Small business owners need to be aware that our emails might qualify as a valid contract.
Here are the details...
Email as a Contract
As one can imagine in the 21st century, courts have wrestled with this very issue. And in certain jurisdictions, courts have ruled emails can be considered contracts for the purpose of enforcement. See Preston Law Firm, LLC v. Mariner Health Care Mgmt. Co., 622 F.3d 384, 391 (5th. Cir., 2010) (“Emails can qualify as the signed writings needed to form contracts”)
As a result, emails can form a valid and enforceable contract. Though, elements of a contract in general still must be met. This means the elements of an offer with definite terms such as the quantity of goods in a sale of goods transaction must be included, followed by an acceptance with terms regarding payment for those goods.
Sale of goods
In fact, in a separate court ruling, sale of goods contract were specifically mentioned with respect to their legitimacy when created outside a traditional written contract. In the decision, the court wrote, “A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.” J.D. Fields & Co. v. U.S. Steel Int'l, Inc., No. 10-20217 (5th. Cir., 2011).
Therefore, any action including offer of terms and an acceptance in one or more emails justifies the appearance of a contract.
As mentioned earlier, the concepts behind email contracts emanate from contract law itself including the concept of parties acting in furtherance of the statements made via email. The concept in the law is known as substantial performance. Substantial performance is exactly how it reads; one must substantially perform as per the terms of the agreement in order for the agreement to be validly enforced.
Substantial performance usually takes the place of a verbal or written acceptance of an offer. So, if one substantially performs in reliance of emails communicated regarding an act to be performed, the likelihood of a contract existing, as per the previously stated court ruling, is very high.
There are some important concepts to take away from this matter.
First, emails, when written in a particular way, can form the basis for contract. And those emails could be used in a legal proceeding to enforce a contract or seek damages for failure to comply with the terms listed in the email contract.
Second, one does not need a formal agreement to form a contractual relationship. This has always been the case. Verbal agreements can be enforceable agreements so; it should not come as a surprise that emails forming a meeting of the minds agreement can be considered a contract.
And third, one must be very careful when engaging in communication, written or verbal, discussing deals and terms as they can be construed as formulating an enforceable contract that will bind all parties to complete. Therefore, when discussing terms of a potential contract, one should always request to have the agreement drafted in a formal contract by a licensed to attorney to ensure all rights are stated and protected.
Author's note: The sole purpose of this article is to serve as a basis for a discussion with your attorney or legal professional. Situations vary widely, each must to be reviewed with a legal professional to make a determination.
About the author
Senen Garcia operates SG Law Group LLP a thriving law practice in multiple states assisting clients with their corporate, real estate, estate planning, and property insurance claim needs. Additionally, Mr. Garcia has accounting practice assisting small businesses with tax and accounting needs. Along with his work with SCORE, Mr. Garcia has also provided assistance with the local Small Claims Clinic that provides assistance to individuals filing small claims cases. Mr. Garcia has spoken on a variety of topics such as: How to start a business, Communication within your organization, Importance of Capital Accounts, What’s in Business Name Anyway?, and Stock Purchase Agreements vs. Asset Purchase Agreements.Website