Case law: contracts by email

A recent case has highlighted the need for businesses to be vigilant when concluding contracts by email.

In this case, an email containing the offer of a personal guarantee of £25,000 was sent by the director of one company to another company that was seeking to wind it up over unpaid debts; when the other company tried to enforce the personal guarantee, the High Court judge ruled that there was no 'signature', as required by the legislation relating to personal guarantees, despite the presence of the sender's email address in the header of the email. However, the judge confirmed that, if someone with the requisite authority had typed his name or initials in the body of the email, that would have been sufficient to make the offer enforceable.

Existing case law makes it clear that contracts can be made by email in the same way that they can be made face to face, in a letter or on the telephone. Even if your employee does not have authority to make or accept an offer, you will be bound if your employee has:

• 'actual' authority, because you have authorised him to make contracts of this type - formally in his job description, informally in conversation, or by implication; or
• 'usual' authority, because someone in his position can usually enter into this type of contract; or
• 'ostensible' authority, because you have done something that entitles a third party to think your employee has authority, and the third party relies on it.

Immediate