“Thumbs up”: Emoji, informality, and risk of inadvertent contracting

Informality in contracting

We’ve reported previously on the risks associated with informal contracting (an increasingly common phenomenon), and tracked the development of the law associated with electronic signatures and execution of documents.

The latest indications are that the use of emojis in correspondence could represent a new potential pitfall for contract negotiators.

Commercial parties will be aware that the fundamental elements of a contract:

• offer
• acceptance
• consideration
• intention to create legal relations
• certainty of terms

all of which are required to form a legally binding contract in England and Wales.

Whilst clear, formal, fully agreed, and completed legal documents are the ideal way to contract, contracts can arise informally. This can happen in correspondence, for example, or by conduct through a course of business dealings.

Recent international case law (see below) suggests a new area of informality risk – i.e., that use of emojis in correspondence associated with contractual negotiations and everyday business practice can evidence intention to create legal relations and can constitute acceptance of a contractual offer.

Electronic signatures and the UK position

Commercial parties will also be aware that, in the UK, electronic signatures are valid.

Common law doesn’t prescribe any particular form or type of signature.

Instead, the relevant question is whether the method of signature adopted demonstrates an ‘authenticating intention’. In determining this, the courts adopt an objective approach considering all of the surrounding circumstances.

The courts have, for example, held that signing with:

• an “X”
• initials
• any other electronic mark
• an automatically-generated e-mail signature
• clicking tick box on a website

are all capable of demonstrating authenticating intent, and of therefore amounting to valid signatures.

Emojis and informality: What are the risks?

Taken together:

1. the lack of required formality when it comes to contract formation and electronic execution
2. the increasing use, in the commercial context, of informal language, text abbreviations and even emojis

can result in contracts being formed, and terms being agreed, inadvertently.

Why is South West Terminal v Achter Land of interest?

The recent Canadian case of South West Terminal Ltd v Achter Land involved the application of basic contractual principles combined with modern business practice and up-to-date law on electronic signatures. In it, the court held that a ‘thumbs up’ emoji constituted valid acceptance of a contractual offer.

Background

After discussing and agreeing to a supply contract over the phone, a representative of the seller texted a photo of the contract along with the message: “Please confirm the contract”.

The buyer responded with a ‘thumbs up’ emoji.

At a later stage when a dispute had arisen, the buyer alleged that there was no valid contract – the thumbs up had merely been to acknowledge receipt of the message, not to indicate acceptance of the offer to form a binding contract.

The court looked at the prior course of dealings between the parties, during which contracts had been offered and accepted and conducted on a very informal basis several times before, including via text message.

An important detail was that the two parties had a history of contracting using informal language, such as “Yup”.

The court applied the objective test and concluded that the reasonable person would believe the thumbs up emoji to be the confirmation or acceptance of the contract on the offered terms, and not merely an acknowledgement of receipt.

Although the case is Canadian, indications are that the same would apply here in the UK.

The emoji is likely to be the latest on the list of electronic marks which, subject to the authenticating intent test, can constitute a valid signature, and can therefore evidence intention to create legal relations and/or acceptance of a contractual offer.

Informality in business: What practical advice arises for commercial contract negotiators?

Before undertaking any work, supplying any goods or services or incurring any significant expenses or obligations, any business involved in discussions concerning potential commercial arrangements should:

• Review their negotiating practices and be aware of the risks associated with informality – in particular in relation to negotiation correspondence.

• Educate staff as to the risks of inadvertent contract formation.

• Where possible, avoid ‘informal’ communication such as emojis and other text abbreviations when dealing with contracts and commercial negotiations/dealings.

• Consider adding a pro-forma note below e-mail signatures to disclaim the possibility of the footer amounting to a signature for contractual purposes, and/or whether all messages should be designated ‘subject to contract’. (Appropriate wording, or whether such an approach is practical at all, will depend on the particular practices of different businesses, and so specialist, tailored advice will be required.)

• Clearly record whether any agreement reached is intended to have legal effect, or whether the parties require any such agreement to be formally documented and signed (with any particular formalities?) by the parties before it has contractual force.

• Clarify that any counterparties have committed to their side of the bargain, and that all necessary terms are consistently understood between the parties.

Commercial contracts, informality, and inadvertent contracting: How we can support you

Informal and pre-contractual communications and negotiations can be a minefield.

An understanding of key contractual principles plus an awareness of the practical scenarios in which such risks may arise for any particular business, is key to getting the balance right between being able to negotiate quickly and effectively, and becoming legally bound when required.

For further information or staff training in relation to pre-contract traps and tips; for assistance in relation to effective commercial contract drafting; or for strategic advice if and when any informal negotiations do result in issues or disputes, please contact Louise Norbury-Robinson or any member of the Commercial Dispute Resolution team.