Business professionals send approximately 125 billion emails every day. The majority of work communications take place ...
Business professionals send approximately 125 billion emails every day. The majority of work communications take place via email (over 60%). Some of these messages involve minor issues, but others cover serious business matters, from client work orders to internal hiring decisions. The question many people ask is: When is an email legally binding for businesses?
Not all emails create a legally binding agreement, but some can. The specifics depend on the content of the email. When electronic communications contain all the elements of a contract, many U.S. courts consider them an official agreement.
As a business owner, HR manager, or other business professional, this information may come as a surprise. You may think that emails are only for hashing out details, making tentative arrangements, or providing updates to customers. Understanding what constitutes a binding email and how to protect your company’s interests is critical.
Any formal agreement must have several “pillars.” Some states and courts take a different view of how many elements are necessary to create a binding contract, so speaking with a local attorney is wise in cases of doubt.
When email communications include specific offers or promises, clients may treat them as legally binding. Here are a few examples:
This doesn’t apply to vague statements or language that deliberately implies the details aren’t final. For example, telling a client “We can probably sell those for around $20 a piece, but I need to check with my team first,” isn’t likely to constitute an official offer or promise.
Both parties must receive something of value in an agreement. Often, consideration means a payment, but not always. Other types of compensation can include:
Businesses can enter into binding agreements with independent contractors or employees for work. Similarly, a tit-for-tat offer to provide catering in return for client referrals — despite no money exchanging hands — represents a contract.
A legally binding email needs some follow-up indication of acceptance. This can take many forms, including email replies, texts, phone calls, or even the action of filling an order.
Contracts involve at least two parties, and they must spell out the obligations of both sides. Only when all parties agree to the terms does the contract become binding.
You’re never under contractual obligation to do something illegal — such as hire someone without proper taxpayer identification — email or no email.
"Capacity" deals with who has the authority to make agreements. Email promises from an entry-level employee, such as a customer service agent overseas, may not be legally binding if the agent doesn’t have pricing system access or authority.
Finally, an email isn't legally binding unless it lays out the main relevant terms. With pricing agreements, it’s relatively easy for this to happen by email, because a product and its price are the most important details. On the other hand, documents related to mergers, acquisitions, and other long-term business deals generally need a large body of terms and conditions for courts to view them as “complete.”
Many U.S. states have legislation outlining contract law, and some also lay out rules for electronic communications in particular. For example, New York has the Electronic Signatures and Records Act. A court ruling found that exchanging email communications regarding a settlement amount was enough to constitute a legally binding agreement.
Other U.S. states have adopted the Uniform Electronic Transactions Act and the Electronic Signature in Global and National Commerce Act. The E-Sign Act and UETA take a similar view of emails as the New York laws, recognizing that electronic communications are just as binding as physical documents. Many other countries either follow the UETA or have a similar legal framework, including the UK, EU, Canada, and Australia.
Some courts have ruled that merely clicking the “send” button is confirmation that you agree with the terms of the document, whether you sign or just use a template. Other states require you to actively type your name or add an e-signature to emails for a valid contract.
Now that you know that emails have the potential to be legally binding, it’s essential to establish clear document-handling guidelines for your organization.
One way to mitigate your exposure is to add disclaimers, such as “This email is only for communication purposes and does not constitute a contractual offer or agreement.” Keep in mind that you can still be on the hook if you act like the document is binding, however, such as supplying raw materials based on email communications instead of official purchase orders.
Emails can work in your favor just as much as represent a liability. Your organization may be the one with the short end of the stick after a supplier reneges on your agreement or an employee sues you. In those situations, emails give you valuable evidence for court.
Depending on your industry, you should store all business emails for at least three to seven years. Treat confidential email communications that amount to business agreements with even more care, storing them securely for as long as you would other proprietary information.
The final decision on whether an email is legally binding or not often comes down to intent. Make it clear when emails are discussing hypotheticals instead of definite agreements.
Consider the following example:
“If you order 3,000 units, we can probably sell them for $35 each. For 10,000 units, I would estimate your price at around $28 or $29. Once you have a better idea, I can type up an official purchase agreement with all the details.”
Using words such as “probably” and mentioning several price possibilities show that the email isn’t a finished agreement.
Enterprise businesses need clear procedures for email disclaimers, client communications, and document retention policies. Make sure email records remain safe with cloud-based data storage. At Cloudficient, we can help you transfer your organization's emails to the cloud securely and efficiently, whether emails are legally binding or merely important for your operations. Contact us to learn more.
With unmatched next generation migration technology, Cloudficient is revolutionizing the way businesses retire legacy systems and transform their organization into the cloud. Our business constantly remains focused on client needs and creating product offerings that match them. We provide affordable services that are scalable, fast and seamless.
If you would like to learn more about how to bring Cloudficiency to your migration project, visit our website, or contact us.
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