Before you press ‘send’ think about the consequences!  It is easier than you think to unwittingly create a binding contract through simple email correspondence.

Electronic contracts in Ireland are governed by the Electronic Commerce Act, 2000 but a recent English case of Golden Ocean Group v Salgoacar Mining Industries (2011) should serve as a stark reminder to those who are negotiating project agreements such as appointments, warranties, guarantee etc. and other contracts via email that it is possible to create binding obligations even in the absence of a formally executed document. 

In this case the Commercial Court applied a “good commercial sense” test to consider whether an contract had been formed once the requirements of offer, counter offer and final acceptance were satisfied across the email correspondences in question.  The Court also considered the UK Statute of Frauds requirement that all contracts must be (a) signed and (b) in writing to determine whether a formal agreement had been ‘executed’.

(a) Signed:

‘Signing’ does not necessarily mean by hand – a person’s email signature or electronic mark would suffice once it is voluntarily attached to a document.  Consequently anything from an automatically generated email signature to a simple one letter initial (or even nickname) at the foot of an email could potentially satisfy this requirement. 

(b) In Writing:

The Court here decided that the content of the chain of emails was sufficient to create a memorandum or note of the agreement ‘in writing’ even if not physically printed.  Also, it is not necessary for all of the documents comprising the ‘contract’ to be in the one place – numerous emails over the course of a period of time can create a binding agreement.

“Subject to Contract” – Possible Prevention?

In order to avoid the pitfalls noted above the correspondence should be clearly marked ‘subject to contract’.  However, this is not an absolute protection as part performance of the contract prior to settlement of the formal terms could overturn the presumption that no contract has been formed either in whole or part.

Contributed by Hugh Cummins, Cassandra Byrne and Jarleth Heneghan.