Contract formation is one of the oldest forms of human interaction. It dates back to the oral contract forming Adam and Eve’s deal with God to live in the Garden of Eden (which of course led to the first breach of contract action—very harsh ruling), progressing to contracts in Neanderthal times created by grunts and gestures.
The advent of written communication begat the signature, made initially using some type of primitive tool to “make one’s mark” with an “X” or another crude identifier on a wall or other surface.
This progressed to the act of signing an actual document, which grew to be quite elegant. Sealing wax, signet rings and quill pens put to parchment were used for centuries, often followed by bacchanalian eating, drinking and cavorting to celebrate the agreement’s consummation. This in turn gave way to simple ink signatures sans flourish.
Today, pixels rule. Emails, texts and other electronic communications (collectively for this blog “emails”) have revolutionized the way we all communicate and correspond. They’ve made doing so lightning-quick and far more informal than paper correspondence. But like most innovation, electronic correspondence has also created new problems. Primary among them is the inadvertent and unwanted contract.
Most people assume that the law requires a written, signed agreement for a transaction to be legally binding. They don’t realize that a seemingly informal email exchange can satisfy the legal requirements of contract formation and collectively constitute a binding contract.
This is especially true for parties using emails to discuss or propose possible contract offers, counteroffers or terms. But, even emails without proposed contract terms in them can be held to be binding contracts between the correspondents.
Both federal and most states’ laws now provide that emails can form a binding contract. Under these laws, the sender’s printed name at the end of an email, in the email’s signature block or even in the “From” line, can be a sufficient electronic signature to bind the sender to a contract formed by that email exchange. And, courts are now enforcing these types of contracts regularly.
But wait, it gets worse. Email exchanges can also inadvertently modify existing contracts.
The take-away should be that you need to protect yourself and your business from inadvertently entering into a contract you didn’t intend to or weren’t done discussing or negotiating, or modifying an existing one. To do this, you need the mindset that every email sent is the equivalent of a wet-ink signature on a paper letter that can create the basis for a binding contract, unless contractual intent is clearly and expressly disclaimed.
An easy way to accomplish this is by using a disclaimer in every email sent that has any reference to a potential or perceived transaction. While the wording of the disclaimer should be tailored to the particular transaction, one example I’ve used in applicable situations is the following, at the top of an email: “For Discussion Purposes Only and Cannot Be Used to Create a Binding Contract.”
There are several other ways I recommend in various circumstances to avoid emails creating or modifying a contract. One is not using contract terms such as “offer,” “agree” or “accept” in an email.
So, lest you be banished from the paradise of happy business consequences and of only making contracts you intend, be carefully what you say and how you say it–electronically.
Just Sayin’ . . . TM
© 2016 Paul I. Menes
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