Many people aren’t aware that pre-contract negotiations conducted over email could amount to a legally binding contract. In recent years the Courts have ruled that email negotiations create binding contracts, regardless of whether a formal contract is ever signed. When negotiating via email, always proceed with care.
The informal nature of an email does not prevent either party involved from enforcing an agreement reached via email. When either party does not wish to legally bound by the email negotiations, they must clearly and regularly communicate that they do not intend to be legally bound by the contents of the email/s.
Statements to the effect of ‘this agreement is subject to contract’ are not effective on their own. An intention to enter into a formal written agreement at a later time is not enough to avoid being contractually bound by an informal or incomplete email arrangement.
The Courts have enforced informal email agreements based on an objective view of the intention of the parties, including:
Whether there is agreement on the essential terms (note that not all of the terms need to be agreed);
How the parties act after the agreement has been made;
Use of the words ‘offer’ and ‘acceptance’; and
Whether present or future tense is used.
The importance of using clear, decisive and continued statements regarding whether it is your intention to be bound or not at any particular stage of email communications should not be overlooked.
For legal advice regarding email negotiations and agreements, please contact our team at wmd@wmdlaw.com.au or on 9525 8688.
