Binding contracts created by email
03 March 2011
In the recent decision of Nicholas Prestige Homes -v- Neal (2010) the Court of Appeal confirmed that a contract will be validly created by an email exchange between the parties.
The Defendant owned a property that she wished to sell and had unsuccessfully instructed a number of estate agents to sell the property throughout 2006. She entered into discussions with a view to engaging Nicholas Prestige Homes (NPH), also an estate agent. On 24 November 2006 NPH sent Mrs Neal an email stating that it would be appointed on a multi-agency basis until 31 December 2006 and after that NPH would have sole selling rights from 1 January 2007. Mrs Neal was therefore told to dis-instruct all other agents before 1 January 2007. The email attached NPH`s sole and multiple agency terms. The important terms were:
- Both sets of terms required Mrs Neal to pay NPH commission if contracts were exchanged on the property with a buyer introduced by NPH.
- Under the Sole Agency Agreement to commence from 1 January 2007, NPH were to have the sole selling rights to the property for 16 weeks and were to continue until termination by 21 days written notice. No other agency could be instructed during that period.
On 28 November 2006 Mrs Neal replied as follows:
That`s fine, look forward to viewing.
The property was bought in May 2007 by a third party through Plumm Properties who had initially contacted both NPH and Plumm. NPH therefore claimed £10,883 commission. Mrs Neal argued that there was no contract since she had always intended to market the property through various agents and never intended to create a sole agency. However, the Court of Appeal held that the two emails in combination formed a valid and binding contract between the parties and that NPH`s terms initially on a multi-agency and subsequently on a sole agency basis were incorporated. Therefore since Plumm remained instructed until 20 January 2007 and the buyer dealt with Plumm during the period that NPH were supposed to be the sole agent, NPH were entitled to damages for the lost chance in the equivalent of the commission that had been earned of £10,883.Conclusion
The case is significant since it demonstrates that the Courts will treat email correspondence as binding on the parties and that contracts for goods and services can easily be formed as a result. While we always advise our clients to get the terms of their agreements in writing if possible, it is very important in business to consider what it is that you are actually putting in writing so that situations such as the case above can be avoided.
Clarkslegal, specialist Dispute Resolution lawyers in London, Reading and throughout the Thames Valley.
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