It is very much the rule now rather than the exception that parties negotiate terms of commercial contracts by extensive and sometimes lengthy email exchanges and, indeed, text messages.
What parties may not always appreciate is whether by doing so a contractual offer might be made or accepted without the party intending to do so.
The Queensland case of Stellard P/L v North Queensland Fuel P/L [2015] QSC 119 is a good illustration of this potential situation.
There, parties negotiated for the sale and purchase of a service station business.
The seller emailed the buyer setting out the price, deposit, settlement date and attached a draft contract. The buyer responded in terms asking for its offer to buy be accepted to which the seller responded in terms accepting the buyer’s offer although “subject to execution of the contract provided”.
The seller then sought to avoid the agreement so it could make a better deal with another buyer. The first buyer sued to enforce the deal.
The Court found that, in the circumstances and notwithstanding that all terms had not been agreed, that the parties had agreed terms by their exchange of emails and that their intention had been to record that agreement subsequently, not that there would be no agreement until a written agreement had been executed.
The Court will always assess parties’ intentions objectively. That is, simply because you think you are simply negotiating does not mean that a reasonable person in the other party’s position does not think you are proposing a contract or agreeing terms.
What, then, should parties do to ensure that they have not made an offer to enter a contract or they have not accepted a contractual offer when they do not mean to do so?
If you do not want what you think to be contractual negotiations to be contractual and binding terms, you should always make it as clear as day from the beginning that there is and will be no binding contract unless and until a formal written contract is executed by the parties; this point should be repeated in every communication.
Do not allow yourself to fall into the trap of ambush by email: read every email you receive and if you do not agree with what is stated by the other party, say so and make sure it is clear that there is no agreement until you are happy that an agreement has been made.