Can you create a contract by email?
- AuthorSusie Mortonson
The traditional view of ‘a contract’ tends to be that reams of paper with “wet ink” signatures, amongst other formalities, are required in order for the contract to be valid.
However, this is far from the case as the courts have ruled that a contract can be created through a simple, and brief, exchange of emails. We are probably all familiar with ‘ticking the box’ on a website which, although we may not appreciate it, creates a contract.
While there are exceptions (like dealing with land or intellectual property) most contracts can be very informal and do not even need to be in writing. The main benefit of having them in writing is obviously to evidence what you have actually agreed. With the ease and speed of negotiations conducted by email, this is increasingly becoming preferred to the formal approach of paper contracts.
For most types of contract to be binding it only needs to meet only a few simple requirements:
- there needs to be an offer to do something or sell something;
- that offer has to be accepted;
- the parties have to intend for the contract to ‘create legal relations’ – in other words, they need to intend that the contract will be binding;
- both parties have to have ‘capacity’ to enter into the contract (i.e. be of legal age and of sound mind); and
- there has to be some consideration – i.e. there has to be some commercial benefit to being in the contract otherwise it is likely to be a ‘gift’ and, therefore, not a contract.
In a recent court case, Athena Brands Ltd v Superdrug Stores plc (2019), a Senior Brand Manager at Athena emailed a Buyer at Superdrug requesting confirmation of whether Superdrug would be committing to a minimum yearly supply of products over a 12 month period.
Despite the Buyer at Superdrug having no authority to bind their company under Superdrug’s internal policies, the court found that the email response “please go ahead” from the Buyer at Superdrug constituted a contract. It met all of the requirements above.
This is a stark reminder that:
Even though your employees may not be the senior decision makers, and your internal policies may stipulate that they cannot make such a decision, they should be aware that they still have the capability to bind the company, particularly if their job title or role would suggest to the outside world that they might have such authority; and
If you intend to create a contractual relationship with another party, you must ensure that it is properly documented and the agreement that you intend to enter into is clearly evidenced in the form of an agreement so that there can be no uncertainly should you need to rely on the agreement in the event of a dispute. The phrase ‘subject to contract’ is often used in negotiations to show that there is not an intention to create legal relations yet.
If you have any concerns that your current, or future, arrangements may be affected by this, please contact our Corporate and Commercial team for advice on contractual agreements.