Have Your Email ‘Negotiations’ Accidentally Become a Contract?
Even in the smallest businesses, we all do at least some of our negotiating by email. Sometimes it’s quite informal and with people you know. Other times it might be more formal and considered – perhaps you even have a process for engaging new business? Whatever the case, you could be forming legally binding contracts without even realising.
Contrary to some of the reasons you might think, it’s not because email counts as writing, or that your email signature will suffice for signing something. Contracts don’t require written words or signatures to be binding. All that’s needed is an offer and acceptance, supported by consideration (usually payment for goods or services, or vice versa) and an intention to create legal relations.
Those first three come up all the time during negotiations – what are you/they offering? What will you/they accept? Unless you’re doing or receiving something free of charge, the agreement is supported by consideration. When it comes to your intentions to create legal relations, even this can sometimes be objectively identified by mundane emails, such as setting dates.
Ok, so why bother getting a contract written up then?
There are obvious pitfalls of inadvertently becoming bound by a contract, not least that you might suddenly be on the hook for something you’re not ready for or thought had gone away.
For really basic contracts, such as private sales, arranging pricing and delivery are sufficient for a smooth deal. In the commercial world, though, it’s rarely that simple. Knowing who does what and when often involves questions about insurance, risk and title, health and safety, data protection and so many other things. Accidentally becoming caught up in a contract that has only determined the ‘headlines’ of your negotiation can leave crucial elements undecided. You might not even realise until it’s too late and the lawyers are involved!
At Devant, our mantra is to produce clear, unambiguous and easy to read contracts precisely because it is the best way towards smooth deals that don’t fall apart. Email correspondence can play an important role in that, so long as it’s done right.
So, what can be done to avoid contract misunderstandings?
Before you start thinking that none of your correspondence will be safe ever again, it should probably be said that the courts are fairly sensible about this. In a recent judgement, the High Court determined that emails between an insolvency administrator and a creditor’s solicitors were not legally binding as it was impliedly subject to contract (as other formalities hadn’t been followed).
That said, where you’re agreeing details over email, the magic words, “subject to contract,” are clear and simple way of showing a lack of intention to create legal relations at this stage.
Where you operate through agents or contractors, make sure they’re aware of this as well. If they shouldn’t be binding you in the first place, then ensuring they are aware and communicate this to others will also relieve you of completely unexpected contracts arising!
So, that’s the easy part covered. Now you just need to successfully negotiate the contracts you really want!
PS – if you’d like to learn more about how to make a good contract, or how to negotiate effectively, check out our upcoming contract and negotiation public workshops.