by Jonathan T. Howe, esq. | April 01, 2008

Vince Lombardi, the legendary coach of the Green Bay Packers, would start each training camp by calling all the players together, reaching under a bench and pulling out an object. He would then hold it up and announce, “Gentlemen, this is a football.”

Similarly, I often find I must reacquaint my clients with the more obvious elements that constitute an actual contract. Once in a while we have to go back to the basics to determine whether an agreement actually exists.

For there to be a valid contract, certain factors must exist. Primarily, the parties need to indicate they want to enter into an agreement that will be binding and to which they mutually have agreed to the material terms of understanding. At this point, these days, e-mail enters the scene. Can an exchange of e-mail constitute a contract?

On the Docket

A recent case from the Appeals Court of Massachusetts looked at an exchange of e-mails that negotiated and outlined a settlement for a contractual dispute between two parties by their respective attorneys. The conclusion of the trial court, affirmed by the appellate court, was that e-mails carry the same weight as a business proposition set forth on paper.

In this particular case, during a trial, the parties began to exchange proposals via e-mail for a potential settlement. On the fourth day of the trial, the parties told the judge that a settlement had been reached, so the trial stopped and the parties were instructed to file a copy of the settlement, thereby dismissing the lawsuit.

Disagreement followed concerning the settlement, however, and further communications took place, leading to an impasse. The plaintiff nonetheless contended that a settlement was reflected in the parties’ representations to the court and in the e-mail from opposing counsel.

The trial judge later ruled that the e-mail terms were valid and binding.

The Written Word

The court evaluated several factors to reach this conclusion. In the key transmission sent by the defendant, his attorney stated, “this e-mail confirms the essential business terms of the settlement between our respective clients.” The framework of those terms was then outlined.

After examining all the materials exchanged electronically and during subsequent negotiations, the judge said the e-mail exchange constituted “an agreement on all material terms” and said there was nothing ambiguous about the agreement. The court noted that a “deferred document” was not the same as “deferred intent.” If you say you will finalize details later but you do have a deal, the deal is made.

The Spoken Word

The judge also found that the declaration the parties made in court, saying that an agreement had been reached, was relevant, and that the parties had, in fact, reached an agreement based upon the e-mail exchange.

Keep in Mind

Know that e-mails can create a contractual obligation. If you are merely trading terms and conditions, make sure you have a caveat in your transmission that this is not intended to constitute the final arrangements, but rather is sent for consideration, and that until such time as the parties have mutually agreed and signed the contract, no contractual intent is created as a result of the exchange of e-mails. Of course, disregard this advice if you do want the e-mails to be a contract.

Next month we will look at another contract situation: What happens when you attempt to change an executed agreement verbally, when the contract says all changes must be in writing?

Jonathan T. Howe, Esq.,is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at [email protected].