Emails did not form a contract – ruling

For amounting to no more than a business discussion, a series of emails and phone calls between a provider of services and a repeat end-user fell short of establishing a contract.

Issuing this ruling, the Court of Appeal said the communications between the parties did not contain either enough details, such as fees, or the elements necessary to form a contract.

Its judgement overturns an earlier ruling from Plymouth Crown Court, which said the provider's emailed estimate to offer 200 units constituted a contract to provide that volume.

The University of Plymouth, which regularly provided beds to sleep external students on language courses, even told the European Language Center that the quote was not definitive.

"There will certainly be less beds available than this year, so we are advising you that there will only be 200 beds available…As ever with these things, this is not set in stone".

None of the staff at the ELC, including managing director Helge Maule, replied to the message, sent May 24, 2005, nor did they respond to a subsequent email about availability.

Yet when a third email from the university offered only 100 beds, Mr Maule sued, claiming that ELC had a contract with the institution for 200 beds, based on the email to him in May.

Lord Justice Moore-Bick disagreed, saying all that the email spelt out was "equally consistent with two parties discussing business with a view to entering into a contract at a later date."

He added that Mr Maule's failure to respond to it "tends to suggest that he did not regard it as an offer to enter into a binding contract for accommodation" in the disputed period.

"Moreover," the judge said, "I can see no basis upon which… [to] properly find that Mr Maule, or for that matter anyone else on behalf of ELC, purported to accept any such offer."

Contract experts say this was problematic for Mr Maule, who was unable to cite exactly when and how the 'contract' was made, as offers must be unequivocal and then accepted.

Alongside an offer, and acceptance of that offer, the two other elements necessary to form a contract – consideration and intention to create legal relations – were also ruled as absent.

"It is the lack of clarity in the terms that meant the emails and phone calls did not establish a contract," Ben Evans, a partner at legal firm Lawdit, reflected yesterday.

"It is well established that contracts can be formed via email and over the phone, however all of the normal contract rules must apply."

Other than the four elements, these rules are also known as the three properties that all contracts must contain, said Roger Sinclair, a legal consultant at Egos.

They are 'consensus' – a point when the parties clearly agree on all the material terms, 'consideration' – each party contributes to the deal, and 'mutual intent' to be legally bound.

But in this case "the to-ing and fro-ing" shows there was no single point of time at which there was clear consensus, Mr Sinclair said, and "therefore no agreed basis on which the parties had agreed to be legally bound."

To reduce the risk of 'accidentally' appearing to have entered a contract by relatively informal written communications, he said IT contractors could head them 'subject to formal contract.'

Mr Evans also advised: "For IT contractors, and really for any business contracting via email or telephone, it is important to remember that should any dispute arise that you would need to be able to prove what was agreed.

"Obviously 'best-practice' would be to have a signed contract every time but this is simply not practical or commercially viable.

"If, for example, you agree a deal on the phone, simply confirm the points via email - it will take a matter of minutes but will give you written evidence of what was agreed."

According to the judgement, any agreement between the parties was not in evidence – an absence which was made more noticeable by the pair's detailed, written agreements in the past, ever year from 2001 to 2005.

Lord Justice Moore-Bick said: "Whatever may have been the case in previous years, in the absence of any clear evidence that the parties had agreed on terms with the intention of creating legal relations the evidence is not sufficient, in my view, to establish that a contract came into existence between them at that time."

He added: "The impression one gets is that the parties were even at the late stage still negotiating with a view to reaching a final agreement on terms.

"Viewed in that context, and in the context of the wider course of dealing between the parties, the e-mail of 24 May 2005 does not look like a binding offer on the part of the university to make facilities available in 2006."

For Lawdit, the judgement reads as a reaffirmation of "some old principles" of contracting, including the terms being as clear as possible, all the key points – price, payment, delivery time – being present, and the safety net of "confirming everything" in writing.

"There's no new points of law here," Mr Sinclair agreed, "just a reminder of the necessity for those [three properties] to be present before a contract is formed.

"Emails and phone calls can be sufficient to evidence a contract - whether on fact they do, or not, depends on all the facts of the case."