The recent High Court case of Beiber v Tethers has shown that email correspondence can form a binding contract, even if this is not intentional.
The case concerned the negotiation of a settlement agreement. The parties’ solicitors made various offers and counter offers by email to settle the case. The principal focus of these emails was the settlement figure itself, not the ancillary terms of the settlement.
A settlement figure was reached by an email exchange with the intention that this would subsequently be recorded in a Consent Order and approved by the Court. A delay ensued because the parties could not agree on the other terms of the Consent Order.
The Court had to decide whether the terms of the settlement outlined in the email exchange constituted a binding contract or whether the agreement of a settlement figure was just the first part of a two stage process whereby a more “conventional” written settlement agreement would also have to be agreed and signed.
The Court took an objective approach in determining whether the parties had reached an agreement by considering the whole course of the parties’ negotiations and determined that they had concluded an agreement on the essential terms via email. The terms agreed in the email exchange had not been made “subject to contract” (either expressly or impliedly). The Judge quoted case law to demonstrate that where there is a proviso to this effect, no binding agreement will be formed until a formal written agreement has been signed.
The case highlights the fact that only certain types of contract e.g. deeds and contracts over land must be contained in a formal written document. Parties therefore need to be particularly careful when negotiating terms over email and be aware that binding agreements can be formed at the click of a mouse. Best practice is to mark correspondence with a clear statement that any terms contained within are “subject to contract.”
If you would like to discuss this further or find out more about how the Commercial & Technology team can help your business please contact Sarah Williamson on 0118 952 7247 or email [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.