We often get asked by clients whether the agreement is worth the paper that it is written on. There is this perception among contractual parties that unless an agreement is drafted by an attorney and properly signed by them, that such an agreement is not valid and legally enforceable.
It happens more often than not these days, that people exchange ideas and even conclude arrangements / agreements on WhatsApp. These agreements might sometimes be minor issues but it can also relate to large financial transactions.
This was the case in a private arbitration (National Soccer League Dispute Resolution Chamber) matter between Mthethwa v Baroka Football Club (2019) 40 ILJ 2879 (NSLDRC).
The pertinent facts of the case were as follow:
The applicant (“Mthetwa”) presented a claim to the Dispute Resolution Chamber (“DRC”) of the National Soccer League (“the league”) alleging a breach of contract by the respondent (“Baroka”)
Before the set down date of his arbitration, Mthethwa’s attorney and the chairman of the club had purportedly concluded an agreement to settle the claim via a series of WhatsApp text messages (“the electronic agreement”)
The attorney had then sent a written agreement to the club, but the chairman had refused to sign same. Mthethwa approached the DRC to enforce the electronic agreement concluded by the parties.
The application was opposed by the club on the basis that the chairman had been intimidated into settling the matter by the employee’s attorney’s threat that he ‘would lose the case’ and, further, that the DRC lacked the power to make an unsigned agreement an order of the DRC.
The DRC ruled that the transaction was governed by the Electronic Communications and Transactions Act 25 of 2002 (“the ECTA”). Section 4 thereof provides that the ECTA ‘applies in respect of any electronic transaction data message’. The ECTA does not define ‘electronic’, it does define ‘electronic communication’ as ‘a communication by means of data messages’ and ‘data messages’ to include ‘data generated, sent, received or stored by electronic means’. Data means ‘electronic representations of information in any form’.
Referring to relevant case law, the chairman found that a WhatsApp message is, data-generated, sent, received or stored by electronic means and is, therefore, an electronic communication. Consequently, there is no reason why a text message sent via WhatsApp on a mobile device should not be considered to be a message. The text messages exchanged between Mr. Van Gaalen (Mthethwa’s attorney) and Mr. Mphahlele (Baroka chairman) on their cellular phones are accordingly ‘data messages’
Section 11 of the ECTA provides that information is not without legal force and effect simply because it is in the form of a data message. Furthermore, Section 22 confirms that agreements formed from data messages have legal effect and are concluded at the time when, and the place where, the offeror receives acceptance of the offer. Section 24 goes on to say that, as between the originator and the addressee of a data message, an expression of intent or other statement is not without legal force and effect merely because it is in the form of data message.
The text messages between Mr. Van Gaalen and Mr. Mphahlele affirmed the amount of the settlement, the method of payment and the dates of payment. These were the material terms or the essentialia of the contract that would form the basis of a binding agreement and would give it legal force and effect.
With regard to signatures, Section 13 of the ECTA differentiates instances in which the signature is prescribed by law and those in which the requirement of a signature is imposed by the parties themselves.
In the absence of an agreement, ‘an expression of intent or statement’ will have legal force and effect even if ‘it is not evidenced by an electronic signature but is evidenced by other means from which such person’s intent or other statement can be inferred’.
Since this was not an agreement that required a signature by law, and there was no indication by either party that a signature was needed to formalise the agreement, or that those messages simply manifested a discussion that was to be captured in a written agreement, the conclusion was ineluctable that the text messages constituted an electronic transaction which was of legal force and effect.
As there were no dispute about the identity of the parties or the content of the exchange of the messages, a valid and binding agreement to settle Mr. Mthethwa’s dispute with Baroka was created by electronic communications between Mr. Van Gaalen, representing Mr Mthethwa, and Mr. Mphahlele, the chairman of Baroka, and this had legal force and effect.
It is clear from the matter quoted above that an agreement entered into between parties on WhatsApp will have legal force and effect if it contains the relevant essentialia of a valid agreement. Parties should therefore be cautious before making final decisions on electronic platforms such as WhatsApp as it can have severe repercussions.