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Court gives further guidance on when emails can create contracts- 27/01/2012
Those negotiating contracts by email will benefit from guidance given in a recent High Court decision on when an exchange of emails can inadvertently create a legally binding agreement.
UK property law says that a contract for the sale of land, or the grant of a mortgage or charge over land, by the owner is not enforceable unless it:
- Is in writing.
- Contains all the terms agreed between the parties to it.
- Is signed by them.
The liquidator of a company argued that a mortgage created by the company in favour of the sister of one of the owners of the company was invalid because it was a ‘preference’ - a transaction that deliberately and wrongly put the sister in a better position than other creditors, and that had taken place within a certain time frame before the liquidation. The sister argued that the mortgage was set out in a series of email exchanges that were concluded outside the time frame and was therefore valid.
The High Court found in favour of the liquidator because, it said, the emails did not contain all the terms agreed. However, it gave the following useful guidance about contracts concluded by email:
- An exchange of emails could amount to a contract in writing.
- If a sender included his or her name at the end of an email, that could amount to ‘signing’ it.
However, the court drew a distinction between a string of emails – where the recipient had, in each case, used the ‘reply’ button when responding rather than creating a new, stand-alone email each time. A string of emails was more likely to amount to a contract than a number of stand-alone emails, even if the stand-alone emails are clearly related and may even cross-refer to each other.
It also seemed to endorse previous court decisions that drew a distinction between the automatic inclusion of the sender’s name in the header of, or the ‘From’ part of the email, and the deliberate, conscious addition of their name by the sender at the end of the main body of their email. The latter was more likely to amount to a signature than the former.
Recommendation
Those using email to negotiate legally binding agreements should ensure that they do not inadvertently create a legally binding agreement in their emails. If in doubt, take legal advice.
Case ref: Green (Liquidator of Stealth Construction Limited) -v- Ireland [2011] EWHC 1305
For further guidance in relation to online issues, please contact a member of our Intellectual Property, Technology and Media Law Team.