Can emails be legally binding?

by | Nov 3, 2016 | Employment Law and Workplace Relations Blog

Those of us who use email as part of business negotiations and transactions should take note of several recent cases where courts have held that emails can create binding contracts between parties. The cases from Western Australia, Queensland and New South Wales represent an increasing trend in the court’s willingness to find binding agreements through email correspondence.

What will the court look for?

When determining whether or not there is a binding contract the court will look objectively at the broader context of the emails and the intention of the parties, including:

  • whether there is any indication that the parties intended to be bound immediately;
  • whether there is reference to a formal contract and intention to formally sign one; and
  • whether offer and acceptance of a contract can be read into the emails.

Important points to note:

  • Even if contractual terms are still being negotiated and there is an absence of a signed contract, a binding agreement may still be found between the parties based on their email communications.
  • Using terms such as “subject to contract” and “subject to execution” may not be enough to prevent a binding contract arising from email communication.
  • A contract will become binding at the time of the email. This means that a party may not be able to withdraw from a deal prior to the signing of a formal document as they will already be contractually bound.
  • Land transactions are not immune, as shown by the court’s finding in Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119 that formal writing and signing requirements under the Electronic Transactions (Queensland) Act 2001 (Qld) had been met.
  • Emails do not need to be between the parties themselves but can be between the parties’ representatives (such as a party’s lawyer).

How to avoid your emails becoming legally binding?

At this stage there is still uncertainty regarding electronic communication and what will and won’t constitute a binding contract. However, there are steps that can be taken which may reduce the risk of creating a binding contract, including:

  • Treating all electronic correspondence with the same care and precision you would a formal document. This includes the use of terms such as “offer” and “acceptance” and other legal terminology.
  • Clearly and consistently stating in your emails that there is no binding contract until a formal contract is executed.

For those of us who regularly use email in business negotiations and transactions, it is important that you are aware that the words you hurriedly type may have legal implications and long lasting consequences.

How can we help you?

If you are considering entering into business negotiations, e.g. to negotiate a lease or other commercial contract, consider engaging an experienced commercial lawyer to help early on.

The Corporate and Commercial team at Panetta McGrath Lawyers is available to provide assistance for all your commercial contractual needs.

Helen Kay

Helen Kay