In a bind: what you say in email can constitute a business contract

25 February 2020 | Legal updates, Thoughts and Opinions

In a bind: what you say in email can constitute a business contract

Over the last two decades, email has transformed how we communicate in our personal lives and how we do business. But how careful are you with what you say in work emails? If you’ve ever agreed to a business arrangement in an email, it could constitute a binding contract, as high street giant Superdrug recently found out, to their expense.

In the case of Athena Brands Ltd V Superdrug Stores PLC, which applied for summary judgement at the High Court, a judge ruled that email exchanges between a Superdrug buyer and an employee of beauty supplier Athena Brands constituted a contract worth over £1.3m.

A supplier relationship already existed between the two companies, as Athena supplied Superdrug with a popular product HiGlow. At the end of 2016, Superdrug entered into discussions with the beauty manufacturer and supplier about stocking a new product range known as Nature’s Alchemist.

The commercial dispute stood or fell on whether emails sent by Superdrug’s buyer in May 2017 expressed the intent to purchase a minimum quantity of product from Athena, and whether this employee had the authority to enter into a commercial agreement with Athena’s representative on behalf of his employer.

When Superdrug then reneged on this alleged initial agreement made by email ­− due to poorer than expected sales of the product − Athena pursued a contract claim against their well-known retail customer. Seeking to recoup losses valued at £980,000, Athena maintained that emails exchanged between their employee and Superdrug’s beauty buyer in May 2017 added up to a minimum order commitment.

Superdrug’s defence that the buyer who had made the commitment by email didn’t have purchasing authority and that only a purchase order evidenced intent to purchase didn’t stand up to scrutiny by the judge.

Harper James commercial solicitor Rana Chatterjee comments: “This case highlights a number of important points in contract law. Businesses should be aware of what constitutes a contract, and make sure their employees – who may be acting as agents for them – are clear on their responsibilities when it comes to negotiating contracts by email or other means.”

The takeaway from the outcome of this high-profile case is to take care over the words you use in business communications, in email, just as you would in other forms of written correspondence. If you have any doubts about what may or may not constitute a contract, our commercial lawyers offer specialist guidance on contract law and a range of other business legal matters. You can also consult our commercial contracts FAQs in our free online Legal Advice Centre.

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