Binding Contract Formed by Exchange of Emails
29th January, 2020
Whether an exchange of emails between parties amounts to a binding contract is often a source of dispute.
A contract requires the following:
- Intention to create legal relations; and
- Certainty of terms.
This was recently at issue in the case of Athena Brand Ltd v Superdrug Stores Plc  EWHC 3503 (Comm). The Court concluded that an email exchange formed a binding contract.
The Court concluded that an email exchange formed a binding contract.
Extracts from the emails in question are below:[Email from representative of Athena]
…Just to confirm, you are placing orders and committing to the yearly quantity against all lines detailed below based on the ROS you have provided… We have agreed that you will call off stock, in exactly the same way as HiGlow, on an ad hoc basis within a 12 month period…
If you could drop me a note to confirm all of the above ASAP that would be great, I shall then be in a position to push the button this end…”[Email from representative of Superdrug]
Please go ahead with the below, happy on Nature’s Alchemist…”
Superdrug took first delivery of the products in October 2017 but they did not sell as well as originally anticipated. As a result, Superdrug emailed Athena on 7 February 2018 to inform them that it would be unlikely that it would make any further orders for that product. Superdrug did not place any further orders.
Athena’s case was that the emails demonstrate a clear agreement committing Superdrug to purchase the minimum quantities of the products, at the specified prices and to be called off over a 12 month period. Accordingly, Athena sought its shortfall in the minimum quantities, which it calculated at just under £980,000.
Superdrug’s defence was:
- The emails do not give rise to any agreement. Superdrug was not committed to purchase any products until it issued a purchase order. No purchase order was issued and therefore it was not bound to purchase the products for the minimum quantities;
- If there was an express agreement, there was no intention of the parties to create legal relations; and
- Mr Iain Sisson, the Buyer acting on behalf of Superdrug at that time, did not have actual or ostensible authority to commit to any such contract in any event.
The Court concluded the emails were a clear agreement. Mr Sisson was held out as a Buyer of Superdrug authorised to negotiate terms of trade, with no relevant restriction identified to Athena. The Court concluded:
“There is nothing in the history of the negotiations capable of showing that Athena or an objective observer would have understood that his apparent agreement to a minimum quantity was not or could not be taken as being what it seemed or that in making it he did not intend to bind Superdrug….
…There is no doubt that Athena relied on Mr Sisson’s confirmation as binding Superdrug, and nothing in this evidence adduced is capable of showing that it acted unreasonably in doing so.”
This case demonstrates the care that should be taken when corresponding with another party, whether that is verbal exchanges, or seemingly informal exchanges in writing including emails or, increasingly, other means of electronic communication.