Email is an indispensable business tool. But the speed and informality of email can lead to the accidental use of contract-forming language, resulting in unintentional binding agreements. This problem is made worse by statutes that compel courts to be “liberal” in finding contracts formed by emails, even where one party did not mean to be bound. In this environment, companies need to recognize and protect themselves from the very real risk of accidental contracts.
The Law Recognizes Contracts Formed by Email
Contract formation is simple. It requires only an offer, acceptance, mutual consideration and agreement to be bound. Peterson v. Regina (S.D.N.Y. 2013). Importantly, the second element turns on its objective—not subjective—nature. Krumme v. WestPoint Stevens, Inc. (2d Cir. 1998). If an email signals an intent to be bound, even if by careless or accidental language, it will trump any unstated reluctance to form a contract. What matters is whether it is reasonable for the receiving party to believe there is an agreement. Emails can satisfy these requirements.
State and federal laws bear this out. The Uniform Electronic Transactions Act of 1999 has been adopted or copied by all 50 states. It provides that a contract “may not be denied legal effect solely because an electronic record was used in its formation,” and it mandates that courts must be “liberal” in upholding contracts formed electronically. In addition, the UETA specifies that courts must engage in an objective analysis of the electronic communications themselves, and not the party’s personal or subjective views. This means that a contract is based on what the person writes, not what she thinks. In 2000, Congress passed the Electronic Signatures in Global and National Commerce Act (E-SIGN). 15 U.S.C. § 7001 (2000). This statute essentially extends the UETA to interstate and foreign commerce. Importantly, E-SIGN preempts state laws imposing “consequences” on parties that do not create “originals” of contracts. Physically signed contracts are thus unnecessary.
