Email Contracts

With the proliferation of electronic communication in the business and legal worlds, state and federal governments have  to consider how to regulate the nature of contracts in this context.  In 2000, the U.S. Congress passed the Electronic Signatures in Global and National Commerce Act (E-SIGN).    Over time, all U.S. states instituted similar forms of electronic transactions statutes.  On their most basic level, these laws mean that contractual agreements discussed electronically (e.g. over email) are to be held to the same legal standard of validity and enforceability as their physically-executed counterparts.  More specifically, an email or series of emails could very well be recognized as a binding contract, provided it met a number of criteria:  The email exchange would need to contain the “essential terms” of the agreement (including clear descriptions of price and payment details), specify a final offer—and acceptance of said offer specifically by the individual(s) who will be charged—with clear indication that the conversation is not simply one of ongoing negotiation, but rather establishes the parties’ “intent to be bound” by the offer.  Furthermore, just as a written contract requires a signature in order to be considered valid, the presence of an individual’s name at the bottom of an email serves this same purpose, whether the name was typed manually or appears as part of the automatic signature block.

A common application of the E-SIGN rules exists with regard to the purchase and sale of real property, when some (or even all) of the communication takes place via email.  As per the criteria above, the “essential terms” of a real estate agreement include a detailed description of the property, specifications regarding the conditions that would impact final purchase price, and establishment of payment terms.  “Intent to be bound” is determined by examining the specific language being used in the e-mails, and taking into account the intentions of the involved parties, as well as the implicit and explicit circumstances of the deal.

There are several best practices to keep in mind when writing emails as part of any business- or legal-related communication.  Begin with the question of intent; if the purpose of an email is to initiate (or continue) a contractual discussion, be sure that it includes “essential terms” and “intent to be bound” content, as indicated above.  If the objective of the communiqué is simply to discuss an ongoing negotiation, however, it is prudent to avoid not only the kind of binding language referenced here, but also summary responses like “agreed,” and “correct,” which have the potential to be construed as acceptance of any conditions that may appear earlier in the same thread.  (This could be particularly problematic in the event that those earlier emails contained the requisite terms and signatures.)  It is also highly recommended to incorporate qualifying terminology like “subject to client approval,” or “contingent upon receipt of fully executed copy and deposit,” which explicitly shows that the email is not meant to constitute a legally binding contract.

Treating digital communication with the same seriousness and scrutiny as a written statement is a good way to ensure that an electronic contract will be legally recognized, assuming it meets the prior criteria.  By the same token, a careful attitude towards electronic correspondence will prevent inadvertent binding to a contractual relationship that was not intended.

2018-05-09T23:23:48+00:00

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