Age of email blurs what’s a binding contract

The age of emails has blurred the boundaries of what is a contract and what is not, writes Sue Mann, a commercial solicitor at Cousins Business Law.  It’s very easy to fire off an email quickly, but do you realise that such an email has the same status as a proper legal contract?

So without expert legal input and advice on terms, businesses could be leaving themselves open to problems – even if your email correspondence does not amount to the formation of a contract.

What is a binding contract?

A response to an email outlining details of an agreement, and agreeing to undertake the work, is effectively a binding contract. But it is unlikely to be a ‘watertight contract’. It might not, for instance, set out payment terms or limit liabilities. Businesses which do not invest in the right legal advice could therefore be laying themselves open to unnecessary problems.

What if I don’t have a contract?

If you do not have a properly drawn up contract:

  • you may not have agreement over some fundamental points (which means that a judge might later have to decide what these points should have been – and you will be paying for the privilege!);
  • there will be uncertainty as to the basis on which the products or work are being supplied (and you can be certain that if a disagreement ever arises, the other party will have a different ‘recollection’ of what was agreed, meaning you have less chance of being paid and a higher chance of it all ending up in messy court proceedings);
  • everything implied by law will apply to your contract even if that’s not what you intended (did you really want Westminster or Brussels to decide what you have agreed to?);
  • you won’t have any limitations on your liability;
  • you won’t have any retention of title on any products you supply (so you have less chance of being paid);
  • you may find that your customer or supplier has introduced their own standard terms (which are likely to be more to their benefit than yours).

I always recommend drawing up a proper contract to consider all of these points. And if you are presented with such a contract, get professional advice on whether your interests are really protected by the document. Doing so could save you a lot of hassle, time and money in the long term.

Tuesday 24th May 2011