Careless emails form contracts
High Court considers whether “Please go ahead..” email was a binding contract
In the recent case of Athena v Superdrug, the High Court highlighted the danger of signalling an agreement to something inadvertently where both parties do not share a common intention to create a binding contract.
Some innocent emails…?
When Ms Whincup, an employee of Athena (a supplier of pharmaceutical products) sent an email to Mr Sisson (an employee of Superdrug) asking him to confirm that a stated minimum number of orders was being placed, he responded saying “please go ahead with the below” (referring to previous emails in the correspondence chain which set out details of the order).
Superdrug subsequently tried to argue that the email had not formed a contract. In an application for summary judgment, Athena argued that Superdrug had no reasonable prospect of success at trial.
Which formed a binding contract…
Superdrug argued that no contract had been formed, for three reasons:
- firstly, the wording of the emails did not give rise to an agreement – Superdrug had a clear purchasing procedure which had not been followed;
- secondly, the parties had no intention to create legal relations; and
- thirdly, Mr Sisson, as an employee of Superdrug, did not have authority to conclude supply contracts on behalf of the company. As Athena had applied for summary judgment, they had to prove that Superdrug’s arguments had no real prospect of succeeding.
The question for the court was whether a reasonable person would interpret the chain of email correspondence between Ms Whincup and Mr Sisson as a binding contract. The court also had to consider whether any of Superdrug’s contrary arguments were sufficient to convince a reasonable person that no contract was formed.
The court decided that none of Superdrug’s defences had a real prospect of success. As Mr Sisson’s words blatantly pointed towards the formation of a binding contract, Superdrug were fighting an uphill battle. Further, as Mr Sisson was being held out by Superdrug as a buyer who was authorised to conclude contracts for the purchase of products, there was no way Athena could reasonably know that he did not actually have the authority to do so. There was no doubt that the email exchange between the parties was clear evidence of an intention to create a binding commercial contract.
Avoid the costs and impact to your business of this scenario with our tips for businesses:
- Clarity is key! Where informal emails are being exchanged prior to the creation of formal commercial contracts, ensure that they are clearly marked to prevent the accidental creation of a binding contract. Words as simple as ‘this is not a binding contract’ or ‘SUBJECT TO CONTRACT’ in the header of the email will certainly help with any arguments later!
- Make sure that all employees in your company are suitably trained to avoid how best to avoid inadvertent contracts in everyday business communications and in your company’s own procedures.
- Put yourself in the other party’s shoes: if it would appear to them that the person emailing them has authority to bind the company and the intention to enter into a contract, then you are less likely to be able to get out of an inadvertent agreement.
At EMW we can support you with training programs for your staff on how to avoid the pitfalls of such communications and ensure that contracts are never entered into inadvertently. If you would like to discuss this with us, or have any other questions relating to these issues, please contact Olivia Morton.
Athena Brands Limited v Superdrug Stores Plc  EWHC 3503 (Comm)
This article was prepared by Tom Revitt.