Is an Email Contract Binding?

by Fred Abramson on October 15, 2012 · 8 comments

We all use email. Perhaps due to its ubiquity, we often feel safe sending business messages via e-mail. The Atlantic recently noted that most sharing is accomplished through Dark Social means that are difficult to measure because they are “private.” But don’t be fooled, communicating through email can have dire consequences.

As a business lawyer, the two most frequent questions regarding emails are the following:

  1. Am I  contractually bound  by what is written in an e-mail?
  2. Can I rely on an exchange of e-mails as evidence of a contract?

It has become increasingly clear as courts are relying on electronic transaction legislation, applying rules of contract formation, and finding that e-mails create binding contracts. As a result, you need to be aware of what you state in e-mails to avoid an accidental contract.

The Legal Framework 
  • Laws passed more than a decade ago by both New York State and Congress provide that contracts will not be denied legal effect solely because they are created or stored electronically. Paper contracts are not a requirement.
  • Courts then look to basic contract formation law to find out whether a number of e-mails creates a binding contract. In doing so, courts look to see if one party made an offer, whether that offer was accepted by the other party, and whether there was intent to be bound by the e-mailing parties, which the courts call a “meeting of the minds.” If a court finds that those elements are present within a series of e-mails and concludes that the terms of the agreement are reasonably certain, the court is likely to hold that the e-mail exchange is a binding contract.

I recently litigated a case where a series of e-mails constituted a change to a sales agreement even though the agreement included a section requiring all changes to be in writing and signed by the parties. The court decided that the series of e-mails exchanged between the parties constituted the requirement that the changes be in writing, and by both parties typing their names at the bottom of their respective e-mails, the changes was signed by both parties as required under the contract.

Be aware that simply because e-mails can satisfy the requirement under the statute of frauds that all contracts over $500 must be in writing, other contract formation rules must be applied. For example, if there is no evidence of a “meeting of the minds,” then there may not be a contract.

What to keep in mind before you hit send
  • Think about whether the series of e-mails contains the necessary contract formation rules. Was there an offer? Did someone accept the offer? Was there any money exchanged?
  • If you do not intend to be bound, use qualifying language in your e-mails, such as this is not a binding contract.
Conclusion 

It is vital to be aware that e-mail can create or change an agreement.

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