When An Email Becomes a Binding Contract
July 10, 2010
In the span of just a few years, e-mail has become a primary means of communication in the business world, surpassing the phone and the now almost outdated written fax. The ease, informality and rapid response of e-mail matches the hurried pace by which day-to-day business matters are resolved. As a result, it is easy to forget that in the right set of circumstances an e-mail can unexpectedly create a binding contract.
The art of negotiation usually follows established patterns: terms are outlined, terms rejected, the parties reach compromise, terms are agreed. Sometimes there is an expectation that the transaction will be detailed in a written contract to be signed by the parties. But what if all of the above takes place via e-mail? Does a written contract already exist? Sometimes, the answer is yes.
In recent years, a number of courts have been required to resolve this issue. In Stevens v. Publicis, S.A., 50 A.D.3d 253 (2008), Arthur Stevens sold his public relations firm and entered into an employment agreement to continue as CEO of the company. When financial problems surfaced, Stevens was removed as CEO. Stevens and Bob Bloom, a former executive of the purchaser, then began a series of e-mails exchanges that described the terms under which Stevens might continue to provide services to the purchaser. Stevens eventually sent an e-mail to Bloom stating, ""I accept your proposal…,"" to which Bloom replied ""I am thrilled with your decision."" Each of the e-mails of Stevens and Bloom included the typed name of the sender. Stevens sent an additional e-mail to the Chief Operating Officer of the purchaser to reaffirm his unconditional acceptance of the new terms of service.
In that case, the New York court held that the series of e-mails set forth the terms of the modification of Stevens' employment agreement and constituted a ""signed writing"". This satisfied the requirement of the employment agreement that any modifications be signed in writing.
Amazon.com also found itself in the midst of a similar dispute that was resolved by a Massachusetts court in Basis Technology Corp. v. Amazon.com, Inc., 71 Mass.App.Ct. 29 (2008). Amazon and Basis Technology were engaged in litigation. During trial, an e-mail from Basis Technology's counsel to Amazon set forth the terms of a settlement that the parties would ""memorialize in a written agreement, to be signed by individuals authorized by each party…."" Amazon's counsel responded in a one-word e-mail: ""Correct."" Subsequently, a dispute arose regarding certain of the terms, and the parties were unable to resolve their differences.
The Massachusetts trial court held that the e-mail exchange constituted an unambiguous agreement on all material terms, and therefore, found a contract to exist. The parties' plan to ""memorialize"" the settlement terms in a written agreement was merely intended to record the terms of the agreed upon settlement, and not to create new terms.
A New York court has also found in Al-Bawaba.com, Inc. v. Nstein Technologies Corp., 862 N.Y.S.2d 812 (2008) that an e-mail exchange complied with the Statute of Frauds requirement for a signed writing based upon the sender's intention to authenticate the e-mail by typing his name at the bottom of the e-mail.
How to Avoid an Unintended E-mail Contract
- Remember that e-mails, no matter how informal, are discoverable, producible and potentially binding contracts.
- If you do not intend to create a contract by e-mail, recite in the e-mail that there is no intention to create a contract, except pursuant to a separate written agreement.
- Recognize that a plan to ""memorialize"" an agreement is simply a recitation of what has already been agreed to by the parties.
Mary Wasik is a Partner at Levenfeld Pearlstein, LLC in Chicago, Illinois, and Vice-Chair of the Corporate Practice Group. Mary can be reached at firstname.lastname@example.org or 312-476-7568.
Levenfeld Pearlstein's articles are intended solely for informational purposes. They are not and should not be relied upon or construed as legal advice. You should obtain legal advice from an attorney with regard to any specific issues you may have.
© Levenfeld Pearlstein, LLC.