Email is great – without it you probably wouldn’t be reading this newsletter. As a form of communication it is invaluable. In a commercial context it can be a useful tool in carrying out speedy negotiations. For example, it is a highly effective way for sales teams to communicate matters such as availability and prices to a potential buyer.
However, just as you might not want to enter into a contract on the basis of a telephone conversation alone, it is likely that you would not want an exchange of emails to form the basis of a contract. There is a strong chance that vital terms would not be referred to and you may want to make sure that the terms of any such contract are approved before your business becomes committed.
It is possible to enter into a contract by email. If you want to avoid this you must make it clear that your email is not intended to have binding legal intent. A common way of achieving this is to include a phrase such as “subject to contract” in a disclaimer within your business emails. This will allow you to demonstrate that it was not the intention that your business would be contractually bound by such emails.
However, use of a “subject to contract” disclaimer is not foolproof. The temptation is to include the disclaimer in an automatically generated footer, usually in a small font. This may be appropriate and act as an effective disclaimer in some circumstances. However, the following risks will still apply:
- The statement may not come to the recipient’s attention if it lacks prominence, for example because it is in a small font or appears only at the beginning of a chain of emails. A disclaimer which is brought clearly to the recipient’s attention is far more likely to be effective.
- The disclaimer can still be undermined by inconsistent conduct. For example, notwithstanding the presence of the disclaimer, the sales team could exchange a flurry of emails with a customer which included statements consistent with a binding agreement being reached and contrary to the disclaimer. The customer could argue that the statements by the sales team had the effect of waiving the disclaimer.
- The disclaimer could be forgotten about and take effect when you do not want it to! There may come a point when you are in agreement with the other party and want an email confirming this to have legal effect. Inclusion of the disclaimer could prevent this.
The best way to manage these risks is to adopt a disclaimer which is appropriate to the value of the potential contract. Where there are to be sensitive negotiations over a valuable agreement it would be best to tailor a disclaimer specific to that matter. This will ensure that the disclsimer is sufficiently prominent. The courts will also give more weight to this type of bespoke disclaimer if the other party tries to argue that inconsistent statements by a member of your staff have overridden the disclaimer and formed a contract. It is also difficult to include such a clear disclaimer by accident!
There are a number of variations on the “subject to contract” wording which you may wish to use, depending on what kind of use you make of business emails. We can help make sure that any disclaimer you do use is fit for purpose and advise how best to use it.