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E-mail exchange does not form contract

E-mail Exchange Does Not Form Contract

In the Contracts Update session of our recent In House Lawyer training day we considered the case of Grant v Bragg.  This decision has now been overturned by the Court of Appeal on three grounds.

As you will recall, this related to a breakdown in relations between two shareholders in a company.  Attempts were made to agree the sale of shares by one shareholder to the other, and although a formal agreement was never signed, the court decided that the effect of two emails, together with the fact that the seller had been excluded from the business, indicated that there was a binding contract for the sale of the shares.

The original court decision downplayed the importance of four intermediate emails which were sent between the email which was deemed to be the offer, and the email which the court decided accepted that offer.  However, three additional arguments were raised on appeal which involved the interpretation of the intermediate emails.  The seller succeeded with the appeal on all three points as follows:

  1. The offer had already been rejected in the intermediate emails, and once an offer has been rejected the offeree cannot subsequently accept it.
  2. One of the emails set a clear deadline for accepting the offer, which had expired before the final email was sent.  The offer was therefore no longer open for acceptance.
  3. One of the emails referred to the seller requiring signature of the agreement, and the court interpreted this to mean that the email exchanges were subject to contract although they did not say so.

As noted during the Contracts Update, when negotiating contracts by email it is important to be clear what the intended effect of an email exchange is, and to mark communications as being subject to contract as appropriate.  Although the appeal overturned the decision that a contract had been concluded, negotiating contracts by email still carries the risk that a contract will be formed unless emails are appropriately worded.

For further information please email Joanne Bone or Helen Goldthorpe.