Any astute attorney, when drafting a contract, will be very careful to ensure that the contract meets two essential standards: firstly, that the contract clearly represents the intentions of the contracting parties involved and, secondly, that the contract pronounces the fact that such intentions coincide and are unequivocally agreed between the parties. A dispute relating to the latter standard would be the last thing any of the parties would want and therefore the specific language and base content included in the contract should be considered with a great deal of thought. The non-variation clause is an oft over-looked and crucial part of this base content.
A contract initiates a relationship between parties and creates rights and obligations enforced by law. Over time, as we know, circumstances and the parties’ desires and needs change and this often leads to parties wanting (or being forced) to amend, vary or alter some or all of the original contractual terms. The non-variation clause is one clause which attempts to protect the agreed terms of a contract from being amended, varied, altered or cancelled unfairly, fraudulently or without sufficient clarity. Although the non-variation clause may seem fairly straightforward, any attorney will tell you that most contracting parties are entirely aloof to its importance and unaware of the implications of not complying with its prescribed formalities.
A typical non-variation clause would restrict amendments, variations or alterations, as follows:
“No amendment, variation or alteration of this agreement shall have any effect in law unless such amendment, variation or alteration is reduced to writing and signed by both parties”
The sanctity of the non-variation clause was confirmed in the well-known case of SA Sentrale Ko-Operatiewe Graanmaatskappy Bpk v Shifren, 1964 (4) SA 760 (A) (the Shifren case), where the Supreme Court of Appeal held that non-compliance with the non-variation clause would be “a striking deviation from the elementary and fundamental principle that contracts which are freely and in all seriousness concluded by competent parties, must be enforced in the public interest”. The Shifren principle (as it is known) entrenches the terms of a written contract against oral variation by the parties.
Our courts have, however, on some occasions ruled to the contrary of the Shifren principle, for example, where a party attempted to enforce the non-variation clause of the contract purely for vexatious or ulterior reasons, in contradiction to public policy.
Plain language and ECTA
Many a drafter would often assume that using plain language in a contract, including in the non-variation clause, would be sufficient to cover the most common risks, however this is very often not achieved. One could query what exactly does “reduced to writing” include? Does it include electronic mail or other electronic messages, such as SMSes? Does the word “sign” encompass an electronic signature? In this regard, the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”) is an important piece of legislation to consider when drafting not only the non-variation clause, but many other terms of the agreement as well.
It is common practice for parties in commercial dealings to attempt to alter terms of their contracts by electronic mail. ECTA recognises that any ‘data message’ (including electronic mail) will possess the same functionality and legal recognition as written documents if they are:
– generated, sent, received or stored by electronic means; and
– accessible in a manner usable for subsequent reference.
Considering the increasing volume of online commercial transactions and electronic communication in South Africa, modern legislation like ECTA should have an increasing influence on the base content of contracts which drafters often assume to be up to standard.
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”. Therefore, any electronic mark which is described or logically assumed to be the party’s signature will be considered in terms of ECTA as electronic signature on the document. An ‘advanced electronic signature’ is defined as an electronic signature which results from a process which has been accredited by the South African Accreditation Authority.
The legal technical aspect of the actual signing a contract is one matter which must be considered by the attorney or drafter, however, the relevance thereof becomes important when considering the language of the non-variation clause.
With that in mind, a well-structured non-variation clause is an essential clause of the contract and one must carefully consider the possible ways which the specific parties may like try amend, alter or vary the terms of the contract in future, and keep in mind the implications of developing law such as ECTA.
Points to consider
The following points should be noted when drafting the non-variation clause:
– define the phrase “in writing” in the contract to either specifically include or exclude data messages or other electronic forms as contemplated in ECTA;
– confirm that the term “signature” either includes or excludes any form of electronic signature as contemplated in ECTA;
– for avoidance of doubt, be clear to state that the parties or their authorised representatives shall be required to sign the written document which includes the amendments, alterations, variations or cancellation.
A more comprehensive non-variation clause could be stated as the following:
“No addition to, variation, or agreed cancellation of this Agreement shall be of any force or effect unless recorded in a written document and signed by or on behalf of the duly authorized representatives of both [all the] parties. For the purposes of this clause, a “written document” shall exclude any written document that is in the form, either wholly or partly, of a data message as defined in the Electronic Communications and Transactions Act 25 of 2002, and “signed” shall mean a signature executed by hand with a pen and without any electronic process or intervention.”
The content of the non-variation clause will depend on the parties’ circumstances and wishes.
The non-variation clause and the Shifren principle may seem restrictive on the parties who will be bound to adhere strictly to the terms of the contract in the absence of any written variation which is signed by both parties, however our courts are quite clear on the principle that the parties will be bound by what they agreed in the written contract, specifically when the contract included a non-variation clause, as this is in the interests public policy. After all, the Shifren principle remains in line with the values of our Constitution.
The ever-changing electronic environment has a strong influence on the way people do business and conduct their affairs generally, and so it has an (often underestimated) significant impact on the contracts governing their relationships. The base content of a contract, including the non-variation clause, should be carefully considered and no longer treated as a “one size fits all” part of the contract.