The recent Court of Session case of Baillie Estates Limited v. Du Pont (UK) Limited, decided in June 2009, highlights the danger of negotiating a contract by email.
Background: Du Pont (UK) Limited ("Du Pont") sold a printing machine to Baillie Estates Limited ("Baillie") in November 2006. Baillie raised an action under the Sale of Goods Act 1979 asserting that they had a right to reject the printing machine as it was not of satisfactory quality. Du Pont argued that this case could not be heard in a Scottish Court as their standard terms and conditions stated that "The Courts of England shall have exclusive jurisdiction over any dispute which may arise." Baillie however argued that these standard terms had not been incorporated into the contract between the parties.
Issues: On 17 November 2006, Du Pont sent an email to Baillie with a proposal setting out a breakdown of the cost of the printing machine. Baillie replied to Du Pont on the same day with the short reply of "Go ahead." Du Pont sent another email to Baillie on 19 November 2006 stating, "It's on the way. See you tomorrow. Thanks again."
On 20 November 2006 Du Pont emailed Baillie including their "standard terms and conditions of sale". It is these terms and conditions that Du Pont argued had been incorporated into the contract with Baillie.
Du Pont argued that the email exchanges on 17 and 19 November were of an informal nature which were not intended to be a binding contract and that Baillie knew that Du Pont still had to carry out a site survey and credit check, which had the potential to prevent a contract coming into existence. (They argued that businessmen would expect a supplier to seek to incorporate its standard terms of sale.)
Baillie argued that the parties had entered a binding contract when Du Pont confirmed that the printing machine was "on the way". The contract comprised the documentary exchanges on 17 and 19 November.
Decision: The principal issue for the court to consider was whether the parties had entered into a binding contract on 19 November 2006, before Du Pont sent their standard terms to Baillie. The court disagreed with Du Pont's argument, stating that the informal nature of the email communications did not point to an intention to postpone the formation of a contract. The court stated that a "reasonable businessman" would consider that Du Pont were offering to enter into a binding agreement.
Although Du Pont had stated that they were required to carry out a site survey and credit check prior to the formation of the contract, the court stated that Baillie had no knowledge of Du Pont's internal procedures. In this regard they agreed with Baillie's argument and construed the intentions of the parties in an objective way.
Conclusion: Conducting business correspondence by email can be convenient and is common in today's technological age. This case however highlights the danger of entering into a contract through email correspondence when one party had not intended to do so. Courts will construe contracts in an objective way, so although you may not think you have entered into a contract, the court may decide otherwise!