The use of email in contract negotiations
Contents |
[edit] Introduction
Recent case law has, once again, revealed the dangers of protracted email correspondence creating an unintended contractual relationship between two parties.
Email is ubiquitous and is used increasingly as a means to convey 'pre-contract' requirements and terms between parties who envisage entering into a formal contractual relationship. However, unless care is taken it is possible for a contract to be formed between the parties based upon that email correspondence.
In law, a contract does not need to be signed for it to be enforceable. A contract can be verbal. Even where a contract does need to be signed, it does not necessarily mean signature with a pen. And the word 'signature' has been sufficiently widely interpreted to include e-mail names or even nicknames.
In modern email practice, where the use of the 'reply' or 'reply to all' options is common, users can find themselves in a situation where a long chain of correspondence is created that can be construed as forming the basis of a binding contract. This is amply demonstrated by the case of Golden Ocean Group v Salgoacar Mining Industries (2012), briefly described below:
[edit] The case
The Court of Appeal considered whether a chain of emails constituted an agreement ‘in writing’ between the parties, Golden Ocean Group (GOG) the owners of a vessel that it offered to hire to a subsidiary of Salgaocar Mining Industries (SMI) who would act as guarantor of their subsidiary.
Negotiations were mostly conducted by email. The purported guarantee was not discussed in any depth, but was referred to in the description of the charterer. But the final emails exchanged on behalf of the parties made no reference to SMI’s guarantee and no formal document was drawn up.
Shortly before the vessel was due to be delivered, SMI’s subsidiary denied the existence of a charter and said it was unable to proceed. GOG sought to bring proceedings against SMI as the guarantor. SMI contended the guarantee was unenforceable because it was not in writing and not signed by the guarantor.
The court disagreed and held the requirements necessary for a contract of guarantee had been satisfied. It found an exchange of emails could constitute an agreement in writing provided the transacting parties intended to be bound by it. The lack of a signature was not a barrier.
[edit] Preventative Measures
Conducting negotiations by email may expose a party to the possibility of unintentionally entering into an agreement. Parties should make it clear when negotiating in writing that they only intend to be contractually bound when a formal contract is drawn up and executed in a specified form. In the meantime all email should be marked 'subject to contract'. Even this is not foolproof but it should provide a measure of protection in the majority of cases.
It is also wise to avoid long strings of email correspondence.
[edit] Related articles on Designing Buildings Wiki
- Alternative dispute resolution.
- Contract.
- Contract claims.
- Causes of construction disputes.
- Email overload.
- Writing technique.
[edit] External references
- See the decision in full Golden Ocean Group v Salgoacar Mining Industries.
Featured articles and news
Passivhaus social homes benefit from heat pump service
Sixteen new homes designed and built to achieve Passivhaus constructed in Dumfries & Galloway.
CABE Publishes Results of 2025 Building Control Survey
Concern over lack of understanding of how roles have changed since the introduction of the BSA 2022.
British Architectural Sculpture 1851-1951
A rich heritage of decorative and figurative sculpture. Book review.
A programme to tackle the lack of diversity.
Independent Building Control review panel
Five members of the newly established, Grenfell Tower Inquiry recommended, panel appointed.
Welsh Recharging Electrical Skills Charter progresses
ECA progressing on the ‘asks’ of the Recharging Electrical Skills Charter at the Senedd in Wales.
A brief history from 1890s to 2020s.
CIOB and CORBON combine forces
To elevate professional standards in Nigeria’s construction industry.
Amendment to the GB Energy Bill welcomed by ECA
Move prevents nationally-owned energy company from investing in solar panels produced by modern slavery.
Gregor Harvie argues that AI is state-sanctioned theft of IP.
Heat pumps, vehicle chargers and heating appliances must be sold with smart functionality.
Experimental AI housing target help for councils
Experimental AI could help councils meet housing targets by digitising records.
New-style degrees set for reformed ARB accreditation
Following the ARB Tomorrow's Architects competency outcomes for Architects.
BSRIA Occupant Wellbeing survey BOW
Occupant satisfaction and wellbeing tool inc. physical environment, indoor facilities, functionality and accessibility.
Preserving, waterproofing and decorating buildings.