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Businesses warned to be mindful of negotiations by email

A recent court of appeal case has highlighted the need for business owners to be mindful when exchanging emails concerning negotiation/amendments to contracts, as they could unwittingly enter into an enforceable agreement.

In the case in question the parties, Golden Ocean Group Ltd and Salgaocar Mining Industries PVT Ltd, exchanged a series of e-mails in which they agreed a number of amendments to a standard form document. One of the parties asked the other to provide a full and complete signed agreement incorporating all the key terms. Despite the fact that a single document was never created, the court held, on the facts, that the parties intended to be bound by the terms in the chain of e-mails.

The decision in this case was upheld as it was deemed that it is not uncommon for agreements to be concluded over email in the industry; with electronic signatures also being a commonplace form of guaranteeing agreements.  Whilst Lord Justice Tomlinson noted that this remains to be tested in other commercial scenarios, the usual and accepted business practices will be a key consideration in such cases.

Business owners and directors therefore need to be aware that a legally binding contract can be made by a simple exchange of e-mails if email is an accepted method of agreeing business. If it is not intended that the business is to be bound by what is communicated in an e-mail, this needs to be clearly communicated.

Writing something on the internet or in an e-mail is exactly the same as writing on paper and, because of the lack of control of who might ultimately see it, sometimes worse as your business cannot control what the recipient does with an e-mail.

It is also important to remember that any staff that are in a position to negotiate, purchase, or sell products and services on behalf of the company are made aware of the potential implications of communicating via email so they do not fall foul of the pitfalls.

If you need any legal advice on commercial contracts or have a dispute regarding a business arrangement or agreement, please do not hesitate to contact one of our specialist solicitors for a confidential discussion.

By Ian Liddle, Commercial Solicitor in Lancashire

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