3rd February 2011

Unwittingly creating contracts by E mail


3rd February 2011

Unwittingly creating contracts by E mail

The case of Nicholas Prestige Homes v Neal provides a stark warning of how easy it is for a contract to be created following an exchange of what might seem, on the face of it, a quite innocent exchange of E mail correspondence.

The case concerned the sale of a property which was being marketed on a multi-agency basis. Nicholas Prestige Homes (a firm of estate agents) sent an email to the Seller indicating their understanding that they would be appointed on a multi-agency basis until 31 December 2007.  After that date Nicholas Prestige Homes would be sole agents.

Unwittingly Creating Contracts by E mail

The E mail in question was accompanied by a copy of the sole and multiple agency terms of the estate agents.  These terms, as is fairly usual, provide that if any time during the subsistence of a contract, contracts for the sale of the property were exchanged with a buyer introduced by Nicholas Prestige Homes, the agency fee would be payable.

The Seller sent an E mail in response which stated “that’s fine, look forward to viewings.”

The property was ultimately sold through a third party estate agency but during the period in which the original E mail from Nicholas Prestige Homes envisaged that a sole agency agreement would be in existence.

Nicholas Prestige Homes commenced proceedings to claim an agency fee and the decision of the judge at first instance was appealed to the Court of Appeal.

The Court of Appeal upheld the decision of the judge that a contract had been created by email correspondence.  Nicholas Prestige Homes were awarded damages for the lost opportunity of selling the property (the Court having found that if a third party agent had not been appointed Nicholas Prestige Homes themselves would have sold the property to the buyer).

This case emphasises the importance of both documenting clearly and accurately contractual arrangements.  It also emphasises the importance of taking extreme care when dealing with suppliers of goods and services by E mail (and underlines the risks described in the blog recently posted relating to Heads of Terms).  An extremely brief email (the operative part in this case was only six words long) may create a contract with the inevitable obligations and liabilities which flow from it.

If you require any further information or wish to discuss any of the issues raised by this blog, please email:  mark.withers@parissmith.co.uk.