Commercial Contracts – Can they be Created by Email?

Man typing on a laptop

It was established later in 2019 when the High Court ruled that an email “signature” in a footer was capable of creating a binding contract for the sale of land. It is perhaps not surprising therefore that a further case has held that an exchange of emails created a contract for the sale of goods.

The case involved the exchange of emails between employees working for two well-known brands, Athena and Superdrug, relating to goods valued at over £1.3m. The exchange of emails included the words:

(From Athena, the claimant) “… Just to confirm, you are placing orders and committing to the yearly quantity against all lines detailed below based on the ROS you have provided… We have agreed that you will call off stock, in exactly the same way as HI Glow, on an ad hoc basis within a 12-month period… If you could drop me a note to confirm all the above ASAP that would be great, I shall then be in a position to push the button at this end.”

To which the reply from the defendant was:

“Please go ahead…”

The claimant argued that the above exchange showed a contractual agreement committing Superdrug to purchase the stated minimum quantities of the products at the specified prices, to be called off over a 12-month period. As it happened, the products sold much more slowly than had been anticipated and Superdrug, the defendant, emailed to state that “orders going forward would be unlikely”. No further orders were in fact placed. The claimant sought its losses from the shortfall in the alleged minimum quantities, valued at just under £980,000, plus storage charges for unsold stock and interest.

The court found for Athena and held that the email confirmation had committed Superdrug to purchase the stated volume of products. The use of email is now omnipresent – so organisations should carefully consider:

  • Who within an organisation has authority to commit the organisation to entering into contracts? This authority must be made clear to any potential contractor.
  • Including the words “subject to contract” on all email footers and statements on any limits of authority to contract is essential.
  • Training on the above should be given to all relevant employees. 

For further information about commercial contracts, why not contact one of Alexander JLO’s expert commercial lawyers and see what we can do for you?

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