Beware of Creating Contracts by Email

By Greg Griffith, Esq.

In todays fast-paced business world where individuals are busy on their computer, tablet device, or smartphone typing away deal terms and conditions in an effort to close the next deal, the time has come to think twice before pressing the Send button on the next outgoing email. Two recent court decisions (one U.S. and one Canadian) serve as a wake-up call that binding contracts and assignments of rights can be created via exchanges of emails almost as easily as they can be created by written paper documents. Exchanging emails is often useful because it can assist in providing a documentary record of discussions between the parties, but parties should be careful not to inadvertently create a binding contract. In Hermosilla v. The Coca-Cola Company, the Court of Appeals for the 11th Circuit confirmed that a copyright can be transferred by exchanged emails which constitute a binding contract under Florida law. The Court held that the copyright created by the plaintiff had been transferred to the Coca-Cola Company because the exchanged emails constituted a binding agreement even though the parties intended to enter into a long form written agreement but never actually did so. The Court, however, failed to address whether the email exchange constituted a writing for purposes of Section 204 of the Copyright Act. That section of the Act provides that a transfer of copyright ownership is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed. Prior to the adoption of the E-sign Act in 2000, courts differed as to whether an email exchange would satisfy the writing requirements of Section 204. Section 7001(a)(2) of the federal E-Sign Act provides, in relevant part, that a contract relating to [a transaction in or affecting interstate or foreign commerce] may not be denied legal effect because electronic signature or an electronic record was used in its formation. In a Canadian court decision, the Court in province of New Brunswick held that a binding contract for the sale of real property can be created by email exchange. This case is currently under appeal. While conducting business transactions via email has become almost the norm nowadays for many, one should take caution on the content of the message so they do not become legally bound based on the content of the email exchanges even if it is the intent of the parties to memorialize their email discussions in a written agreement. In light of the controversy surrounding these recent court decisions one should consult with their counsel about how to avoid being in this predicament.