Language school the European Language Center (ELC) used to use
vacant summer accommodation and teaching space at the University of
Plymouth for its courses. The University told ELC in 2005 that it
would have less space available in 2006.
ELC later claimed that emails and phone calls in which the
University told it that it would have less space available and
which contained estimates that it might have 200 beds available
constituted a contract to provide that amount of space.
Plymouth County Court ruled that the communications represented
a contract, but the Court of Appeal disagreed.
On 24 May 2005 an employee of the University emailed ELC
managing director Helge Maule in 2005 to say that "there will
certainly be less beds available [in 2006] than this year, so we
are advising you that there will only be 200 beds available for you
to sell…I will keep you informed as soon as we know of any plans
which may affect your summer booking with us".
That number was eventually reduced to 100 beds, and Maule sued,
claiming that his company and the University had a contract based
on the 24 May email.
Lord Justice Moore-Bick disagreed, saying that the email and
Maule's lack of immediate response to it did not give the
communication the properties of a contract.
"Further e-mail discussion on numbers and prices followed, the
last exchange before the critical e-mail taking place on 12 May
[2006]," said his ruling. "In none of those messages is there any
indication that any informal contract had come into existence on an
earlier date; rather, the impression one gets is that the parties
were even at the late stage still negotiating with a view to
reaching a final agreement on terms."
"Viewed in that context, and in the context of the wider course
of dealing between the parties, the e-mail of 24 May 2005 does not
look like a binding offer on the part of the university to make
facilities available in 2006," he said.
A contract can be created verbally, on the phone or by email,
but in England and Wales it must contain four elements. These are
an unconditional offer, an unconditional acceptance, a
consideration and an intention by both parties to create a legally
binding relationship.
The ruling said that in previous years the contracts agreed by
ELC and the University had been detailed. The absence of such
detail in the communications made it difficult to sustain the
argument that they represented a contract, the Court ruled.
"It is not without significance, in my view, that [ELC] found it
extremely difficult to identify the terms on which [it] said the
parties had agreed," said Lord Justice Moore-Blick. "If there was
to be a contract between them it was necessary for it to contain
all the terms needed to enable it to work."
Jon Fell of Pinsent Masons, the law
firm behind OUT-LAW.COM, said that the ruling made it clear that
you could conclude a contract by phone and email, but only if all
the qualities of a contract were present.
"What is clear is that if you do have all of those elements
present there is no reason that you couldn't have a contract formed
even with the most informal email or phone communication. It would
be just a question of what evidence there was of the elements of a
contract being there," he said.
To be sure that email exchanges do not create contractual
relations, employees should be clear, he said. "If you are worried
then the thing to do is to put 'subject to contract' in your
business communications," said Fell. "But it can be more difficult
than that."
"What you really have to do is make sure that staff are aware of
the potential risks involved in communicating and agreeing the
terms of a contract," he said. "In particular, the fact that
the communications might in themselves become a contract," he
said.
Fell said that it is helpful to follow up anything which might
be a contract with written communication.
"What was interesting in this judgment was that it said that a
particular detail clearly wasn't important because no-one had
written down anything about it," said Fell. "If you want to make
sure someone is bound by something you should not only write it
down but send an email to confirm it so that there is no doubt
about what has been agreed."
Editor's note, 04/08/2009: Jon Fell's
comments have been amended for clarity since this story first
appeared.
Disclaimer: We hope you find OUT-LAW’s content useful. It’s prepared by the lawyers at Pinsent Masons. Please remember, though, that it’s intended as general information only. It’s not legal advice. If that’s what you’re seeking, please
contact us. See also: our
full disclaimer
