Using Email To Create A Contract
6/30/2008
There are a lot of ways to create a contract. Not surprisingly, courts are now beginning to find that an exchange of e-mails can be sufficient.
Arthur Stevens sold his public relations firm to Publicis
Unfortunately, financial problems occurred. PDNY failed to meet revenue and profit targets and it lost its largest client, Pitney Bowes. Stevens was removed as CEO of the business, and was given several options, including leaving the firm Bloom, the chairman and CEO of Publicis
“Thus I suggested an allocation of your time that would permit the majority of your effort to go against new business development (70%). I also suggested that the remaining time be allocated to maintaining/growing the former Lobsenz Stevens clients (20%) and involvement in management/operations of the unit (10%). This option, it would seem, is in your best interest because it offers the best opportunity for you to achieve your stated goal of a full earn-out. When I suggested this option, you seemed to have considerable enthusiasm for it and expressed your satisfaction with it so I, of course, assumed that it was an option you preferred.” (emphasis added.)
The next day, Stevens e-mailed: “That being said, I accept your proposal with total enthusiasm and excitement….” “I’m psyched again and will do everything in my power to generate business, maintain profits, work well with others and move forward.” Bloom replied, “I am thrilled with our decision.”
The court found that the parties had agreed in writing to modify Stevens’s duties under the employment agreement:
The e-mails from Stevens constitute “signed writings” within the meaning of the statute of frauds, since Stevens’s name at the end of his e-mail signified his intent to authenticate the contents. Similarly, Bloom’s name at the end of his e-mail constituted a “signed writing” and satisfied the requirement of the employment agreement that any modification be signed by all parties.
Stevens v.
In another case, a settlement agreement was hammered out during a trial. After three days of submitting evidence, Basis Technology Corporation (“Basis”) and Amazon.com (“Amazon”), agreed upon settlement terms by an exchange of e-mails messages between counsel.
They reported the settlement orally and on the record to the trial judge. The court entered an order of dismissal. The order directed the parties to file an agreement for judgment or stipulation of dismissal within thirty days.
Then the parties encountered disagreement. Basis moved to enforce the settlement agreement.
Basis’s counsel had sent the following e-mail to Amazon’s counsel:
From: [Basis Counsel]
To: [Amazon counsel]
Subject: Basis v. Amazon-Settlement Terms
[Amazon counsel]-this e-mail confirms the essential business terms of the settlement between our respective clients….Basis and Amazon agree that they promptly will take all reasonable steps to memorialize in a written agreement, to be signed by individuals authorized by each party, the terms set forth below, as well as such other terms that are reasonably necessary to make these terms effective.
1. Amazon shall pay to Basis, within a period of days after execution of a settlement agreement, the sum of $275,000 (
2. Amazon shall exercise its conversion rights, and in so doing shall convert all Basis Series A Preferred Shares to Common Shares, pursuant to the terms and conditions set forth in the Series A Preferred Stock Purchase Agreement dated as of
3. Amazon shall relinquish all rights held as a holder of Preferred Shares, including but not limited to the right to designate a member of the Basis Board of Directors.
4. Basis shall be permitted to resume use of the Amazon name and logo on its website and in its printed marketing material, in the manner and degree in which Basis has been making such use up until recently taking steps to remove references to Amazon from the Basis website (the agreement will spell this out to everyone’s satisfaction).
5. Amazon agrees that Basis shall be removed from any and all ‘do not use’ lists or ‘blacklists,’ again on terms and conditions to be spelled out in more detail in the settlement agreement.
6. Amazon and Basis will exchange comprehensive releases, which will include all claims that were brought, or that could have been brought, or that have been threatened to be brought, by either party against the other. Once again, the settlement agreement will provide further clarity on this point.
[Amazon counsel], please contact me first thing tomorrow morning if this e-mail does not accurately summarize the settlement terms reached earlier this evening.
See you tomorrow morning when we report this matter settled to the Court.
(emphasis added).
Amazon’s counsel replied with a one-word reply: “correct.”
After hearing, the judge ruled that the e-mail exchange constituted an agreement on all material terms and that there was nothing ambiguous about the agreement. She entered judgment specifically enforcing the first five numbered provisions in the e-mail. Amazon appealed.
The appellate court examined the text of the e-mail for the “incompleteness” and “indefiniteness” claimed by Amazon. The court pointed out that contract provisions are not ambiguous simply because the parties have developed different interpretations of them.
As indication of incompleteness, Amazon identified references in the e-mails (i) that the parties “will take all reasonable steps to memorialize [the terms] in a written agreement”; (ii) that duly authorized individuals will sign the subsequent writing; (iii) that details of the removal of Basis from any Amazon “blacklist” will appear in the settlement agreement; and (iv) that the settlement agreement will provide further clarity as to the matter of mutual comprehensive releases.
However, in the preface to the enumerated terms, Basis’s counsel stated that the “e-mail confirmed the essential business terms of the settlement between our respective clients,” and that the parties agreed that they would promptly take all reasonable steps to memorialize those terms. Amazon’s lawyer concisely responded, “correct.”
The court of appeals said the “essential business terms” had been resolved. The parties were merely proceeding to memorialize the settlement terms, not to create them. There was little need for further clarity.
In reaction to the invitation to identify any inaccuracies before the trial court appearance, Amazon’s counsel had identified none. Nor did Amazon hypothesize to the trial judge any plausible material omissions.
The appellate court concluded that the trial judge correctly ruled that the e-mails constituted a sufficiently complete and unambiguous statement as to the terms of the agreement as a matter of law, and that both parties intended to be bound by that communication of settlement terms. Basis Technology Corp. v. Amazon.com Inc.,
Many commentators have noted that people tend to be informal, and indeed sometimes careless, in e-mails. Cases like those discussed in this article emphasize that point. When discussing a possible business deal in an e-mail, the writer should be sure to disclaim any intent to create a contract if that is not what is intended.
