DISPUTES Alert: Email correspondence leads to binding contract for sale of land and business

Sep 14 2015

Publications

In a recent case, Thomson Geer has been successful in securing an Order for specific performance of a contract formed by an email exchange for the sale of land, and the service station and roadhouse business conducted on that land.

The outcome of this case has potential ramifications for any business that enters into contracts.

The Decision

In the case of Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd [2015] QSC 119, the Supreme Court of Queensland had to decide if a chain of emails formed a binding contract.

The Court held that there was a binding contract even though the agreement was expressed in informal terms, and was made by emails. The language used in the emails suggested that the parties were content to be bound immediately.

The fact that the parties made reference in the emails to the dealings being “subject to contract”, was not taken to be inconsistent with the parties having agreed on the essential terms sufficient to be immediately bound, and with the intention that the contract would be formally drawn up and signed later.

The email exchange was considered to be a “sufficient written memorandum or note” to satisfy the “statute of frauds” requirements (under section 59 of the Property Law Act 1974 (Qld)) relating to the land.

The Court also had regard to section 14 of the Electronic Transactions (Queensland) Act 2001 (Qld), which reflects the national scheme, and provides that:

 “if… a person’s signature is required, the requirement is taken to have been met for an electronic communication if a method is used to identify the person and to indicate the person’s intention in relation to the information communicated”.

Key points

The decision has significant commercial ramifications in relation to the negotiation of agreements, noting the following:

  • the parties’ communications stated that they were subject to contract;
  • some terms of the contract had not been agreed;
  • the vendor company was represented in the emails by a person, Drew Kellahan, who was not a director, but was held to have apparent authority;
  • the requirements of a “signature” were satisfied by an email by Drew Kellahan indicating acceptance of the buyers’ offer, which simply ended “Drew”.

Summary and next steps

This case reinforces a growing line of superior Court decisions in Australia holding parties to transactions, even where a formal contract has not yet been signed. This case also makes it clear that email correspondence can lead to a binding agreement when a “signature” is required, even if the emails refer to the negotiations as “subject to contract”, or uses similar wording to that effect.

Parties need to be aware of the potential for emails to be considered to be a binding contract in a transaction, and should take steps to educate their staff, or put in place processes to minimise the risk of this occurring.

For more information, please contact:

Robert Gallagher | Partner | +61 7 3338 7920 | rgallagher@tglaw.com.au