Conversations and agreements – when are they binding?

Conversations and agreements – when are they binding?


A major cause of disputes occurs over the content of agreements. Sometimes these disputes are a result of poorly drafted contracts; content and deliverables not being adequately described; or as a result of variations to the original contract. Another source of dispute is verbal contracts and conversations where the parties dispute the content of what was agreed upon.

Both verbal and written contracts are, in general, legally binding. However, sometimes writing is unavoidable and is a formality for the contract to be valid, for example: the sale of immovable property, antenuptial contracts, wills and executory donations. Along with the preceding list, all documents that have to be submitted to and registered with the Deeds Office must also be set out in writing.

Written contracts have various advantages, among others, they:

  • ensure that both parties are fully aware of the contents of their agreement;
  • create transparency between the parties;
  • create and maintain trust between parties;
  • can stipulate formalities that must be met for validity; and
  • serve to avoid unnecessary disputes.

Electronic communication

The Electronic Communications and Transactions Act 25 of 2002 (“ECTA“) recognises electronic messages (or “data messages“) as the functional equivalent of writing, meaning that data messages have the same legal validity as content written on paper. This results in any formality requiring writing to be met when the information is in the form of a data message. ECTA, however, imposes a requirement of accessibility to accompany data messages by requiring data messages to be easily accessible to the parties thereto.

The validity of electronic messages was confirmed by the Supreme Court of Appeal (“SCA“) in November 2014 in the case of Spring Forest Trading v Wilberry (Pty) Ltd. The court held that variations to an agreement between the parties made via email were binding – the arguments put forth were that the variation to the agreement was required to be made in writing and signed by both parties in order for it to be valid and that this requirement had not been met because the variations were only discussed and agreed to via email. The court stated that the email signatures at the bottom of the emails amount to signatures and that the email messages constituted writing in terms of ECTA.


Written contracts are always recommended. The rationale being that oral agreements offer no objective or clear record of the details of the agreement and the specific terms are often difficult to establish when a dispute arises. Well drafted agreements should include useful information and guidance to the parties to ensure a fair and smooth resolution of disputes or disagreements. The guidance information should address when parties may cancel the agreement, what constitutes breach and how the breach should be remedied.

Written agreements should also set out that any changes to the agreement are not valid if they are not in writing (and signed by both parties) – which prevents disputes over any amended terms of the agreement. This also prevents quarrels of a “he said, she said” nature as everything has been recorded. As set out above, this can be done via email or other electronic messages, including Whatsapp, for example, however, the name of the sender must be signed at the end of the message for it to be valid.

It is important to understand that following the abovementioned judgment, parties to a contract should specifically refer to an “advanced electronic signature” – which is a special signature provided for in ECTA – being required to amend the agreement if the intention is for the usual email type correspondence not to effect an amendment to the agreement.

Remember, you could be bound to a contract where you have willingly signed it even if you have not yet read it.

Important take-aways

  • electronic communication is legally binding and is the equivalent of writing;
  • some agreements can only be altered if the variation is in writing and signed by both parties;
  • some agreements must be in writing and signed (and sometimes commissioned or notarised) in order to be valid and binding; and
  • oral agreements are binding (but not advised!).


In an effort to keep our clients well-informed and to eliminate their chances of finding themselves on the wrong side of the law, we have found it necessary to write an article on the registration requirements of Financial Service Providers (“FSPs”). This article is a brief summary which details when the Financial Advisory and Intermediary Services Act 37 of 2002 (“the Act”) would require a business organisation to obtain authorisation. In other words, when will a business be required to be registered or licensed as an FSP?

In order to operate as a FSP in South Africa, a business entity or individual must be issued with a licence in accordance with section 7(1) of the Act read with section 8 of the Act and may not act or offer to act as a FSP unless being issued with such a license. Section 8 sets out how an FSP should apply for a license.  The process includes submitting an application to the registrar of the Financial Services Board (“Registrar”) along with certain information to satisfy the “fit and proper requirements”. Once the application has been considered by the Registrar one of the following may result:

  • the application is granted as a result of the applicant or key individuals complying with the requirements of the Act; or
  • the application is refused if the Registrar is not satisfied that the applicant or its key individuals comply with the Act.

A successful application may be granted with accompanying conditions and restrictions. These conditions and restrictions will be included in the licence issued by the Registrar. Upon an application being successful the Registrar must issue the applicant with a licence authorising the applicant to act as an FSP and the number of copies of such licence as the applicant requests. This licence may however be withdrawn or amended after it has been issued upon application by the applicant or by the Registrar on its own initiative. Conditions and restrictions may also be amended or imposed should key individuals change after the licence has been issued. Should an application be refused the applicant must be notified by the Registrar and be provided with reasons for the refusal.

An FSP is defined in the Act as any person, other than a representative, who as a regular feature of the business of such person furnishes advice; furnishes advice and renders any intermediary service; or renders an intermediary service. In order to determine whether one qualifies as an FSP, it is necessary to examine the meanings of “advice” and “intermediary service”. The Act defines “advice” as any recommendation, guidance or proposal of a financial nature furnished by any means or medium, to any client or group of clients about the purchase of any financial product or investment in a financial product. Any recommendation, guidance or proposal of a financial nature “on the conclusion of any other transaction, including a loan or cession, aimed at the incurring of any liability or the acquisition of any right or benefit in respect of any financial product” is also considered to be “advice” for purposes of the Act. Intermediary service means any act performed by a person, excluding the rendering of advice, which results in the client entering into any transaction in respect of a financial product with a product supplier without dealing with the product supplier directly.

A “financial product”, as mentioned above, has been given a broad definition in the Act in order to provide extensive protection to consumers. Financial products include a wide array of products such as a participatory interest in one or more collective investment schemes; securities and instruments including shares in a company, debentures, money market instruments and any “securities” as defined in section 1 of the Financial Markets Act 19 of 2012; a health service benefit provided by a medical scheme and a benefit provided by a pension fund organisation or a friendly society.

Persons who offer advice and intermediary services are either a “key individual” or a “representative”. A representative is a person who is employed or mandated by a financial services company to render advisory or intermediary services to clients. They make recommendations and perform activities based on their judgement and lead clients to conclude transactions on financial products. A key individual is a natural person who manages and oversees the activities of a FSP and is responsible for ensuring the operational ability of the FSP.

As mentioned above, part of the registration process includes meeting certain criteria, referred to as “the fit and proper requirements”. The fit and proper requirements differ according to the category in which the Registrar classifies FSPs. Section 6A of the Act provides a non-exhaustive list of what the fit and proper requirements may include. These requirements include (a) the personal character qualities of honesty and integrity, (b) competence including experience, qualifications and knowledge tested by the Registrar through examinations, (c) operational ability, (d) financial soundness and (e) continuous professional development.

  • Personal character qualities of honesty and integrity

The requirement of honesty and integrity refers to the fact that within the 5 years preceding the date of appointment as an FSP, the applicant must not have been found guilty in any criminal proceeding or liable in any civil proceedings by a court of law. The applicant must also not have been found to act fraudulently, dishonestly, unprofessionally, dishonourably or to have breached a fiduciary duty.

  • Competence including experience, qualifications and knowledge tested by the Registrar through examinations

In order for an FSP to be declared competent the FSP must pass regulatory examinations applicable to the category in which the FSP falls and be found to have necessary minimum experience. The FSP must also have a relevant qualification as prescribed based on the category into which that FSP falls, and comply with Continuous Professional Development.

  • Operational ability

Operational ability requires the FSP to meet business requirements, to confirm competence requirements of the people working for the business and the key individual is required to meet requirements.

  • Financial soundness (of the business)

The business must not be an unrehabilitated insolvent, under liquidation or under provisional liquidation and the assets of the business must exceed its liabilities. The category in which the business falls will determine the liquid assets which the business will be required to maintain. The liquid assets will be equal to a portion of the annual expenditure of the business.

  • Continuous professional development

The category into which the business falls determines the amount of hours which must be completed by the business of professional development over a three year period. The activities which the business participates in may include courses, conferences and seminars as well as structured self-study programmes and workshops.

Exemptions in terms of the Act:

Certain persons and businesses are exempt from the requirements set out above. These exemptions apply to administrators of Pension Funds, administrators of Medical Schemes, managers of Collective Investment Schemes and an authorised user or clearing house under the Securities Services Act.


It is important to bear in mind that a person or business will be required to apply to register as an FSP in terms of the Act where that business or person supplies financial products including the furnishing of financial advice and the rendering of intermediary services. However, certain businesses and persons are exempt from application for a licence as set out in section 45 of the Act and mentioned briefly above. The application process involves various steps and persons and businesses applying to be an FSP must ensure that they meet the “fit and proper requirements” as set out in section 6A of the Act if they intend their application to be successful. It is important that the applicant be able to prove that the requirements are met and that where additional training is required, such as in section 6A(2)(e) which requires continuous professional development, that certificates and proof of such development are maintained.

Please don’t hesitate to contact us for assistance with the registration process or with any queries about whether you need to apply to be an FSP.