Email. Casual, quick and efficient – seemingly harmless. Much ink has been spilled in the past 18 months about former Secretary Hillary Clinton’s use of private email accounts, raising questions about emails and the proper handling of sensitive information. More recently, the WikiLeaks’ release of campaign chairman John Podesta’s hacked emails, interestingly, seems to raise more questions about the risk of unconsidered email content than how emails should be stored.
Most of us do not have to worry about the political risks of emails, but as the decisions of the BC Supreme Court and BC Court of Appeal in Vancouver Canucks Limited Partnership v. Canon Canada Inc. show, we all should be more mindful of another risk - the potential legal effect of an email or string of emails. This is particularly true in the context of business negotiations.
In Vancouver Canucks Limited Partnership v Canon Canada Inc., the issue was whether the parties, through a series of emails, had reached agreement on the terms of a new sponsorship agreement even though the parties had not finalized and executed a new agreement.
The trial judge, finding in favour of the Canucks, held that a meeting of the minds had been reached through the exchange of emails and that the parties did intend to be bound by the agreement described in the emails, notwithstanding the lack of a final written and executed agreement. The following are some key reasons relied on by the trial judge:
- Key emails between the parties contained the essential terms of the new sponsorship agreement. Those emails indicated that Canon wanted to continue its sponsorship arrangement with the “same rights and benefits” as before and that the Canucks agreed. The trial judge determined that this phrasing of the emails essentially meant that the parties intended the previous sponsorship agreement’s terms and conditions to form the basis of the new sponsorship agreement. The trial judge found that since the parties were essentially negotiating an extension of a previous sponsorship agreement, the emails indicated agreement on essential terms.
- While it was clear that it was understood by the parties that a formal written agreement would be executed by the parties after review by each party’s legal department, such execution was a mere formality rather than condition of reaching the final agreement.
- The parties intended to be bound by the agreement reached by way of the emails, without the need for the formal written agreement. Sponsorship benefits were implemented by the Canucks and Canon took those benefits notwithstanding that a formal written agreement had not been finalized or executed.
Canon appealed. The Court of Appeal upheld the trial judge’s finding of a binding agreement. Although the Court of Appeal found that the trial judge may have interpreted the use of “same rights and benefits” in a key email too broadly, the Court of Appeal found that this phrasing was merely a reference to the desired sponsorship benefits listed in the relevant email, and that a binding, enforceable agreement had been formed.
It is increasingly common for negotiating parties to exchange information by email that documents the progress of the negotiation of issues, including documents such as meeting minutes, issue spreadsheets, term sheets, letters of intent and letters of award. Emails can make the use and exchange of negotiation aids convenient and efficient, replacing face-to-face negotiations. In some cases, subject-matter experts may exchange emails and reach agreements directly without the involvement of others on their respective negotiation teams. What decisions like the Vancouver Canucks case show is that emails, which may be produced in the high-speed context of negotiations, can later be reviewed by a court at its leisure, to identify if and when binding agreements were in fact reached. Negotiating parties need to be clear, within their own teams, and with each other, as to whether “sub-agreements” or the main overall agreement, can be reached prior to the execution of the final, formal written agreement.
This analysis is not limited to contract formation, but extends also to contract amendment.
Duff v Genesys Laboratories Canada Inc. is illustrative. This case involved an agreement where the plaintiff assisted the defendant in its effort to obtain financing. An issue in dispute was whether the term of that agreement and its “tail period” (a period of time after termination during which the plaintiff would receive compensation if the defendant accepted funds raised through the plaintiff’s efforts from entity on the “Approved List”) had been amended so as to entitle the plaintiff to claim compensation in respect of a particular financing. Clause 10 of the agreement provided that the agreement “may be amended only by a written supplemental agreement agreed to by both parties in writing”. No formal written supplemental agreement had been prepared or signed by the parties. The court found that:
- An oral agreement between the parties to extend the agreement (and, notably, conduct on the part of both parties consistent with that oral agreement) by itself was not sufficient to satisfy Clause 10. (A plain reading of Clause 10 requires something in writing from both sides.)
- A written exchange between the parties (partly by email and partly by letter) in which the defendant appeared to affirm the extension of the term, consistent with the oral agreement, was sufficient to satisfy Clause 10.
It is worth noting that in the Duff case, the defendant conceded that an exchange of email would have been sufficient to satisfy Clause 10 – no signed formal document was required.
Similarly, in C&S Associates UK Ltd v Enterprise Insurance Company Plc,  EWHC 3757, emails effectively amended the contract without strict compliance with the amendment provision. The parties to a services contract exchanged a series of emails that, among other things, increased the fees applicable to specific services. The emails expressly contemplated recording the parties’ agreement in a formal amended contract. Similar to the Canucks case, the revised fees were applied and actually paid after the exchange of emails, even though no formal amending agreement was ever prepared. The services contract contained a standard “no amendment” term that provided: “Any variation of this Agreement shall not be effective unless made in writing and signed by or on behalf of each of the Parties to this Agreement.”
In finding that the requirements of the “no amendment” provision were satisfied through the use of emails, the court remarked that there was “no reason as a matter of construction of [the “no amendment” clause] why documents in electronic form, in particular an exchange of emails, signed on behalf of both parties should not satisfy the requirements of the clause, provided of course that the other requirements of contract formation and variation such as an intention to be bound are also present.” The court also found that the parties objectively intended to be bound, in part because the emails used “offer and acceptance” language and did not specifically use “subject to contract” language to negate an intention to be bound, and the amended terms were sufficiently certain as to be given effect.
What these cases indicate is that, as a matter of law, it is not true that emails are only informal communications and somehow different than other forms of formal written correspondence. The courts are willing to look at emails as written communication to determine the intentions of the parties, including if and when an agreement was actually reached, and the terms of such an agreement. If, however, the parties to a negotiation agree at the outset that no agreements will be reached or enforceable unless and until a final, formal written agreement is executed by the negotiating parties, then the courts will respect that approach, providing that the parties themselves conduct themselves accordingly and do not, for example, commence to take action or benefits on the basis of a new agreement prior to the execution the final, formal written agreement.