or more people to be appointed as that child’s legal guardian, should you and any other guardian (such as another parent) both die before the child becomes a legal adult. The appointment is not automatic and requires a court order after your death. The guardian is responsible for major legal decisions concerning the child. In most cases it is sensible to appoint the person who would be entrusted with the physical care of your child in your absence, as the guardian. Responsibility for managing any cash or immovable property (houses or land) inherited by a child can be left to the same person as a trustee, but need not be.

Guardian’s Fund – If a child aged under 18 years stands to inherit cash or immovable property in terms of a will or intestate succession law, the Guardian’s Fund, an office within the Master of the High Court, will take control of that cash or property and manage it until the child turns 18 years of age. The child’s guardian can apply to the Guardian’s Fund for access to that cash for the child’s maintenance, or permission to dispose of the child’s property (with the proceeds to be paid to the Guardian’s Fund). When the child turns 18 years of age, they can apply for the remaining assets to be transferred to them personally.

Trustee – In most cases, it is not in a child’s best interests to have their assets managed by the Guardian’s Fund. It is preferable to set up a trust in your will, if there is any likelihood that your minor child or grandchild will inherit immovable property or any substantial amount of cash from your estate. The downsides of relying on the Guardian’s Fund include dealing with a bureaucracy and its inefficiencies, relying on unknown government officials who do not know your child or take a personal interest in them, and all assets being released to your child on legal adulthood (at 18 years). A trust has the benefits of being more efficient, managed by trusted people selected by you in your will, and flexible enough to continue until an age of your choosing (often 21 to 25 years, or indefinitely). You should select trustees who are responsible and diligent people, and will take a personal interest in your specific child’s needs and welfare.

There is a common misconception that the executor and trustee are the same role. They are not. The executor is responsible for collecting assets, paying debts, and transferring what is left to the correct beneficiaries. The trustee’s role becomes most important around the time that the executor’s role is being completed. Once the executor has transferred assets to the trust from the estate, the trustee must manage these for the lifetime of the trust. This too is an important role requiring utmost trust and good faith.

One person can be executor, guardian, and a trustee, or these can be completely different people. This all depends on your personal circumstances.

In our next post: Ensuring a valid will – how to get the prescribed formalities right and avoid common but costly mistakes

Part 1 of 3: WHO IS WHO? The key parties in your last will and testament

It is well known that, if you own assets and/or have dependents, a last will and testament is a must to transfer your property to those you choose efficiently, and on sensible terms tailored to your specific circumstances.

However who is involved in one’s will, and precisely what role they play, is less understood. Let’s break down the major parties in a last will and testament and what role each plays.

Testator – This is you, the person making the will. The will sets out your wishes as to what happens to your property after your death. You enjoy freedom to make, amend, destroy and replace your will freely (subject to certain rules as to form).

Executor – This is the person you appoint to implement your will. They can be a professional executor (such as an attorney) or a layperson (such as a spouse, child, other relative or friend). A common misconception is that your executor cannot inherit under your will. Your executor can also be an heir under your will. The role is important and requires the utmost trust and good faith. The executor’s many tasks include identifying, gathering, reporting and safeguarding assets, liaising with debtors and creditors, settling and pursuing claims, operating a bank account, advertising at different points in the process, correctly distributing assets, and liaising with the Master of the High Court throughout. Where the estate (your property) has a gross value of R250 000 or more, the Master will require an attorney to wind up the estate, and a layperson executor must appoint one as their agent. The executor is entitled to payment equal to 3,5% of the gross asset value.

Heir – This is someone who stands to inherit from your estate – either through your valid will or in terms of the rules that apply where you don’t have one (intestate succession law). The term beneficiary is usually reserved for an heir who stands to inherit in terms of a will. You can nominate any individual or legal person (eg company, trust or NGO) as your beneficiary. It is important to describe your beneficiaries clearly, preferably using full names and identity numbers, and naming your relationship to them. This is especially important when an heir has a common name, and where your family uses the same first and middle names across generations. You can leave a specific asset to a beneficiary or make them your residual heir, receiving all that is left after any specific assets.

Drafter – This is ideally an experienced professional, specialising in wills and estates. In preparing your will, they will ask probing questions about aspects you have probably not considered, and guide you away from common pitfalls that can have dire consequences. They will prepare a succinct and unambiguous document and ensure that it is signed in accordance with all prescribed formalities.

Master of the High Court – This is an office within the Department of Justice that is responsible for receiving the original last will and testament after a death, determining its validity on face value, formally appointing the executor, and overseeing the entire process of winding up an estate. They will receive reports from the executor and grant permissions at various stages in the process. They will charge the estate a fee between R600 and R7000 depending on the gross asset value.

In our next post: Who else may be involved in your will if you have minor children or other dependents needing care? Trustees, guardians and the Guardian’s Fund.

Later: Ensuring a valid will – how to get the prescribed formalities right and avoid common but costly mistakes

7 reasons to avoid the trap of the free or bargain-basement will (or: How is a professionally drawn will like car insurance?)

 

Car insurance is a grudge purchase. So much so that a leading insurer is offering cash incentives to prospective clients, simply to get them on the phone long enough to sign them up. But if you are a careful, reasonably lucky driver, you may pay premiums year after year and never make a claim.

Along comes Penny Wise Pound Foolish Car Insurance (“Penny Wise”). They guarantee the lowest premiums or a free holiday to Disney World. Naturally, you are on the line to their call centre in minutes – and discover to your great joy that you can save R1000,00 a month in premiums! It’s a no brainer. Each month, you admire the teeny premium on your bank statement, and pity those poor suckers still insured by No Corners Cut Car Insurance (“No Corners”).

And then the worst happens. You are in your first-ever car wreck. Thankfully no one is hurt, but your beloved car is a write-off. To replace it would cost R100 000,00. Penny Wise informs you that your excess is R25 000,00, and that your car was insured for a total value of R50 000,00. It’s time to dust the cobwebs off your bicycle. Or prepare to take on a mountain of debt to replace your fully paid-up car.

So what does car insurance have to do with wills?

Legal fees, like insurance, are a grudge purchase. No one gets a bonus at work and enthuses: “It’s finally time to draft the co-habitation agreement of my dreams!” No one writes on their wedding invitation: “Instead of gifts, please consider a donation to our fund to finally sue that dodgy contractor that left us with an uneven, potholed driveway!”

Legal fees, like insurance, are an area where one can be “penny wise and pound foolish”. Especially in the area of wills. Why see a lawyer to prepare your will when your bank is offering to do it for free? Or you can pick up a fill-in-the-gaps version at PNA?

I visited a prominent bank’s website this morning. The website suggests that legal advice is a “nice to have” when drawing your will – only really necessary when you want to put “lots of special conditions” in your will. The website concedes that a will drafted by a lawyer is unlikely to be open to interpretation and so end up in legal disputes. That’s a pretty big advantage, I would say. If you want to put in “lots of special conditions”, the website concedes that professional advice would be worthwhile, and hyperlinks to a terrifyingly pared-down website that promises you a downloadable will for R350,00 in six easy steps (the first of which is “sign up” and the last of which is “print” – so actually four steps).

As an attorney with 16 years’ experience, I charge R1500,00 for a will. On the face of it, a bank customer who uses the web-based service is saving R1150,00. However, a client who sees me for their will gets a lot more than 4 answers plugged into a template:

  1. There are a wealth of different options available to testators to achieve exactly what they want with their estate. The best option in each case depends on the testator, the size of their estate, the nature of their assets, and even the personalities of their heirs. Is your youngest son terrible with money and in need of a trustee to look after his financial interests? Is your eldest daughter a home owner who would benefit more from a cash bequest than from inheriting a third of your house? Will it mean a lot to Aunt Mildred that she gets Granny’s emerald ring even though you are leaving the rest of your jewellery to your cousins? Come drink a cup of coffee with me and tell me about your family. There is no algorithm for that.
  2. Lawyers are trained to ask “what if” – and to confront head-on the worst case scenarios that most of us like to avoid thinking about. This is where things can go badly wrong. When I consult with a client for a will, I try to look around all the corners, and provide for every eventuality. You cannot assume that life will unfold as you expect it to, and there is tremendous benefit to being led to apply your mind to the unexpected, and covering all the bases.
  3. Once we have selected the options that make the best sense for you and your heirs, I will ensure that your wishes are put to paper in unambiguous terms. Your executor will know exactly what you meant. Your heirs will understand what they are getting. The aim is to enable an easy process to wind up your estate, and not leave confusion and conflict in the wake of your passing.
  4. You don’t have to use your own paper to print my wills. Seriously, I will print it for you (not on R1000 paper, but still.) I will supply a sturdy cover to store the will in. I will help you sign the will in accordance with all legal formalities. You do NOT want to sign a will incorrectly and have it rejected by the Master when your heirs try to wind up your estate. If that happens, your heirs must apply to the High Court to have your will accepted, and your initial saving of R1150,00 from Penny Wise Wills Ltd will fade into insignificance when those fees start rolling in.
  5. Once your will has been signed, our relationship continues. I will register your will online so that it can be easily located when needed. I will store the original will for you, should you so choose. I will make contact with you each year to ask: how has your life changed since we met, and does your will need to change to keep up with it?
  6. In my view, banks do not offer free wills to benefit their customers. They offer free wills to snag lucrative executors’ fees when their customers pass away. Should your estate be deemed small potatoes, the bank will drop it like a hot potato and your heirs will need to get the Master to appoint another executor in their place. Should it be sufficiently large, a bank official who probably never met you will wind up the estate and charge the maximum allowable fee (3,5% of asset value) for doing so. I recommend to my clients that they appoint their major heir as the executor, unless there is good reason not to do so. The heir can then approach an attorney of their choice for assistance in winding up the estate. That may be me. It may be their own attorney. Some clients prefer to appoint me as their executor, as they trust me to treat their heirs with care. We have a relationship, and winding up a client’s estate is generally the last service I can offer them. My fees for winding up an estate are negotiable, and unlikely to be the maximum fee unless the estate is very small in value and the work still considerable.
  7. And the website offering a four-step will for R350,00? Whoever owns it has a great passive income business and may be getting quite rich. I hope they have had a professional draw up their will. Ha.

 

 

The 11 Things an Executor Must Do

The administration of a deceased estate is a cloaked and murky process. As laypeople, we may hand over the task to an attorney or bank, wait a long time, see a sizeable fee deducted for executor’s remuneration, and never quite understand what happened in the intervening period. What do executors actually do, and why do even small estates take months (or even years!) to wind up? In this blog, we cover the 11 step process an executor follows to wind up a deceased estate.

Step 1: Meeting the family

The nominated executor will start off by meeting with the deceased’s loved ones to commence the process of winding up the estate.

Step 2: Reporting the estate

At this early stage, she will take possession of the deceased’s original will (if any) and assist the loved ones in completing the necessary documents to report the estate to the Master of the High Court. There will be an initial assessment of the size of the estate to determine whether a full administration process is needed or whether a truncated procedure can be followed if the estate assets are valued at less than R250 000,00.

Step 3: Obtaining letters of executorship

She will send off the reporting documents to the Master, who will then issue Letters of Executorship in her favour, which empower her to handle the estate and liaise with debtors and creditors.

Step 4: Notice to creditors

She will place a notice in the Government Gazette and a local newspaper, advertising the estate and calling on all creditors to come forward and lodge their claims against the estate, within a 30 day period. The executor will receive and assess all claims received.

Step 5: Open estate cheque account

She will open a cheque account in the name of the estate as soon as there is cash in hand. All cash assets and monies due to the estate will be deposited into this estate.

Step 6: Valuations of assets and liabilities

She will determine what the assets in the estate are valued at, and the amount of the estate’s debts. Assets include immovable property, movable property, cash and investments, and claims in favour of the estate. Liabilities include debts and administration expenses.

Step 7: Draft liquidation and distribution account

This is the core of the administration process. Having gathered the necessary information, the executor will draw up a comprehensive account that sets out all assets and liabilities, their values, any cash surplus or shortfall, how the estate must be distributed in terms of the will or law of intestate succession, estate duty calculations, and handling of fiduciary assets. This account goes to the Master for scrutiny.

Step 8: Respond to Master’s queries

In response, the Master will send a query sheet giving details of documents and information required at different stages of the process.

Step 9: Inspection period

Once the Master’s initial queries have been responded to and he is satisfied with the account, the executor will place a notice in the Government Gazette and a local newspaper, advertising the account as lying for inspection for a period of 21 days. During this period, any interested person may inspect the account and lodge objections to it. Any objections are responded to by the Master.

Step 10: Distribution

Once the account has lain for inspection and any objections have been dealt with, the executor must distribute the estate assets by transferring immovable property, delivering movable property, and/or paying cash inheritances over to the heirs.

Step 11: Discharge of executor

The executor will be paid her remuneration and send the necessary proof to the Master to demonstrate that all assets have been distributed as required, as well as a full set of bank statements and unpaid cheques. She can then apply for a discharge as executor, supported by affidavit. At this stage, her duties have been completed.

The administration of a deceased estate is a process with many stages, all of which take time. A professional executor should keep you informed at all stages of where the process is, and what comes next.

For assistance in winding up a loved one’s estate in a timely, sensitive and cost-effective manner, contact us below or at camilla@roseattorneys.co.za

Divorce and the forgotten will

Divorce inevitably affects one’s estate. If you were married in community of property, your joint estate is divided up. If you were married with accrual, some money or property would have changed hands, or one of you would have waived a claim. Even if you were married out of community, some division exercise would have taken place in the common home to sort out what is yours and what was your spouse’s.

Yet the last thing on your mind when going through a divorce may be your will. It may have been signed years earlier – in happier times – and the chances are that your spouse would have been your primary heir.

The Wills Act acknowledges that it can take some time to get one’s affairs in order after a divorce. Section 2B provides that, if (1) you made a will before your divorce (or annulment) and (2) you die within three months of your divorce (or annulment), then your will will be implemented as if your former spouse died before you. An exception is made where it is clear from the will that the bequest is made regardless of divorce.

Three months after a divorce, however, any outdated will that benefits your former spouse becomes of full force once again. If you die three months and one day after your divorce, and your old will made your former spouse your heir, then they will still inherit.

It is thus important to think about the need to update one’s will whenever there is a major change in status such as a divorce. Births, deaths, marriages and divorces, and major changes in one’s estate, should all trigger a review of your will to ensure that it still reflects your wishes.

Contact us to draw or revise your last will and testament and/or living will: camilla@roseattorneys.co.za / 074 697 2048.

 

Public equality and private sexism?

Is a person making a will entitled to be sexist?

That question recently came before the Cape High Court, and the outcome may be surprising.

Well over a century ago, a wealthy couple executed a will. In it, they distributed their numerous farms and other properties between their four sons and two daughters, subject to a fideicommissum. A fideicommissum is a provision that an heir must transfer an inherited property to a specific other person on their own death. On each son or daughter’s death, shares in the properties would go to that son or daughter’s own sons, and thereafter those grandsons’ sons. If there were no sons, then brothers or nephews might inherit.

One of the couple’s children, Cornelius, inherited certain properties from his parents in terms of the fideicommissum. He died in 1957, leaving behind three sons and six daughters. The properties he had inherited were passed on to his three sons (the grandsons) in equal shares, to the exclusion of his six daughters.

When the first grandson died, he left no children, and his shares in the properties went to his brothers in terms of the will. When the second grandson died, his shares went to his sons (the great grandsons). The third grandson had five daughters and no sons. He and the great grandsons, his nephews, treated the properties on the basis that they would ultimately belong to the great grandsons in terms of the will. A year before his death, however, he was advised that the fideicommissum may be unconstitutional, and he made a will leaving his shares in the properties to his five daughters instead.

An executor was called upon to wind up his estate, and was faced with the third grandson’s will leaving his estate to his daughters on the one hand, and the original will which excluded his daughters from inheriting the properties on the other hand, along with a claim to the properties from the great grandsons.

The daughters and executor took the view that the terms of the fideicommissum were unfairly discriminatory on the basis of sex, and should be set aside as being against public policy and unconstitutional. They approached the court for direction, asking the court to remove the discrimination against female descendants from the original will, to enable the daughters to inherit their late father’s properties. The Master of the court accepted the third grandson’s will in favour of his daughters, and abided the decision of the court on the validity of the fideicommissum. The great grandsons opposed the application.

The court considered wills creating charitable and educational trusts which had discriminated against Jews, women and those not “of European descent”. These had been varied by the courts to remove the unfair discrimination. In at least one case, the discrimination on the basis of race had not been deemed unfair, and an application to vary terms had been refused.

The court drew a distinction between wills having a public character (providing for ongoing bursaries, for example) and those which were strictly private in nature. In the latter cases, the freedom of testation of the person making the will should be respected, the court reasoned, even if the wishes expressed were unreasonable. No potential heir enjoys the right to an inheritance, and the maker of a will is free to disinherit whomever they please.

In the present case, the parties were in agreement that there was unfair gender discrimination in the fideicommissum. The argument centred around the appropriate limits on freedom of testation – and whether the maker of a will was required to refrain from unfair discrimination.

The court considered which was the lesser of two evils – unfair discrimination against a small group of potential female heirs (as the discrimination against an earlier generation of potential female heirs, and their female heirs in turn, was past and irrevocable, and this substitution was the final one in terms of the will), or incursion upon a testator’s freedom to arrange their estate as they chose. The court decided that, even if the fideicommissum perpetrated unfair discrimination against the daughters, this was a reasonable and justifiable limitation upon their right to equality. The freedom of testation had primacy in the private sphere. The application to remove the discrimination from the will, accordingly failed, and the great grandsons inherited the properties in place of the daughters.

In sum, this judgment means that the maker of a will is indeed entitled to be sexist, as regards their family members – but in general not as regards public beneficiaries of charities or educational bursaries set up through their will.

One wonders whether the result would be the same if the maker of a will disinherited descendants of a specific race or religion instead of a specific gender.

 

 

Cape High Court upholds rights of trans people and their spouses

The Alteration of Sex Description and Sex Status Act was signed into law in 2004. It was a groundbreaking piece of legislation, intended to enable transgender and intersex people to correct their official birth certificates and identity books or cards, by updating the gender assigned to them at birth, to their accurate gender identity.

While the law represented progress, it has been subject to criticism – and not only from those who believe that gender is biologically determined, with exclusive reference to one’s genitals visible at birth.

Reliable local statistics are hard to find, but with estimates that about 1,7% of a population are likely to be intersex, and about 0,5% transgender, a full 2,2% of the South Africa population (or 1,2 million people) might benefit from the Act’s provisions. In the 10 years following the enactment of the law, however, only 95 people were able successfully to access its provisions. Something has clearly gone wrong.

The Department’s inconsistent and unfair implementation of the Act came before the Cape Town High Court late last year. A number of happily married, trans individuals had applied for correction of their gender on their official identity documents. The applicants had all been married in accordance with the Marriage Act, to spouses of the opposite sex. The correction of records would have the result that they were in same sex marriages going forward. The Department refused to assist two of the applicants unless they divorced their spouses – and a third was assisted but had their marriage deleted from the official records and their married name dispensed with, without their consent.

The cases came before court, with orders sought (1) compelling the Department to assist applicants in terms of the Act regardless of their marital status, and in the alternative (2) declaring the statutory framework constitutionally invalid to the extent that it disallowed the correction of the recorded gender of a married person.

The Court considered the statutory framework, and noted that the Marriage Act dealt primarily with the solemnisation of a marriage – that is, who was authorised to act as a marriage officer, and what formula should be followed to conclude a marriage. Nothing in the Act prohibited a spouse in a marriage from later altering their recorded gender. The Civil Unions Act provided a parallel system for the solemnisation of same sex marriages. Once solemnised, the distinction ended and there was only one institution of marriage (reached by different routes).

Thus, the Court found, an alteration of gender records was in no way irreconciliable with the continuation of a marriage solemnised under either law.

The Court thus ruled that the Department, in its treatment of the applicants, had infringed their constitutional rights and failed in its legal obligations. Marital status and whether a marriage was solemnised under the Marriage Act or Civil Unions Act, was entirely irrelevant. The Department was directed to process the alteration applications of the first two applicants, and restore in its records the marriage of the third applicant, within 30 days.

 

 

 

FWIW cncllg cntrct TTYL B4N

If you have a smartphone, you probably use Whatsapp daily. This handy little app has 1,3 billion monthly active users, but is often controversial – sending your data to Facebook for targeted adverts and friend suggestions, and encrypting communications to lock out cybercriminals but also government agencies investigating terror networks.

Our whatsapp conversations are increasingly being entered into evidence in court proceedings.

A Saudi man reported that he divorced his wife after the app showed that she had received and read his messages, but failed to respond to any of them. This process, known as “blue ticking” in reference to the little blue ticks that show that your message has been displayed on the recipient’s phone, also played a role in a Taiwanese woman’s divorce. She submitted evidence of her husband continually ignoring her messages, and this was accepted as evidence that the marriage had irreparably broken down.

An Italian divorce lawyer reported that evidence of whatsapp messages between spouses and their extra-marital partners was being used in around half of the divorce cases going to trial there.

Closer to home, the country scrutinised emotional whatsapp messages exchanged between murder convict Oscar Pistorius and his victim Reeva Steenkamp, provided as evidence of a tumultuous and emotionally abusive relationship.

Increasingly, even business negotiations may take place via whatsapp. But are these communications legally binding?

The Electronic Communications and Transactions Act of 2002 (ECTA) gives formal legal recognition to transactions concluded by email. The Act obliges courts interpreting its provisions to recognise and accommodate electronic communications in applying statute or common law.

Our law recognises a data message (such as an email or whatsapp message) as adequate in most cases where the law or an agreement requires something to be in writing. Notable exceptions where agreements cannot be concluded electronically include deeds of sale of immovable property, and last wills and testaments – even where an advanced electronic signature is used.

The law or an agreement may also require that a document be signed by a party. The question then arises as to whether one can sign a document via email or whatsapp. This question was recently considered by the Supreme Court of Appeal (SCA), in the case of Spring Forest Trading (SFT) versus Wilberry (W).

W owned car wash equipment, and contracted with SFT to operate car washes at several locations, using its equipment, for which SFT paid W rentals. SFT fell into arrears, and the parties entered into discussions to remedy the situation. A face-to-face meeting was held, after which SFT’s representative emailed W’s representative, recording in writing four proposals which W had offered it. The second proposal was recorded as “Cancel agreement and walk away.” SFT sought confirmation that, if this proposal was pursued, there would be no legal claims by either party.

W’s representative responded by email, confirming that, provided all rental arrears were paid, there would be no legal claims.

SFT then emailed W, advising that it accepted the second offer.

SFT returned the car wash equipment and paid the rental arrears. That might have been the end of the matter. It was not, however – SFT continued to run car washes from the same locations, now renting equipment from W’s competitor – probably not the outcome that W had foreseen.

W rushed to court on an urgent basis, claiming that its agreements with SFT had not been validly cancelled, and seeking an interdict to prevent SFT from operating car washes while it prosecuted a claim for damages. The High Court was sympathetic, and granted an interdict, agreeing that the agreements had not been validly cancelled. The judge deciding the matter found that the agreements – which required consensual cancellations to be reduced to writing and signed by both parties – did not allow for cancellation via an exchange of emails.

SFT appealed this judgment to the SCA. It relied upon ECTA, which states that, where parties to an electronic transaction require an electronic signature, but have not agreed upon the type of electronic signature, then the requirement is met if (1) a method is used which identifies the person and indicates their approval of the information communicated and (2) the method was as reliable as was appropriate for the purposes for which the information was communicated, having regard to all the circumstances. It argued that the consensual cancellation had been reduced to writing in the form of the exchange of emails, and had been signed by the parties when they ended each email by typing their full names.

W disagreed, arguing that (1) the emails were evidence of negotiations but could not constitute an actual agreement to cancel, (2) at best, the emails only referred to the rental agreements and not the master agreement between the parties, and (3) even if ECTA applied, then an advanced electronic signature was required, and this was absent.

The SCA found: (1) the emails clearly amounted to an agreement and not mere negotiations, as the parties reached consensus that they could walk away once arrears were settled and equipment returned, with no further legal consequences and (2) “walking away” could only mean that all agreements would be cancelled.

On (3), the court examined ECTA in more detail, finding that:

  • a data message could unquestionably satisfy the requirement that an agreement be in writing;
  • an advanced electronic signature was only required where imposed by law, and not in private agreements: it involved an elaborate and strict application process, for accredited products and services only. The parties did not deal in such products or services;
  • between private parties who required a signature, a standard electronic signature would suffice.

W argued that the recordal of a party’s full names at the end of an email did not meet the ECTA requirements for an ordinary electronic signature – there was no reliable method to identify the parties and indicate their approval of the information communicated.

The court disagreed, pointing out that courts have always taken a pragmatic approach to signatures, and required that a signature authenticates a signatory’s identity, without insisting on specific forms. In appropriate cases, a witness touching the pen while a magistrate made a mark on her behalf, had been accepted as a valid signature. The typed names identified the parties, were logically connected with the information that preceded them, and satisfied the ECTA requirements for an ordinary electronic signature.

The appeal was accordingly upheld, and the interdict against SFT set aside.

Had the parties not appended their names or another form of signature to their emails, however, the requirement that a consensual cancellation be signed by both parties would not have been met, and the purported cancellation would have been ineffective.

In summary, electronic communications via email, whatsapp and other means are increasingly relied upon in commerce. Parties engaging in electronic communications in business matters should be aware that these communications may feel casual but can be legally binding upon them. Where a party is negotiating by text or email but intends for any resultant agreement to be written up and signed on the printed page before it will be binding, this should be spelled out clearly – before an “in principle” agreement is reached. Failure to do so can mean that a party is bound by the terms set out in the text exchange, while other pertinent clauses the party may have wished to insist upon will be excluded.

While email and text are convenient, in cases such as the one above, the presence or absence of a signature can have far-reaching and costly implications. When emails and texts are intended to have legal consequences, a party would be wise to ensure that these communications still fulfill all legal requirements – such as a full signature where one is required. Had the parties’ representatives ended their emails with an unsigned greetings (“Best”) or an initial for shorthand (“C”), the outcome of the case may have been quite different – and a business potentially ruined in the process.