Date Added: 24 April 2012
Businesses are often unaware that a legally binding contract can be made by a simple exchange of e-mails. A Court of Appeal decision has confirmed that an enforceable guarantee can be created by a series of e-mails authenticated by the online signature of the guarantor.
In Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd and another  EWCA Civ 265 (09 March 2012), the parties had exchanged a series of e-mails in which they agreed a number of amendments to a standard form document. One of the parties asked the other to provide a full and complete signed agreement incorporating all the key terms (the document was never created), but the court held, on the facts, that the parties intended to be bound by the terms in the e-mails.
This case makes it clear that even relatively casual means of communication such as e-mails signed with an informal salutation will satisfy the requirements of section 4 of the Statute of Frauds 1677, provided that the parties intend to be bound by them. If you do not want to create an enforceable guarantee while negotiating in writing then it is important to make it clear that you are negotiating subject to contract and do not intend to be bound until a formal document is executed.