On 9 March 2012 in Golden Ocean Group Limited v Salgaocar Mining Industries PVT Ltd  EWCA Civ 265 the Court of Appeal held that a contract that has to be in writing, and signed, had been created by e-mail. This was a guarantee that had to comply with section 4 of the Statute of Frauds 1677. Although the direct significance of the case is in respect of contracts for guarantees, it is also a potential early warning of how the law in respect of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 could develop.
Section 4 of the Statute of Frauds now only applies to contracts for guarantees and in its modern form states "No action shall be brought whereby to charge the Defendant upon any special promise to answer for the debt default or miscarriage of another person unless the Agreement upon which such Action shall be brought or some Memorandum or Note thereof shall be in Writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised."
As the name suggests this is a shipping case where Salgoacar Mining Industries (SMI) claimed not to be bound by the guarantee it was claimed to have given to Golden Ocean of a 10 year charterparty. Both the charterparty and the guarantee were claimed to have been concluded in a series of e-mails. SMI pursued various issues but the material ones were that:
- There was no single document which could be identified as the contract of guarantee.
- The final email did not refer to any of the terms of the guarantee - nor even save inferentially to its existence.
- The final email contemplated the creation of a future instrument, a formal charterparty document, which would be the one instrument comprising a contract of guarantee satisfying the statutory requirement for an agreement in writing.
- The final email was not signed. It contained no more than a salutation.
The Court held that there was nothing in section 4 which meant that the required contract, note or memorandum had to be comprised in a single document. It also held that reference to a future document being created encompassing the terms of the guarantee would only lead to the conclusion that there was no present binding guarantee if there was a shared intention that the creation of the later document was a condition precedent. In relation the signature the final e-mail of the chain was concluded “Guy”. Lord Justice Tomlinson (in the only judgment) stated “In my judgment Mr Hindley put his name, Guy, on the email so as to indicate that it came with his authority and that he took responsibility for the contents. It is an assent to its terms. I have no doubt that that is a sufficient authentication.”
As to the fact that the “signature” was on only one of the several e-mails comprising the contract Lord Justice Tomlinson said “Naturally I accept that the email at B106 is not itself the contract of guarantee. I have no doubt however that the signature on that document of Mr Hindley, assuming his authority, is properly regarded as authentication of the contract of guarantee contained in it and the other document or documents in the sequence to which I have already referred.”
Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 is of course different to section 4. However, in noting these differences Lord Justice Tomlinson stated:
“There are two obvious points to be made. First, section 4 of the Statute contains no similar language requiring all the terms of the contract to be incorporated in one document. Secondly, the purity of this requirement is in any event compromised by sub-section (2) which permits incorporation of all the terms by reference to some other document.”
That comment and the wider judgment will certainly be taken as encouragement that a sequence of e-mails (whether or not in a single “thread”) can satisfy section 2.
The simplest way to prevent an enforceable contract arising in that way would be to head the e-mails “subject to contract”.
For the full transcript click here.