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.