Case law: Court confirms emails can create legally binding contracts

Parties negotiating contracts should be aware that emails can create a legally binding contract, so should take care to ensure that they specifically state in any email correspondence whether or not emails are 'subject to contract', a ruling makes clear.

A limited company went into administration. The administrators considered that the company had a potential legal claim against third parties. There was an exchange of emails between the administrator and two of the company's shareholders (through their solicitors) discussing a possible assignment to the two shareholders of the rights to pursue the claim. The shareholders claimed that the emails created a legally binding contract that the administrator would make the assignment at the price mentioned in the emails. The administrator disagreed and proposed to auction those rights. The shareholders asked the court to prevent the auction.

The High Court, having considered the content of the emails, found no contract had been concluded. Contracts in England & Wales require the following elements if they are to be legally binding:

• an intention by both parties to enter into legal relations
• an offer by one of the parties which is capable of being accepted by the other
• acceptance of that offer by the other, and
• a mutual promise by each to provide something of value to the other (known in law as 'consideration')

In this case the Court found that the administrator had not made an offer capable of acceptance, so there was no legally binding contract.

Particularly, it found that the shareholders knew the administrators would instruct their own solicitors in relation to the terms of any agreement to assign. They must therefore have known this would involve further written agreements and negotiations. The Court ruled that the email exchange was impliedly 'subject to contract', even though the administrators had not specifically said that it was.

Operative date

• Now

Recommendation

• Parties to contract negotiations should be aware that emails can create a legally binding contract, dependent on the language used in them, and ensure that they specifically state in any email correspondence whether or not their emails are 'subject to contract'

Case ref: Goel & Anor v Grant & Anor (As Joint Administrators of Meem SL Ltd) [2017] EWHC 2688