When Emails Form a Binding Contract
An email exchange in the course of negotiations for the sale and supply of products formed a legally binding contract, the High Court has found. Businesses are reminded, once again, of the need to take care when relying on emails to negotiate and discuss terms and conditions.
In Athena Brands Ltd v Superdrug Stores1, the claimant was a cosmetics manufacturer who took on high street giant Superdrug – and won. It alleged that through emailed correspondence, a contract with Superdrug had clearly been constituted. Under this contract, Superdrug had agreed to buy specified minimum quantities of various cosmetic products to be sold under the brand Natures Alchemist over a 12-month period from September 2017. The sale price would have been just over £1.3m.
However, Superdrug stopped placing orders when sales were slower than expected. The claimant took proceedings claiming almost £980,000 in damages.
Superdrug resisted the claim on the basis that the emails did not give rise to any such agreement; and even if there was, there was no intention between them to create legal relations. The retailer also argued that its buyer in the email chain had no actual or apparent authority to enter into a contract on behalf of Superdrug.
The High Court agreed with the claimant, finding a clear acceptance on the part of Superdrug of a commitment to buy annual quantities of product. Specifically, it had no doubt that the claimant relied on the Superdrug buyer’s confirmation as binding the company and nothing in the evidence put forward was capable of showing the claimant acted unreasonably in doing so.
A key issue for the court was that although Superdrug had policies in place governing the negotiating of purchase contracts, the employee concerned failed to make the claimant’s representative aware of them. He was held out as a buyer authorised to negotiate the terms of trade, and no relevant restriction was identified to the claimant. The claimant was therefore entitled to assume the buyer had the necessary authority to negotiate and that he intended to bind Superdrug.
What does this mean?
There are a number of lessons here for businesses but two stand out as particularly important.
Exercise caution when negotiating by email. If commitments are made or requested by email, respond with care. If there is no intention to bind the business to a legal contract at a given point, make sure the wording is clear and unambiguous and that this is fully communicated and understood by the other side - else a costly dispute can arise.
Make sure your staff understand the limits to their authority when acting on your company’s behalf, and that they communicate these to anyone with whom they are in discussions. Implement appropriate policies setting out the accepted process for representatives negotiating agreements on your behalf and review if necessary.
Commercial dealings between businesses can be fraught with complexities and specialist legal advice from corporate and commercial solicitors should always be sought if there are any concerns.
1Athena Brands Ltd v Superdrug Stores Plc [2019] EWHC 3503