An email chain of commercial negotiations constituted a legally-binding contract, the court has ruled. The award-winning commercial lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising commercial clients on their business contracts and negotiations, and the risks they face in a technological age.
A High Court1 ruling from the UK reminds businesses to take care when relying on emails to conduct their contract negotiations. The ruling has persuasive authority on the courts in The Bahamas and should be noted.
What’s the background?
This was a battle between a retail giant and a small company – and like all good stories the giant lost the battle. The claimant in the case was a cosmetics manufacturer who took on high street drug store, the national UK giant Superdrug.
An email exchange took place between a Superdrug buyer and a cosmetics manufacturer. The manufacturer claimed that a legally binding contract had been effected through the emailed correspondence but Superdrug disputed this, saying that even if an agreement had been reached by email – it was not legally binding because it had no intention to create legal relations. Also, it said its buyer had no authority to enter into such a contract on behalf of the retailer in any case.
The court found a clear acceptance on Superdrug’s part when it committed to buying annual quantities of the product from the manufacturer. As for the question of the buyer’s authority – the court ruled that nothing in Superdrug’s evidence showed that the claimant was unreasonable when it relied on the buyer’s confirmation as binding the company.
Particularly relevant to the court’s finding was the buyer’s failure to make the claimant aware of Superdrug’s policies which governed the negotiation of purchase contracts. Had it done so, the outcome would likely have been different.
What does this mean?
Businesses need to be particularly careful when discussing potential contract terms via email, or other digital methods. An understanding of what makes an agreement legally binding is vital otherwise you risk either being unintentionally bound to a contract, or considering that a contract has been concluded when it hasn’t.
Take specialist legal advice to ensure your business interests are fully protected, and to minimise the risk of an expensive and time-consuming dispute.
Where appropriate, you should ensure your employees and directors are aware of the limits to any authority they have to bind the company to business decisions.
How can we help?
We advise and represent a wide range of business clients in their contractual negotiations and obligations, as well as disputes concerning the terms of their contracts. If you have any concerns in relation to your contractual obligations or there is a potential claim, contact the expert commercial lawyers at ParrisWhittaker for strategic advice and representation.
1Athena Brands Ltd v Superdrug Stores Plc [2019] EWHC 3503
