The courts have affirmed that a binding contract can be formed based on a standard email signature automatically added to the foot of an email.
Some caution and forethought is appropriate to future email communications therefore to avoid contracts being formed without key provisions or benefits which a party might have been considering introducing at a later stage of an anticipated negotiation process.
The court’s decision was in Neocleous & Anor v Rees, which was a case involving a dispute between neighbours regarding a right of way to a boat landing stage on Lake Windermere.
The dispute became legalised, and a potential solution was reached involving a payment of £175,000.
The buyer’s solicitor therefore confirmed the terms of the agreement to the other neighbour’s solicitor by email.
Subsequently the buyer regretted the solution, and tried to break the deal. The matter was taken to court where it was argued that he was in breach of contract. It was contended that the email from his solicitor was a valid contract, and therefore the remedy of specific performance was being sought.
The solicitor’s communication had ended with a standard email signature listing the usual details of name, role title, firm, telephone number and the like. The solicitor had closed the actual text of the email with “many thanks”, before his email software had appended the standard signature.
In resisting the application for specific performance, it was argued that this was not a true signature for contract formation purposes.
The court disagreed. It considered that through the use of the words “many thanks” the solicitor had intended to associate himself with the statements in the email and authenticate them. It considered that the email signature was otherwise valid for the requirements of a signature, and whilst the software had added it automatically, the solicitor was well aware that this was the case and had intended the same.
The court was also clearly motivated by disapproval of a party seeking to renege on a contract due to a technicality.
The implication of this decision is that correspondence which one or more of the parties consider is pre-contract discussion may be argued to be the contract itself. As such, the resulting legally binding and enforceable agreement may be out of kilter with the parties’ expectations. Moreover, it may lack key provisions. There is plentiful case law involving unexpected results through the detail of a contract not being worked through – for example where the provisions of another contract are incorporated into the terms without all the implications being thought through.
The present decision creates dangers of further instances of such problems, where statements of intent are intended by the parties (“our contract will be back to back with the main agreement” for example) but the detail was intended to be worked through later (harmonising dispute resolution provisions, limitations in time, the operation of pain/gain clauses and so on).
A straightforward step to mitigate these concerns would be to caveat email correspondence “subject to contract”, in order to indicate that this is not the final agreement, and flag that further terms are intended to be negotiated later on.
If this is the case of course, it is important that the parties actually do return to the detail of the contract later on, and that this is not left unresolved.