(Via Jordan Hatcher) What are the rules with regards to contract formation through email? When exactly is a contract concluded if the negotiators have not disclosed the terms and conditions clearly? The case of Baillie Estates Ltd v Du Pont (UK) Ltd helps to elucidate some of these questions.
The case deals with email contractual negotiations that are nowadays common in various industries. The case involves Edinburgh printing company Baillie Estates, and the English representative of US multinational Du Pont. The contract involved the purchase of a large printing press. While the sales process involved visit by Du Pont sales agent to Baillie’s facilities, the negotiation process was mostly conducted through email. According to the facts of the case, Du Pont sent an email to Baillie with details relevant to the conclusion of the contract, including price, date of delivery, payment dates, interest rates, and extras to be included in the transaction. Baillie responded with a short email reading “Go ahead”, and Du Pont replied with a terse and vague and terse response “It’s on the way”, with no reference as to what was on the way. At this point, Baillie’s representatives thought that the contract had been concluded. However, Du Pont then sent the standard terms and conditions as an email attachment the day after, which included a jurisdiction and choice of law clause, but also specific provisions about credit checks that may hinder the conclusion of the contract.
The parties were in disagreement as to when there was a contract. Baillie argued that the contract had been concluded with the communication that “It’s on the way”, while Du Pont argues that the early exchange was only an invitation to treat, and that the contract would have been concluded after Baillie had agreed to the standard terms and conditions. In the Court of Session decision, Lord Hodge opined that the email with contractual details was indeed an offer, and that the subsequent communication, while informal, had the acceptance effect. Therefore, a contract was concluded before Du Pont had sent an email with its standard terms and conditions.
A very interesting aside is that Du Pont’s communications contained a disclaimer stating that no email communication should be considered contractual unless clearly stated. Lord Hodge says:
“For completeness, I record that Du Pont did not advance the argument set out in their defences that their emails contained a standard disclaimer that the email did not constitute a contractual offer or acceptance unless it was designated that an e-contract was intended. Such an argument would have been inconsistent with Mr Cormack’s approach and would have been met by the response that it was the attached proposal rather than the email which was the offer document.”
Very interesting ruling indeed! It seems like this serves to further erode the enforceability of email disclaimers. Brodies has drafted a list of lessons to be learnt from this case:
- “Contracts may be formed by email earlier than you might expect.
- When negotiating a contract by email, tell the other side about your standard terms as early as possible.
- Consider rewording standard “no contract” email footers to cover attachments.
- If you do not want to be bound until the contact is signed, then say so expressly in your communications (both written and verbal). In England, the phrase “subject to contract” is often used. In Scotland, while it may help to use this phrase, it does not have the legal meaning that it has in England. It is better to spell out the position in each communication e.g. by making clear that nothing in the communication constitutes a legal offer that is open for acceptance to create a legally binding contract.”
Sound advice indeed.