Does an Email Constitute a Legally Binding Contract?

Hannah CarpenterBlog

The recent case of Athena Brands Ltd v Superdrug Stores Plc [2019] EWHC 3505, highlights employee’s liability when negotiating a contract on behalf of their employer via email. For a legally binding contract to be formed, an offer; acceptance of that offer and consideration is required. There must also be certainty regarding the key terms of the agreement, and there must be intention by both parties to create legal relations. Where an employee (agent) seeks to contract with a third party on behalf of their employer (principle), the employee must have principle authority to do so. This requires an agreement between the agent and principle, for the agent to act on the principal’s behalf. This authority can be express or implied.

In Athena Brands Ltd v Superdrug Stores Plc [2019] EWHC 3503, an email exchange took place between a Superdrug Stores buyer and Athena Brands, a manufacturer, regarding the sale of a new cosmetic product. The exchange of emails set out that the product would be sold to the Defendant at a set price during a 12-month period, in which the Defendant could order consignments of stock at any time via purchase orders. The sale price would have exceeded £1.3m, but in response to slower than expected sales – Superdrug stopped placing orders. The manufacturer claimed nearly £980,000 in damages.

The Claimant alleged that the agreement also included a commitment by the Defendant to purchase a minimum amount of £1.3m of stock during this period, which the Defendant disputed on the basis that they were not committed to purchasing any products unless and until it submitted a specific purchase order. The Defendant alleged that there was nothing in Superdrug’s standard terms and conditions of purchase to indicate that they would agree terms for purchasing minimum quantities or would be bound by any such terms if an employee agreed them.

The email containing the proposed terms was sent by the Claimant’s employee to the Buyer at the Defendant on 23 May 2017 and said:

“Just to confirm, you are placing orders and committing to the yearly quantity against all lines detailed below…. We have agreed that you will call off stock… on an ad hoc basis within a 12-month period…. [there followed a table of products with quantities and prices] 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.”

The Buyer replied on 25 May 2017, stating:

“Please go ahead with the below [referring to the claimant’s previous email and preceding chain], happy on Nature’s Alchemist…”

The High Court found that there was a clear acceptance of Superdrug’s commitment to buying annual quantities of the product from the manufacturer. The Court ruled that nothing in Superdrug’s evidence showed that the claimant was unreasonable when it relied on the Defendant’s confirmation as binding the company. The Defendant’s failure to make the claimant aware of Superdrug’s policies which governed the negotiation of purchase contracts was particularly relevant to the Court’s ruling. It was found, had they done so, the outcome would likely have been different.

Despite the fact the contract was agreed via an email exchange, it was found to be sufficiently clear to create a liability of £1.3m on the part of the Defendant. This highlights the dangers that businesses face when discussing contract terms in any sort of written form and that a legally binding contract contains a number of components that the court will assess objectively to determine validity. This case also serves as a reminder for employers to make clear to employees their responsibilities when acting on their employer’s behalf and the risks of failing to do so.

At Eldwick Law, we have an expert team of contract lawyers who can assist with your claim no matter how big or small. Contact our specialists today.

Should you have any queries with regard to this article, please do not hesitate to contact us via email: mail@eldwicklaw.com, or telephone: +44(0)203 972 8469.

 

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