Several US Courts Decide Email Exchanges Can Create Legally Binding Contracts
March 16, 2023Is an Email Legally Binding?
Several courts in the United States have recently ruled that email exchanges are sufficient to create or modify written contracts. Franchisees should be aware of these decisions to avoid unintentionally binding themselves in enforceable contracts.
When Are Emails Enforceable Contracts?
Certain contracts (including ones dealing with real estate, goods worth more than $500, or contracts that can’t be performed in one year, among others) are subject to the statute of frauds.
The statute of frauds requires that these contracts be signed and in writing in order to be enforceable. Additionally, all modifications to these contracts must also be signed and in writing. Franchisees are likely to encounter contracts subject to the statute of frauds when dealing with leases, distribution agreements, and some employment contracts.
When Did Emails Become Enforceable Contracts?
Historically, the statute of frauds has prevented unknowing parties from accidentally binding themselves in long-term, high-value, or important contracts. The statute of frauds, however, has not kept pace with modern communication methods. In recent years, courts have been grappling with when an email chain can be sufficient to create or modify a contract.
Legally Binding Email Contract Example:
A New York court held that an employee’s email accepting proposed modifications to his employment agreement constituted “signed writing.” The employer’s email at issue in the case delineated how much time the employee should spend working on different tasks in order to earn a full earn-out of his stock purchase agreement. The employee replied saying that he accepted the “proposal with total enthusiasm and excitement.” The employer then replied, saying that he was “thrilled” with the employee’s decision. All of the emails contained the sender’s typed name at the foot of the message.
How this email counted as a legally binding contract:
The court found that the email exchange set forth the proposed terms modifying the employment agreement. It also found that the employee’s email was a valid acceptance of the terms and that the employer’s reply after acceptance memorialized the terms of the modified agreement. It also decided that the signature block in the emails satisfied the signature requirement. The court ruled that the emails properly modified the initial employment agreement and that the modifications were enforceable.
Other states have also held that a typed name at the end of an email can be sufficient to satisfy the “signed and in writing” requirements, but only if the signature is affirmatively typed, not automatic.
In 2010, the United States District Court in Colorado ruled that an automatic signature block at the end of an email describing purported settlement terms did not satisfy the signature. This was because the automatic signature did not sufficiently signify the sender’s intent to sign the email.
Wondering If Any Emails You’ve Sent Are Legally Binding?
If you are worried your emails have locked you into an enforceable contract or if you want to try to enforce a contract that you believe was entered into by email, the experienced franchise attorneys at Garner, Ginsburg & Johnsen are here to help. Contact our team of lawyers today to understand your legal rights and how this could impact your business.