By Grant Esterhuizen, Lester Aldridge LLP
It is generally accepted in today’s world that a contract can be created via email. However, businesses need to be aware that a strand of case law is developing which may result in certain emails being construed as a binding contract which could unwittingly commit a business, just by clicking the 'send' button.
Have you ever considered that typing your name at the end of an email could constitute a signature, which in turn could make your business contractually bound by the contents of the email?
A recent Court of Appeal decision suggests that this is possible. In another recent case it was noted that where the main terms of an agreement are agreed in email form, the fact an email states that a “formal contract” is still to follow, may not be sufficient to render the email “subject to contract”. The word “formal” may even indicate that any further agreement is a mere formality, as the substance has already been agreed by the parties.
It is common for many businesses to negotiate with others via email simply by clicking the “reply” button and creating a string of emails. The Courts have indicated that a string of emails constitutes a single document, which is the electronic equivalent of a hard copy letter signed by both the sender and the recipient. This may have the inadvertent effect that businesses become bound to a contract, where all the terms are agreed in numerous emails sent over numerous weeks.
As a result of these cases, businesses need to consider what they might be unwittingly agreeing to via email. The safest course of action would be to avoid long strings of emails which could be construed as one document; mark emails “subject to contract”; and clearly and expressly state in the main body of the email that there is no intention to be legally bound until a long form agreement is entered into.
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