Businesses and consumers tend to assume that if they haven’t signed a contract or legal document, they have not formed a legally binding agreement. However, this isn’t necessarily true. There is no requirement for an agreement to be in writing to make it binding upon the parties and even where the specifics of an agreement have not been reduced to writing, the parties to those discussions may still find themselves in contract.
In UK law, for a contract to be legally binding, there are 5 elements that need to be present:
- There needs to be an offer;
- An acceptance of that offer;
- Consideration;
- An intention to create legal relations; and
- Certainty as to what the parties have agreed.
The law doesn’t state the form of communication that has to take place for an agreement to have been formed, which in essence means that any discussion – be it written or verbal – that includes these elements, can be deemed legally binding. Furthermore, this applies across all types of negotiation between both individuals, companies or both.
Due to the increasing reliance of businesses on email communication over the past 20 years, we have seen a growing number of clients being caught out – facing legal action due to the contents of their emails. The enforceability of an agreement depends upon the context and what exactly has been said during the discussions.
From negotiating the terms of a service to reaching an agreement on the cost of the supply of goods and services, there is a growing volume of case law which sets a clear precedent – emails can be legally binding. The court has stipulated that so long as the five elements to a legally binding contract are present within an email chain, where a person puts their name on an email to indicate that it comes with their authority (even where only the first name, initials or perhaps even a nickname is used), it will be deemed to be a signature under law.
It is worthwhile pointing out that email contracts can be formed not only when negotiating a new agreement, but also when making variations to an existing contract or agreement. Sometimes, the terms of an agreement are discussed over email with the intention of being included in a formal contract at a later date and regardless of whether or not that contract is ever written, the terms that were agreed between the parties can be enforced.
Due to the increasing level of litigation in this area, companies will often include a line in their automatic signature stating ‘all negotiations are subject to contract’. However, if a matter ever did reach court, it is unlikely that this alone would form a sufficient defence.
In order to avoid being bound by the terms of a negotiation, it is important that it is made clear that you are negotiating ‘subject to contract’ and do not intend to be bound until a formal document is executed.
If you are facing a dispute with another party that is based on an informal contract of any kind – be it by email, text message or otherwise – it is important to seek legal advice. The team at O’Donnell Solicitors will be able to look at the evidence available and advise you on the best way forward.
To access our Dispute Resolution services please contact Suzzanne Gardener or James O’Donnell on 01457 761 320 or email Suzzanne Gardener at suzzanne@odonnellsolicitors.co.uk or James O’Donnell at james@odonnellsolicitors.co.uk.
