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13th May 2014

Even emails and text messaging can constitute a legally binding agreement!

13th May 2014

Even emails and text messaging can constitute a legally binding agreement!

James McNeil

Posted: 13th May 2014

T: 023 8048 2108

E: Email Me

As lawyers, one of the repeated misconceptions we see is that clients tend to assume that provided they haven’t signed a document, there’s no way they can be bound by it. Indeed, clients are often quite surprised, and, in some cases alarmed, to learn that seemingly casual email conversations, which (even) contain text speak, can be sufficient to create a legally binding contract or even a guarantee.

This has been confirmed recently in the case of Golden Ocean Group Ltd v Sagacor Mining Industries PVT Ltd and another [2012] EWCA Civ 265. Here, the Court of Appeal confirmed that an enforceable guarantee can be created by a series of emails authenticated by the online signature of the guarantor. The parties exchanged a series of emails where they agreed a series of amendments to a standard-form document. The language used was far from formal legalese and it even included text speak. At the end of the negotiations, one of the parties asked the other to provide a full and complete signed agreement incorporating all the key terms. In fact, this document was never drafted (never mind signed), but the court confirmed that the parties intended to be bound by the terms which they informally negotiated and agreed in the emails. The court went further and said that if a person puts his name on an email to indicate that it comes with his authority and he takes responsibility for its contents, it will be deemed to be a signature for the purpose of section 4 of the Statute of Frauds 1677. This is the case even where only the first name, initials or perhaps even a nickname is used.

The clear and unambiguous lesson is that if you do not want to create an enforceable agreement or guarantee while negotiating in writing, it’s important to make it clear that you are negotiating ‘subject to contract’ and do not intend to be bound until a formal document is executed.

As more and more people are negotiating documents via email on their phones or tablets, perhaps it’s time to include a line in your automatic signature stating ‘all negotiations are subject to contract’, however this probably wouldn’t be sufficient if you indicate in the body of the email that you intend to be bound by the conversation.

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10 Comments

  1. Tracey McCallum

    My mum gave £1000 deposit for a house which was supposed to be completed within 2 weeks. The agent and builder knew her house wasn’t even on market so would never be completed in that time. 6 weeks later and he took a deposit from someone else and pulled out from my mums purchase just as she received offer for her house. Resulting in mum not going ahead with selling as the house she wanted was being sold to someone else. Since then we have received countless text messages stating builder would refund the deposit out of common decency. 5 months later still not happened. Does my mum have a right to hermkney back. Note the house is back on market as the other purchaser fell through.

    Reply
    • Paris Smith

      If the house being built was being developed with the benefit of one of the leading house warranties (such as from the NHBC) then the builders conduct will be governed by the Consumer Code for Home Builders which includes requirements for how home builders should deal with any deposits taken before contracts are exchanged. Advice on the Code and how to make a complaint can be found by following this link: http://consumercodeforhomebuilders.com/homeowners/ . If the builder is not governed by the code then the matter is purely one of contract and your mother may need to obtain specific legal advice on the terms of the agreement that she entered into and whether she can get out of it. It would be difficult to get out of the agreement simply by saying that the builder should have known it was never going to be completed in time if the reason for that was entirely due to your Mum not having the finance but in order to advise with any certainty it would be necessary for a lawyer to go through the full history of the matter. So next stop probably needs to be the Consumer Code website and I hope that the complaints procedure offered there does the trick.

      David Eminton
      LLP Partner and Head of Dispute Resolution Team

      Reply
  2. Ben

    We put a metal fence on ebay. One guy contacted and offered £1500 for it so the manager agreed and ended the auction and the guy said he could pick it up in the next 2 weeks. My manager text messaged him about the fence and payment but received no reply. In the meantime someone else offered £2000 for it and said they could collect the next day. As he had no reply or deposit from the other buyer he accepted it and the guys took it. The original buyer now claims he has a legally binding contract with us and will bill us for his costs. I can’t imagine any truth to this claim as he paid no deposit and then also did not reply to my manager’s message about payment/still wanting it.

    Reply
  3. Paris Smith

    Ben,

    A basic binding contract must comprise of four key elements: there must be an offer, acceptance of this offer, consideration and the intention by both parties to create legal relations.

    An offer was made by an individual to purchase the fence and your manager accepted this offer in consideration for the future payment of £1,500. There was also an intention by both parties to create a legal contract as it would appear that the agreement was made in a commercial context. Therefore, based on the facts you have provided us with, all four key elements of a contract were satisfied and a binding contract was formed. It was also an agreed term of the contract that he would pick the fence up within the next two weeks and presumably pay for this upon collection.

    You have mentioned that a deposit was not paid. If this was not a specified term of the original agreement then it is likely that a valid claim could be made by this individual. However, if your manager specified that a deposit was a term of the agreement then it could be argued that the individual breached the contract by non-payment of the deposit and that your manager was therefore entitled to terminate the contract.

    Reply
  4. Martin

    Hi

    In regards to a business lease sale we were made an offer by a prospective buyer and this offer was accepted via email and although we engaged our solicitor within a week of the email below, no contract was signed within the two months of the process going through. Unfortunately very near to completion the buyers met the Landlord who stated that he wanted to increase the rent this year and in two years time. The completion date came and went and a week later the buyers pulled out stating that the increase in rent was the problem. No negotiation or anything. Our solicitors have offered no assistance only to put the business back on the market. During the two month period we have turned away eleven inquiries for the business and a cash offer also. The email is detailed below please not all A3 and premises licence consent was supplied to the buyers solicitor.

    We would like to put forward a formal offer to purchase XXXXX for the sum of XXXXX which includes all current fixtures and fittings and all connected utilities in a good state of working order.

    The above is subject to having the correct consents for restaurant (A3) use and premise license as well as no unforeseen problems or circumstances we cannot solve in a reasonable matter found by our solicitors and within the current lease to effectively run our business.

    Reply
    • Paris Smith

      Your email query has been referred to me.

      Although emails can be binding this is very rarely the case where the sale of land (including leases of land/buildings) is concerned as the law requires certain formalities to be followed including the signing and witnessing of documents.

      I am afraid this sounds as if you have just been let down by your purchasers. That is the risk just the same as happens when buying and selling a house I am afraid.

      Regards
      David Eminton

      Reply
  5. Jen

    My ex-partner recently contacted me by email offering a lump sum in full and final settlement of maintenance for our son.I accepted this and requested he pay within 7 days.He told me that he would have the necessary documents drawn up by his solicitor and they would pay the lump sum on receipt of the papers signed by me. I agreed.He is now saying he can’t pay it because his solicitor has told him that he can only pay a lump sum once a year and a signed document by me would not stand up in court and I could request further money in a year’s time.I told him that I would sign a document stating that I would not ask for more money but he is now refusing to pay the lump sum. Is the offer by him and acceptance by me via email legal binding?

    Reply
    • Paris Smith

      Dear Jen

      Thank you for your enquiry. Please follow this link to our Family page on our website. If you would like to speak to someone about your situation please contact one of our lawyers.

      Reply
  6. cody

    Is it a binding contract if a per son agrees to pay a said amount through text messaging. If price, time of payment expected, and agreement was set. Needless to say sold a vehicle to family member for said price, offered to buy and began driving. Vehicle broke down and was abandoned but was still in my name, so i had picked it up then sold it again to another individual. Is the family member still reliable to finish paying the initial balance that was negotiated. Also if same individual offered to buy a replacement vehicle for said price but has not made a payment, is there a case there as well. Needless to say there is amount owed on 2 vehicles but only half of first one has been paid.

    Reply

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James McNeil

Posted: 13th May 2014

T: 023 8048 2108

E: Email Me