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Caught on our radar

E-mail reply not
enough to formalise
an agreement

We often receive the question whether one can enter into a binding agreement via e-mail communications under Swedish law. The answer is usually that most types of agreements do not require a written form and that everything else is just a question of evidence.

If one can be legally bound by an oral agreement, it stands to reason that one can also be bound by what has been agreed upon in an Internet based conversation. And with modern technology it may be even easier to prove what has been said over the Internet, compared to the old days’ correspondence by letter, where the only proof might be a faded copy of a letter, and no one could be quite sure what had been received or not.

In a Swedish court ruling the question of making agreements through text messages or e-mail is brought to a head in a purely commercial context.

The dispute in brief

A consultant within the pharmaceutical business made a request in court to receive almost SEK1.5 million as a compensation for outstanding fees. He had previously carried out assignments for the pharmaceutical firm and claimed that his client had extended his assignment. To support this notion he referred to e-mail correspondences and text messages showing how their discussion had led to an agreement.

The firm, on the other hand, maintained that an agreement had never been made; there had just been negotiations which had not led to any result. According to them a number of questions, among others those concerning the final fee, were still unsettled.

Furthermore, according to the firm the person conducting the negotiations was a market director who was not authorized to enter into an agreement with consultants as this was a task for the managing director.

The disputed assignment related to work projects of a significant scope and for a considerable period of time. Previous assignments had been based both on written and oral agreements.

The questions

The question of principal interest in this case is how the status of an agreement shall be assessed when there is no written agreement and when word stands against word in the witness statements.

As stated by the courts the burden of evidence in this case lies with the person claiming that an agreement has been made. This is what raises the interesting question of how much importance can be placed on e-mail communications and text messages sent during the negotiations between two parties.

A number of electronic messages were considered in this case:

  • On 7 September 2009 the firm, through their marketing director, sends an e-mail stating that he considers it a good idea for the consultant to continue with all activities since one of the firm’s employees was going on parental leave for the whole of 2010.
  • A week later, on 16 September 2009, the consultant re-plies via e-mail that he has been given the impression that it was settled that he was going to have a consultant assignment part time (50%) from October to December 2009 and then full-time for all of or half of 2010. He finished the e-mail by expressing his wish to have this confirmed.
  • Five days later, on 21 September 2009, the firm’s marketing director sends a text message to the consultant saying that this sounds good, i.e. “ok”.

Parallel to the e-mail correspondence there are a number of factors, which seem to have affected the court’s assessment.

  • On 28 October 2009 the consultant sent a draft agreement in order to confirm the agreement in line with their more informal understanding.
  • As a response to this the consultant receives a request from the firm to change a particular condition regarding the payment and that the terms for holiday leave be adjusted – an adjustment which then was made.
  • At a late stage (December 2009) the consultant receives the information that the marketing director wants to discuss the fee with him.
  • The agreement was never signed.
  • The firm took the initiative to prolong the consultant’s telephone subscription, which indicated that the arrangement with the consultant was to continue.
  • Previous agreements for longer arrangements had been made in writing and signed by the firm’s managing director in January the same year, after the firm’s budgeting process was finished.

Ruling

Taking all the circumstances into consideration, the courts (the District Court and the Court of Appeal; the Supreme Court did not grant a leave to appeal) did not consider that the consultant had been able to verify that an agreement had been made in the way he had maintained.

The courts said the correspondence via e-mail and text messages was brief and they did not consider it explicit enough to substantiate the claim that an agreement had been made. In one of the instances it is stated that the electronic messages were not enough to give the consultant “a justifiable impression” that the parties had made an agreement for the year 2010.

Factors which evidently affected the ruling were previous practice, the question of who normally represented the firm in agreements of this kind and, not least, the fact that the consultant, after the point where he considered an agreement to have been made, presented a written draft agreement, which was never signed.

Reflections and practical conclusions

A ruling is always founded on an appraisal of a number of circumstances. Looking only at the electronic messages in this case it is somewhat surprising to us that an “ok” to a proposed agreement can be interpreted in any other way than as an acceptance. If this “ok” is given via telephone, through a solemn “knock on a table top”, via an e-mail or a text message should not really be of any legal significance. And the fact that the messages are brief might just be seen as consistent with the nature of the medium.

When no particular form is stipulated and no specific form of writing is agreed upon, it is commonly advised to be careful in these contexts. The outcome of the case might indicate that the courts demand a greater explicitness when it comes to agreements exclusively based on electronic messages.

 Another practical conclusion is that situations might arise where it is best to think twice before sending a draft agreement on things already agreed upon. Or rather, if one chooses to do it in the form of a written agreement one must make completely certain that the agreements are finalised and signed. Otherwise there is a risk that the agreement document weakens one’s position.

The ruling in this case could have been different if the consultant had chosen simply to confirm the agreement that had already been made. The firm’s passivity might then have worked to his advantage rather than to his disadvantage when later on the court assessed the circumstances under which the agreement was entered into.

 

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