Businesses rely on emails daily, often without realising the legal risks they can pose.
A quick exchange could unintentionally create a binding contract, exposing your business to unintended obligations. Your staff must understand these legal risks and how to protect your business.
Our commercial law solicitors outline the key risks and legal issues surrounding emails and how they can form legally binding contracts.
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Can an email form a legally binding contract?
Under English and Welsh law, contracts don’t always need a specific format to be enforceable - they can be verbal, written, or even formed through email. However, certain agreements, such as those involving land, must meet specific formalities to be enforceable.
For an email to create a legally binding contract, it needs to include:
- An offer
- Acceptance of that offer
- Consideration (something of value exchanged between the parties)
- Intention to create legal relations
- Certainty of terms
If all these elements are present, an email exchange could be legally binding - even if that wasn’t your intention.
If a dispute arises, courts will examine the email chain to determine whether a contract was formed. Even if you believed an email was just part of negotiations, it might still be deemed a legally binding agreement if it meets the key requirements. That’s why you and your team must be extra cautious when wording emails, especially when discussing deals.
What contractual risks do emails bring to your business?
Emails make business communications more efficient, but they also introduce legal risks:
- Unintended agreements: A simple email like “Sounds good, go ahead” might be interpreted as accepting an offer, depending on the context and the parties’ intentions.
- Missing legal protections: Unlike a formally drafted contract, an email agreement may lack crucial safeguards such as termination rights, liability limitations, or dispute resolution terms. Without these, your business could face serious risks.
- Losing track of agreements: If a crucial email gets deleted or misplaced, proving the agreed legal terms can become challenging.
- Misinterpretation: Poorly worded emails can lead to confusion and disputes over what was agreed. Vague language may even create unintended or burdensome obligations.
- Unauthorised commitments: If an employee agrees to a contract without the proper authority, your business may still be held accountable. Even if they weren’t officially allowed to commit, the other party may assume they had the power to do so - potentially leading to legal disputes.
How can your business avoid email contract risks?
You can take several steps to minimise the risks of contracts being formed through email:
- Seek legal guidance before sending emails: Contract law is intricate, and many businesses overlook the potential legal consequences of email correspondence. Consulting a commercial solicitor beforehand is essential if there’s any doubt about whether an email might form a binding agreement. A commercial lawyer can asses your messages, identify possible risks, and ensure your business avoids unintended obligations.
- Implement a clear contract approval process: Define who within your business has the authority to enter contracts via email. Without clear guidelines, employees may unknowingly commit the business to a legally binding agreement.
- Train your team on email contract risks: Ensure staff understand that certain statements in emails can be interpreted as accepting contractual terms. Without proper training, they might inadvertently create agreements.
- Use ‘subject to contract’ where necessary: Adding ‘subject to contract’ in emails can indicate that discussions are still ongoing and no final agreement has been reached. However, this is not a foolproof safeguard, as courts will consider the full context of an email exchange. If you are unsure how or when to use this phrase, seek legal advice.
- Make your intentions clear in emails: If you don’t intend to accept specific terms or form a contract, explicitly state that in your emails. If discussions are still ongoing, clarify that no binding agreement has been made.
- Use written contracts instead of email agreements: Where possible, formal written contracts should replace email arrangements. A professionally drafted contract provides much stronger legal protection. If an email contract is unavoidable, have a solicitor review the terms before committing.
- Keep proper records of email agreements: If a contract is agreed via email, ensure all relevant correspondence is securely stored. Losing key emails can create legal uncertainty and make it difficult to prove what was agreed.
For companies that frequently deal with contracts, a specialist in commercial agreements can evaluate your exposure to contractual risks. They can also advise establishing a streamlined contract management system and refining agreements to support your long-term business growth.
Avoiding costly contract mistakes in emails
Emails might seem informal, but can create serious legal obligations and risks. A single poorly worded email could legally bind your business to unintended terms.
By understanding how contracts are formed, implementing a structured contract approval process, and seeking legal guidance, can safeguard your business from common email contract pitfalls.
If you need support managing contract risks in email communications or reviewing your contractual processes, our commercial law solicitors are here to help.
