HOW TO: CONTRACTS VIA EMAIL
10.26.2020
By: Harrison Wicker
The average office worker sends out 40 and receives 90 work-related emails each day.
The ease of use and speed of transmission makes email a useful tool. It allows for quick communications between suppliers, sub-contractors, clients, and more. It is no surprise that you might use email as a way to negotiate and solidify deals.
However, the question is: does it actually work? And can they legally work?
REQUIREMENTS FOR CONTRACTS
For a contract to be valid, three elements must be present:
An offer.
Acceptance of that offer.
Consideration.[1]
Acceptance of an offer may seem simple enough; however, in the context of an email (or text message) chain, acceptance may not be that straight forward.
Below are two scenarios showing the complexity of such agreement.
SCENARIO 1: ACCEPTANCE OF THE OFFER
The sub-contractor never hears back from the contractor. The next Friday, the sub-contractor shows up ready to paint the house; however, the contractor has already hired another sub-contractor who painted the house on Thursday, the original day requested.
It is likely, in this case, that the contractor will not be required to pay the sub-contractor, even for the expenses he incurred.
Here, the sub-contractor’s statement functions, not as an acceptance or a rejection, but as a counteroffer.[2]
A COUNTEROFFER IS AN OFFER THAT CREATES A POWER OF ACCEPTANCE IN THE OTHER PARTY.[3]
Here, the sub-contractors statement, “Sure, but it will have to be next Friday,” not acceptance but instead an offer to the contractor. To ensure a valid contract is formed, the contractor needs to affirmatively accept that offer.
One solution might be the creation of a contractual document that is sent as an attachment to the email, signed, and returned to all parties. However, if a party wishes to a create a contract through a chain of emails, the party must send and receive confirmation of acceptance.
SCENARIO 2: ADDITIONAL TERMS
The next week the sub-contractor shows up to the job site with contractor-provided Brand Z siding to install, but the sub-contractor refuses to proceed.
In this situation, no valid contract was formed. In the acceptance email, the contractor added a term and therefore the contractor must supply Brand X siding, which was not in the original contract. This means that the offer and acceptance did not ‘mirror’ each other and no valid contract exists.
IN A CONTRACT FOR SERVICES, IF THE TERMS BETWEEN THE OFFER AND ACCEPTANCE ARE DIFFERENT, THEN NO VALID CONTRACT HAS BEEN FORMED.[4]
In other words, if the acceptance contains different terms OR additional terms than the offer, the contract is not valid and no agreement can be enforced.
The moral here is much the same as in the situation above. The best practice would be to create a document that is a formal written agreement and have both parties sign it. However, in the absence of such an agreement, in a circumstance such as the one above, ensure that the other party affirmatively consents to the additional term for the contract to be enforceable.[5]
[1] See Copy Prods., Inc. v. Randolph, 62 N.C. App. 553, 303 S.E.2d 87 (1983). (The essential contract elements are offer, acceptance, and consideration).
[2] See Corbin on Contracts § 3.36 (2020). (In one respect a counter-offer differs from a rejection in its legal effect).
[3] See Russell v. United States, 320 F.2d 920, 162 Ct. Cl. 544 (1963). (A counter-offer creates a new power of acceptance, where as a rejection of an offer does not).
[4] See Iselin v. United States, 271 U.S. 136, 46 S. Ct. 458 (1926). (“It is well settled that . . . an acceptance upon terms varying from those offered, is a rejection of the offer, and puts an end to the negotiation, unless the party who made the original offer renews it, or assents to the modification suggested”).
[5] See Corbin on Contracts § 3.37 (2020). (“If the terms of the response to the offer deviated from the offer in any manner the response was not an acceptance but a rejection of the offer and a counter-offer that created a new power of acceptance in the original offeror”).
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