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Friday, 03 July 2015

Hi, this email looks casual but it’s a binding contract. Regards...

The law of contract is something which takes years to understand, but most of us have a fair idea of what is needed to conduct business in terms of a promise to do something in return for payment.

Email photo

A common misconception is that contracts have to be in writing. While certain contracts, such as for the sale of land, must be in writing, oral contracts cover many everyday events. In fact, a contract can be formed from just about anything which signals that both parties intend to abide by whatever it is they have agreed. So, oral contracts are adequate, but you will easily see the problem is with evidence – how to prove what was said.

Solicitors like written contracts because it means there is less room to wriggle. Long ago there were personal seals and wax for the wealthy, while the uneducated left their mark, often an “X”. Sometimes signatures were witnessed to help reduce the risk of falsification.

Today, the most common form of signature is a manuscript, stylised version of a person’s name; however courts also recognise the printing of a company name, a rubber stamp, typewritten and printed signatures. Add to this the most common form of “Electronic Signature”, ie the act of typing your name into an electronic document.

Most of us use computers and email on a daily basis and, as such, will use an Electronic Signature.

There have been a number of legal cases recently, relating to the question of whether an email or a string of emails, and the typing of a name at the bottom of emails can create a legally binding contract.

In March, the second highest appellate Court in England considered this very question. It found that a contract could be formed even when it was not contained in one single document, but in a series of documents and emails.

In this case, one of the emails forming the contract was very informally signed off at the bottom by a shortened version of the writer’s first name. It was found that, despite the informality, this act of signing the email did in fact provide the validity and authority required to form the contract. Business agreements usually follow negotiation of key terms. Increasingly these key terms are being discussed by email correspondence – mainly due to its instantaneous and easily accessible nature. These discussions must be given careful thought, because these discussions can inadvertently give rise to and form the binding contract itself.

If when negotiating a deal, you wish only to assume obligation and be bound once the key terms have been agreed, and you have signed a formal written agreement, you must make this clear in the preceding negotiations. If pre-contractual negotiations are intended to be just that, legal guidance should be sought to ensure that a contract is not unwittingly entered into.

English law is adaptable, Courts have and will find ways to make traditional legal principles fit into modern communications and the online world, and it is not beyond reach to think that in the future even contracts for the sale of land could be concluded via email.

What can you do? A good start would be to mark any email which may give rise to contractual obligations “Subject to Contract”. The main message, however, is to treat email just as seriously and carefully as you would “hard copy letters” letters.


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