Subject to Contract? Emailed Negotiations

Subject to Contract? Emailed Negotiations

Businesses should be aware of the risks of informal communications such as emails and conversations whilst negotiating commercial agreements.  The expert commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in providing legal advice to businesses on their commercial contracts, including commercial disputes.

Email discussions

The terms discussed between commercial parties in the course of email exchanges could be relied on to form a legally binding contract.  A recent ruling of the High Court in the UK has decided that a legally binding contract had been reached through a series of emails that passed between the parties’ lawyers.  Critically, the negotiations were not expressed to be ‘subject to contract’.

In this complex £20m dispute, the claimants were investing in an unregulated collective investment scheme to fund television programmes.  The defendant organised the scheme which, unfortunately, eventually failed.  A settlement agreement was negotiated and involved emailed correspondence and verbal discussions.  At issue was whether a final agreement was, in fact, reached – and whether any agreement reached was being subject to further agreement. 

During negotiations, emailed correspondence took place containing various offers and counter-offers.  A final figure was accepted by the claimants, following which the defendant’s solicitor sent a long form settlement agreement.  However, this contained additional terms, including an indemnity in respect of any future contribution claims against the defendant as a result of the claimants pursuing third parties for their remaining losses.

The claimants would not agree to these additional terms.  Subsequent negotiations then took place but the parties failed to reach agreement on the terms of a formal settlement agreement.

Applying an objective test, the court decided an agreement had been concluded – and that agreement was not subject to any further agreement.  The court looked at the entire negotiations that had taken place and found that the claimants had clearly established that the parties had intended to be bound by their agreement (to be documented in subsequent documentation).

What does this mean?

Commercial parties and lawyers negotiating terms of contracts and settlements, particularly those conducted on a less formal basis, are advised to make it clear when such negotiations are subject to contract – or risk being legally bound by the terms agreed in those negotiations.

How can we help?

The commercial litigation lawyers at ParrisWhittaker have years of experience advising commercial organizations on contract terms and how best to conduct negotiations.  If you have a potential claim against another organisation or you are facing legal action, or if you need specialist help in negotiations contact us straightaway for urgent advice.

(1) Bieber v Teathers Limited [2014] EWHC 4205