Beware the binding email

Are you in the habit of negotiating or creating commercial agreements using email? If so, you might be exposing yourself and/or your business to serious risks by inadvertently binding yourself to a legal agreement that you can’t get out of.

Despite their informal nature, emails are still written communications that are ‘signed’ by the sender and can create binding obligations. This may be the case even if the various terms that make up the emailed ‘agreement’ are scattered across a chain of emails, with no single document pulling everything together.

And when it comes to email, what’s left unwritten is just as important as what’s included. You’re at risk of missing out matters that go beyond the core commercial agreement, such as insurance, liability and breach of intellectual property. If these aren’t specifically mentioned in the email conversation, you may have to rely on general law – potentially giving you less protection if a dispute arises.

So how can you do business on email without binding yourself? You could state clearly in each email you send that any terms included in the message are ‘subject to contract’. However, this device can be a double-edged sword. Not only does it sound a little officious but if you forget to use it, you’re back to square one.

A better idea is to state clearly that you can’t enter into any formal contract based on an email exchange, and a formal agreement must be signed when you’ve finished negotiating. Just one word of warning. If you choose this option, don’t start the work until you’ve received the signed agreement. Otherwise, you could still be bound by your original emails!

Turning to the other side of the coin, how do you protect yourself if you still want to use email for your business negotiations? Here are a few guidelines to help you reduce risk and maintain good practice:

  • Keep the email chain short and messages to the point.
  • Clarity is key – it must be easy to see what’s been agreed between the parties. Keep to-ing and fro-ing over contract terms to a minimum.
  • Try to ensure all the emails you receive are sent from the same person.
  • Make sure you have evidence, or reasonable grounds to believe, that the sender is authorised to bind their organisation.
  • When email negotiations are complete, draft a final summary that pulls all the agreed points together and clearly sets out both parties’ intentions.