Not worth the paper it's written on?

By LBV

22 Jun 2010

It is still common in business for deals to be made on a handshake but more increasingly emails are now being used to make and accept orders for goods and services.

However what is often overlooked is what would happen if a dispute arises, would a court consider a series of emails to be a legally binding contract?

The phrase “it’s not worth the paper it’s written on” is usually used in relation to verbal contracts and refers to the lack of evidence to show what was verbally agreed.

Where something is agreed by email, there is evidence of the agreement but will a court allow you to rely on those emails and accept that a legally binding contract exists?

In a recent case, the University of Plymouth and the European Language Centre Limited (‘ELC’) emailed each other about some accommodation the University was to let ELC use. It had done this before under written contracts.

A debate took place about the number of accommodation places that would be available that year.

In those emails the University said it would be reducing the number of beds to 200. ELC said that the reduced number was unacceptable. A formal written contract was never signed.

When the University failed to provide accommodation, ELC said that the emails amounted to a contract obliging the University to provide 200 beds.

The Court of Appeal looked at several factors including the content of the emails between the two organisations. It said that there was not enough detail in the emails to be clear what was agreed.

The parties still appeared to be negotiating – therefore how could there be a binding contract when the terms were unknown?

Also, the parties’ previous dealings suggested that after negotiations, a formal written contract was usually entered into. The Court concluded that a legally binding contract was not in place.

This case highlights the need for certainty. Each party in a deal must know what is agreed.

While it is possible for a contract to be made through correspondence, if there is any uncertainty a court could decide there is no binding contract.

The way to avoid uncertainty?

Have a written agreement. It needn’t be lengthy or complex but it must cover all the key issues and satisfy the requirements of a legal contract.

Charlotte Wood, solicitor, Forbes Solicitors.
 

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