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Electronic Contracting: Think Before Hitting “Send!”

It is becoming a common practice for parties to use email to negotiate, review and revise contracts. While the internet makes it convenient and quicker, it can also inadvertently lead to liability. Courtrooms across the country are seeing an increase in the use of “electronic evidence.” You don’t want an opposing party to use your email exchanges as evidence of (or to disprove) the existence of a contract.

Pursuant to the Uniform Electronic Transactions Act of 1999 which has been adopted in all 50 states, a legally binding contract can be formed by use of electronic records. Electronic communications, including email, and even text messages, can be used to form binding legal contracts if the individuals have actual or apparent authority to do so. The essential requirements of a contract must still be met for the agreement to be enforceable, including an offer, acceptance and consideration exchanged between the parties. If the electronic evidence clearly establishes that these basic requirements have been met, it may be sufficient to prove the parties intended to be contractually bound and that a valid contract was formed.

How do you protect yourself when conducting contract negotiations via email? It is imperative that you are clear and succinct in outlining your intentions. All of your employees should receive detailed training regarding your business’s policies regarding electronic correspondence and to be careful in email to avoid terms such as “offer” or “accept” and to avoid unconditional “promises”. If you do not wish certain employees be able to form binding contracts by email, you should require that a prepared, blanket disclaimer paragraph be automatically inserted into every email that is sent from such employees. The disclaimer should include a statement that the sender of the email does not have authority to legally bind the company and any commitments on behalf of the company must be confirmed by either the appropriate department (such as purchasing) or the person’s manager. You should also include a statement that your business does not intend to be bound by an electronic contract and that all electronic correspondence is considered non-binding until the agreement is signed by the parties. Finally, if the other party gives you an indication that they are relying on your emails as forming a contract, you should take immediate action to set them straight. The quicker you clear up any confusion or misunderstandings, the less likely you are to be held liable.

To learn more about electronic contracts and how to protect yourself or how we can assist you with other business-related matters, contact Leslie S. Marell today.

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