7th Dec 2016
When is an email a contract and no longer simply a series of communications?
Emails between two parties, without any formal document being signed, can in themselves, be considered a contract, according to court rulings on the UK law section 4 of the Statute of Frauds 1677 (The Act).
In Golden Ocean Group Limited v Salgaocar Mining Industries PVT Ltd and another  EWCA Civ 265 the Court of Appeal had to consider a chain of emails between Golden Ocean Group and Trustworth Shipping by which they agreed the charter of a vessel. In the course of the email correspondence reference was made to the deal being “fully guaranteed by” an affiliate of Trustworth, Salgaocar Mining Industries Ltd (“SMI”).
The court found that the exchange of a number of electronic messages could lead to the conclusion of an agreement in writing for the purposes of The Act, without the need for all operative terms to be contained within a single or limited number of documents. The court also found the “signature” requirement was satisfied. The email in which the guarantee was concluded simply contained the name “Guy” (being from Guy Hindley, SMI’s broker) and SMI argued that this was only a “salutation, and moreover one delivered in a “matey” or familiar fashion”.
However, the Court considered that “brokers may communicate with one another in a familiar manner but that does not detract from the seriousness of the business they are conducting”. Mr Hindley had added his name to indicate that it came with his authority and he took responsibility for its contents. The Court said it had no doubt that this was sufficient to meet the underlying requirement of the Statute of Frauds, namely to authenticate the contents of the guarantee.
This case illustrates that relatively informal forms of communication, such as a string of emails, will suffice as a contract, provided that the parties intend to be bound by the outcome.
Parties should exercise caution when conducting negotiations by email to avoid entering into binding obligations. During such negotiations parties should make clear on all correspondence that negotiations are subject to contract and that the parties do not intend to be bound until a formal document is executed.
The Negotiation Lab is developing a new course on Negotiating through Email. We would very much like to hear about your negotiation experiences over the Internet to build on our body of knowledge.