The use of email in contract negotiations
Contents |
[edit] Introduction
Recent case law has, once again, revealed the dangers of protracted email correspondence creating an unintended contractual relationship between two parties.
Email is ubiquitous and is used increasingly as a means to convey 'pre-contract' requirements and terms between parties who envisage entering into a formal contractual relationship. However, unless care is taken it is possible for a contract to be formed between the parties based upon that email correspondence.
In law, a contract does not need to be signed for it to be enforceable. A contract can be verbal. Even where a contract does need to be signed, it does not necessarily mean signature with a pen. And the word 'signature' has been sufficiently widely interpreted to include e-mail names or even nicknames.
In modern email practice, where the use of the 'reply' or 'reply to all' options is common, users can find themselves in a situation where a long chain of correspondence is created that can be construed as forming the basis of a binding contract. This is amply demonstrated by the case of Golden Ocean Group v Salgoacar Mining Industries (2012), briefly described below:
[edit] The case
The Court of Appeal considered whether a chain of emails constituted an agreement ‘in writing’ between the parties, Golden Ocean Group (GOG) the owners of a vessel that it offered to hire to a subsidiary of Salgaocar Mining Industries (SMI) who would act as guarantor of their subsidiary.
Negotiations were mostly conducted by email. The purported guarantee was not discussed in any depth, but was referred to in the description of the charterer. But the final emails exchanged on behalf of the parties made no reference to SMI’s guarantee and no formal document was drawn up.
Shortly before the vessel was due to be delivered, SMI’s subsidiary denied the existence of a charter and said it was unable to proceed. GOG sought to bring proceedings against SMI as the guarantor. SMI contended the guarantee was unenforceable because it was not in writing and not signed by the guarantor.
The court disagreed and held the requirements necessary for a contract of guarantee had been satisfied. It found an exchange of emails could constitute an agreement in writing provided the transacting parties intended to be bound by it. The lack of a signature was not a barrier.
[edit] Preventative Measures
Conducting negotiations by email may expose a party to the possibility of unintentionally entering into an agreement. Parties should make it clear when negotiating in writing that they only intend to be contractually bound when a formal contract is drawn up and executed in a specified form. In the meantime all email should be marked 'subject to contract'. Even this is not foolproof but it should provide a measure of protection in the majority of cases.
It is also wise to avoid long strings of email correspondence.
[edit] Related articles on Designing Buildings Wiki
- Alternative dispute resolution.
- Contract.
- Contract claims.
- Causes of construction disputes.
- Email overload.
- Writing technique.
[edit] External references
- See the decision in full Golden Ocean Group v Salgoacar Mining Industries.
Featured articles and news
Not buildings. Happy holiday from DB.
Future Homes Standard: Industry calls for more ambition
As the Government FHS consultation finally closes.
Improving government projects with data and AI
Enabling better outcomes, efficient modern delivery and influential leadership on government projects.
BSRIA Living Laboratory Innovation Challenge
Final days for submission, closing March 29.
Windows, their frames, forms, factors and functions.
The hidden subtleties of U-Value calculations
Different contexts and what to include as variables.
A brief run down with related articles.
Electrical sector calls for safer public EV charge points
Serious concerns about electrical safety in the public domain.
Building Blocks manifesto presented to parliament
Architects Declare call in for support of five critical policies.
The four elements of project management with APM
Analysis, expectations, collaborative communication and partnerships.
City of London launches Heritage Building Retrofit Toolkit
Empowering owners to initiate necessary adaptations.
Guidance on RAAC in listed buildings
Published by Purcell, endorsed by IHBC, SPAB and C20.
Learning from the past.
Reluctance to hire people with criminal convictions revealed
Employing People with Criminal Convictions Report.
Tackling unconscious bias; Women's History Month
Personal reflections, as the last week of March approaches.