The Law & The Planner
Can an E-mail Trail Create a Contract?
Courts find electronic communications can be binding
by Jonathan T. Howe, Esq.December 1, 2012
Jonathan T. Howe, Esq.
A senior partner of the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., specializing in meetings and hospitality law. E-mail questions to him at meetings-
Takeaways• Be careful in e-mail correspondence concerning contract terms; add a line requiring signatures from both parties in order to form an agreement.
• Documents now can be signed and notarized electronically, with the same official clout as printed documents notarized by hand.
• Keep meticulous notes to document and support the creation of your contracts, to indicate the intent of your side of the bargaining table.
As a lawyer, I always like to have a paper trail so I can demonstrate the meeting of the minds that culminated in the formation of a contract. But that practice is becoming more and more old-fashioned.
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Today, ink on paper is giving way to electronic communication and electronic signatures. But even before there was a cyberspace, exchanges between parties -- whether written or oral -- could create a contractual obligation, even without any signatures.
So is it possible to have a contract based on the exchange of e-mails? The courts have said yes. To come to this conclusion, the judges went back to the basics of what makes a contract.
Intent is Key For an agreement to be established, certain things have to occur. First, there has to be an intent to enter into a binding contract. Then this intent is coupled with sufficient terms and conditions showing what is expected of the parties and what they can expect from each other. Adequate consideration must be part of the communication, meaning there is a fair give-and-take that benefits both parties. Once there is agreement, the material terms are set forth and both sides accept those terms, you've got a valid contract.
A series of e-mails, text messages, written correspondence, or even phone calls or oral statements can lead to the formation of a binding contract. The key here is whether the parties intended to establish an agreement. If the communications demonstrate the intent to create a contract and the documentation supports it, it's binding.
Signing by E-Mail The days of requiring witnessed signatures -- as much as I hate this -- are gone. Currently, the law allows the transmission of electronic documents that have been signed electronically to become binding agreements. However, some states might interpret this process differently.
To take it one step further, notarization on an electronic document also is now possible and is equal to "ink on paper, plus notary seal."
The main law that governs this goes under the name of the Electronic Signature in Global and National Commerce Act, which was voted into law in 2000, setting a single national standard for electronic signatures and how they could be used in contracts and other legal agreements that in turn can be archived in electronic records.
Sealing the Deal Having said all of this, a word to the wise: Always have a hard copy of the documentation in hand. Ink on paper is always preferable. If you do go electronic, the back-and-forth should be handled in Microsoft Word, where redline edits can be seen, but the final document should be in a locked PDF or in another secure format that cannot be manipulated, to avoid adverse changes that could be disastrous to your event.
In e-mail exchanges, always state that in order for there to be an agreement, the parties must sign a written contract. If both parties agree, that "signature" now could be electronic.
In the end, contract law still is based on mutual agreement, however the parties come to that conclusion.