E-mails: Avoiding Unintended Agreements

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By Hafez Daraee

For parties who wish to communicate quickly but indirectly, no other medium is as efficient or as effective as an e-mail. But, e-mails can have unintended consequences, specifically by forming an unintentional and potentially binding contract.

Fundamental Elements of a Contract

Under Oregon law, as in most states, a contract is formed only if the parties involved have a "meeting of the minds" on the essential terms. This simple phrase means that the parties have reached a consensus on the necessary elements of the transaction, such as quantity, price, volume, etc. There are other required elements to a contract but without a basic meeting of the minds, there is no consensus and thus no contract.

Electronic Transaction Laws

In 2000, the U.S. Congress recognized that electronic communication was well on its way to becoming the most common method of business communication. Lawmakers realized that agreements were being formed over the Internet and through e-mails. In order to facilitate transactions electronically and to maintain orderly transaction of business across state lines, the Electronic Signatures in Global and National Commerce Act ("E-SIGN") was passed.

E-SIGN provides that a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form, or because an electronic record or electronic signature was used in its formation. E-SIGN specifically preempts state laws that are inconsistent with itself, while exempting certain contracts or records from its coverage, such as wills, trusts, and matters of family law.

Oregon Statutes

Most states, including Oregon, have followed the federal government. In 2001, the Oregon Legislature enacted ORS Chapter 84, more commonly known as the Oregon Uniform Electronic Transactions Act ("OUETA"). Like E-SIGN, on which it is generally modeled, OUETA seeks to validate transactions that are conducted primarily in an electronic format.

OUETA does not purport to supersede E-SIGN; it attempts to facilitate electronic transactions by providing specific guidelines for how such transactions and agreements can be formed under Oregon law. For example, OUETA applies only to transactions in which the parties have agreed ahead of time to be bound by the provisions of this act. Like its federal counterpart, OUETA does not apply to certain agreements, regardless of the parties' intent, such as wills, trusts, codicils, or other agreements that are required by another statute to be in a specific form.

Clarity

The single most important precaution any business should take, in the face of laws such as E-SIGN and OUETA, is to be very clear when communicating with customers or market partners. Otherwise, e-mails could easily create unintended consequences.

For example:

Buyer: Do you still have those rubber boots I just purchased from you? Lots of clients are asking for them. I would love to have another order like the one you just filled. Can you help?

Seller: Sure, we still have lots. I can have them out to you right away.

Buyer: Thanks for the info.

It is difficult to tell whether the buyer and seller intended to form an agreement or were merely exchanging information. But if one of them were to take the position that their e-mails constituted an agreement, one could argue, compellingly, for either result (yes, there is an agreement; no, there is no agreement). What is certain, however, is that if buyer or seller pursues the issue, the cost of resolving this dispute will reduce everyone's profits and will damage business relations.

When composing or responding to e-mails, it is very important to consider whether the e-mail or a series of e-mails could be viewed as having formed a contract. Policies and practices emphasizing the use of qualifiers or disclaimers in e-mails can prevent the creation of an unintentional agreement. For example, phrases such as "subject to review by client" or "not binding until deposit is received" or even, "contingent upon receipt of a fully executed written agreement" demonstrate an intent not to be bound. Conversely, one-word responses such as "agreed," "correct," or "accepted" should be avoided because these words can be viewed as demonstrating acceptance, especially when e-mails contain essential terms and comply with E-SIGN or OUETA.

Because e-mail communication is now the norm, parties must be especially aware of and vigilant about unintended consequences of their communication.

Winter 2012

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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