Do Emails Between Parties Create a Binding Agreement?
March 11, 2020 by John Freeman
In today’s world, email is a distinctly conversational, informal medium of communication. It is used extensively to relate all types of messages. Those messages may be to send needed information between a client and a professional service provider, personal messages between friends, and messages between businesses which are attempting to establish, among other things, a working relationship. But, are email exchanges effective to create an agreement that is binding on the parties? They can be, but it could depend on the content of the emails and potentially other factors.
EMAILS ARE WRITINGS
Texas statutory law provides that if a law requires a record to be in writing, an electronic record satisfies the law. In addition, Texas case law provides, that in certain circumstances, an agreement can be expressed in multiple writings exchanged between the parties, when those writings pertain to the same transaction or matter. Email exchanges can be such writings, but even emails that refer to a common subject do not automatically establish a binding agreement.
…there are times when email exchanges can establish an agreement but the content and context of the emails matter.DOES CONTENT MATTER?
How many times have you received an email and wondered what the real meaning of it was? Aside from whether the intent of it was meant to be serious, cute, or sarcastic, have you ever questioned what a certain phrase meant or was referring to, and if subsequent email exchanges covered all of the points of a relationship or agreement you were establishing? The answer to those questions depends in large measure on the content of the email exchanges and the understanding that the parties attribute to the statements made, which may not always be clear.
WHAT ABOUT CONTEXT?
Understanding email exchanges may depend on the context in which those exchanges are made. For instance, the exchanges may be between those who have never communicated before, and the parties are beginning to get a feel for each other and how each express what he or she intends to say. Or, it may be that the parties have already established a relationship, or they may already have an agreement, and are communicating regarding working through the agreement. Other documents that impact the parties’ relationship may also bear on the meaning of email exchanges. One of those documents might be a previous agreement the parties have executed.
AN EXAMPLE OF A PREVIOUS AGREEMENT IMPACTING THE PARTIES’ EMAILS
A recent Texas Supreme Court case decided on February 28, 2020, illustrates that the content and context of email exchanges matter. In Chalker Energy Partners III, LLC v. Le Norman Operating LLC, the sellers owned substantial oil and gas working interests worth hundreds of millions of dollars. As a part of the bid and sale process, parties interested in bidding had to sign a Confidentiality Agreement which had a No Obligation clause in it. Essentially, the No Obligation clause stated that no contract or agreement between the parties for the sale of the working interests would be deemed to exist until a definitive agreement had been executed and delivered between the parties. Prior to the deadline to submit a bid, a company (“Company A”) emailed its bid with details and the email bid was made “subject to the execution of a mutually acceptable purchase and sale agreement.” Although the bid was rejected, the sellers emailed a counter proposal, which Company A accepted by email but referred to parts of its previous email which contained the original bid. In the meantime, another company (“Company B”) made a higher bid, and the sellers accepted it. Company A sued claiming it had an agreement to purchase the working interests and that the agreement was established by the email exchanges. The Texas Supreme Court rejected Company A’s argument on the basis that a condition to any deal was that a definitive agreement, as stated by the No Obligation clause of the Confidentiality Agreement signed by the sellers and Company A, was required. The Court stated that the email exchanges showed that a definitive agreement had not been executed and delivered. Thus, the content and context in which the emails were exchanged mattered since there was a previous agreement that impacted the rights of the parties.
Emails are a valuable method of communication. They can frame a relationship and establish an agreement between parties, or they can show that an agreement was not made, or worse, that there are questions as to whether there is an agreement. As the Chalker case shows, litigation can resolve those questions, but it is time consuming and expensive. So, the point is that there are times when email exchanges can establish an agreement but the content and context of the emails matter. A more reliable method to establish an agreement is to consult a qualified attorney who can prepare an agreement in one document that is agreed to by all parties.
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