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emailed contracts

Can a contract be formed by an exchange of emails?

| Published on December 22, 2015

Globally, we send over 200 billion emails each day.  It is the most common form of correspondence in the business world.  However, many emails can be sent without careful consideration of their content.

In a number of recent cases, the High Court found a contract had been reached between two parties simply from an email exchange.

A legally enforceable contract is formed when there is an offer by one party, acceptance by the other and some form of consideration e.g. payment.  There must also be a mutual intention to create a legally binding arrangement and the terms of that arrangement must be certain.

However, in a large proportion of modern day business, parties begin to write a formal contract but start to perform the contract before all of the terms are fully agreed.  When something goes wrong the parties then seek to rely on the terms they believed applied and a dispute arises.  It is then for the Courts to decide when a binding agreement was finalised and what effect this has in the circumstances.

The Court’s approach is to ask: would an honest and reasonable businessman have concluded from the communication and conduct that all terms had been agreed and the parties had intended to enter into a binding agreement?

In the recent case of Mi-Space (UK) Ltd v Bridgwater Civil Engineering Limited [2015] EWHC 3360, the High Court found that marking correspondence “without prejudice” did not mean the same as an agreement being “subject to contract”, despite that being one party’s intention.

If a genuine attempt to settle a dispute is marked “without prejudice”, this prevents statements from being put before the Court as evidence against the party who made them.  Conversely, “subject to contract” means that some terms may be agreed upon, yet the matter is still under negotiation and thus you can withdraw from the agreement before it has been performed.

Top Tips to remember:

  • Be clear about what you have or have not agreed at the time of discussions.
  • If you are making a statement, make sure your intention behind this is clear.
  • If you are in the process of negotiating an agreement but it has yet to be finalised, mark the agreement “subject to contract”.
  • Agreements do not have to be in writing so take care when making verbal exchanges too.

For further advice please contact the commercial team at our offices in Poole on 01202 725400 or Dorchester on 01305 251007.