Implications of using email to negotiate agreements

The mobility and fast-paced nature of today's world means that businesses are relying on technology more than ever to conduct business. While the use of technology in conducting business has provided many benefits, the British Columbia Court of Appeal in Vancouver Canucks Limited Partnership v Canon Canada Inc, provides an important reminder on the implications of using email to negotiate agreements.

The Court of Appeal held that through a series of emails, the parties had entered into a multi-year sponsorship agreement. In reaching its decision, the court applied three factors to determine whether a binding agreement had formed based on a series of emails between the parties:

  1. whether a reasonable bystander would conclude the parties intended to be bound by the terms of the contract emails;
  2. whether the emails included all essential terms; and
  3. whether the agreement was conditional on subsequent review and approval, including execution of a formal contract, or whether execution was just a formality.

Factor 1: Intention of the Parties

Canon took the position that the emails should be construed as an agreement to agree, and that nothing discussed would take effect until legal and executive personnel for each party had prepared and approved a formal Sponsorship Agreement. The court disagreed.

The court held that the language used in the emails indicated the Parties intent to be bound by the agreement formulated via email. For example, in one email the Canucks stated, "it is quite frequent that we will enter into a season moving forward on agreements that have been reached by way of exchange of e-mails" Further, the court also considered the parties' long-standing relationship, and that the "genesis and aim of the transaction" was not the negotiation of an entirely new sponsorship agreement, but the renewal or extension of their previous agreement.

Factor 2: Essential Terms

The court determined that because the contract was a renewal agreement, it established and cemented in the parties' minds many of the terms under which the new agreement would be made. Again, the court focused on the language used in the emails, including one in which Canon stated they wanted to "continue their sponsorship with the same rights and benefits that were in place", whereby Canon cut and paste the sponsorship benefits from the first agreement. The combination of the language used in the emails and the fact that this was a renewal agreement, resulted in the court finding that the parties' agreed on the essential terms of the contract.

Factor 3: Contract Formalities

The court determined that the language used in the emails represented a final agreement and having each party's respective legal representatives draft a final Sponsorship Agreement was merely a formality. In making this determination, significant weight was placed on the fact that the emails did not contain a statement making the contract terms conditional on formal documentation. In conclusion, the court held that the execution of a formal agreement would simply set out the terms of the agreement the parties had already entered into.

Key Takeaways:

  • Essential terms negotiated and accepted over text messaging or emails may constitute a binding agreement between parties.
  • To ensure an agreement negotiated over email or text messaging is not binding until a formal agreement has been drafted and signed by representatives for each party, include a statement at the outset stating all terms are conditional on formal documentation prepared by legal representatives.
  • While the nature of the agreement is not one of the factors outlined by the court, it appears that it will be taken into consideration in determining whether a binding agreement was formed through a series of emails or text messages. Here, the court considered renewal agreements, whereby many of the essential terms will remain the same, versus an entirely new contract where all essential terms need to be negotiated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.