Untitled design (29)

Can an exchange of emails be considered a binding contract? This is the question the Supreme Court of Queensland was asked to consider in relation to the purchase of some land. Where there is no formal contract, whether the evidence supports that a contract existed, and whether a contract could exist based on a series of emails.

[Tweet “Can a series of emails be considered a binding contract?”]

The case

The owners of a roadhouse in North Queensland appointed an agent to sell their property. The purchaser approached the agent with expressions of interest in buying the property.

Late in October 2014 the agent sent an email to the purchaser that listed out the terms upon which the vendor would sign a contract. A draft contract for the sale of land was also attached.

The purchaser replied with an offer that expressly noted that “this offer is of course subject to contract and due diligence …” but went on to say that “we…need acceptance of our offer immediately so we are in a position to instruct the appropriate consultants to carry out the necessary investigations”.

The agent responded by email stating that the offer was accepted but that they understood the contract to be “subject to execution of the Contract provided … [with a] minimal due diligence period and the provision of all information/reports, etc. …”.

A couple of days later the purchaser’s solicitors sent a draft contract which actually changed some of the terms that had been included in the earlier offer. The vendor was not comfortable with those amendments and at the same time, notified the purchaser that they had entered into another contract for sale with another party.

The prospective purchaser sued and argued that the email exchange constituted a valid and binding agreement that the vendor was required to comply with.

Was there an agreement?

The court ruled that the parties had reached final terms for the transaction that they agreed to be bound by. A formal contract would only have re-stated the terms, rather than deviating from them. Therefore, the court found that it was a binding agreement, and that both parties considered themselves bound by the agreed upon terms.

[Tweet “It was considered a binding contract because final terms had been agreed upon.”]

Does a binding agreement have to be signed?

The Electronic Transactions (Queensland) Act 2001 provides that if a person’s signature is required under any Queensland law, the requirement is taken to have been met for electronic communications if the electronic communication properly identifies the person sending the email and displays and confirms their intention to be bound by the contents of it. In this scenario the requirements under the act were met.

[Tweet “An email exchange does not require a signature to make it a binding contract.”]

Be careful what you say….

The most important thing to note when it comes to entering into a contract is to be careful about stating your intentions. This case illustrates that a binding legal agreement does not have to be a formal document, nor does it need to be signed. The important factor is the intention of the parties. If a party does not wish to be legally bound during a particular communication, it must be expressly stated.

It’s not uncommon to commence negotiations with a real estate agent, whether buying or selling a property, by email. You should be aware that doing so may mean you are entering a legally binding contract.

If you have any questions about real estate law, please contact us for a FREE, 10-minute phone consultation.