This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.
Organizations that conduct business by email recently received a stark reminder that a contract can be formed even without the standard exchange of signed agreements. In the British Columbia Court of Appeal case of Vancouver Canucks Limited Partnership v Canon Canada Inc., 2015 BCCA 144 [Canon], the Court found that an exchange of emails resulted in a legally binding contract.
The Plaintiffs, two affiliated limited partnerships that owned the Vancouver Canucks and the Rogers Arena (collectively, the “Canucks”) and the Defendant, Canon, had entered into a series of agreements set to expire on August 31, 2008. Under one of these agreements, Canon purchased “sponsorship inventory”, which included tickets, merchandise and advertising (the “Existing Agreement”).
Negotiations for the renewal of the Existing Agreement began in June of 2008, with Canon sending the Canucks an offer via email on July 11. In that email, Canon proposed to renew the Existing Agreement on terms similar to those that were already in place. After limited success soliciting competing offers, the Canucks communicated their acceptance of Canon’s offer on September 23 (the day of the Canucks home-opener) however the creation and execution of a formal agreement confirming the renewal of the Existing Agreement was deferred.
After a short period of time, a dispute arose concerning the inclusion of a clause in the new agreement for the sponsorship inventory. Canon maintained its position and later declared the relationship at an end in mid-December. In response, the Canucks brought a claim against Canon for breach of the agreement that the Canucks claimed was reached via the email exchanges.
The three issues before the Court dealt with the three relevant requirements to finding a binding agreement:
- Did the parties intend to be contractually bound by the terms of the email exchanges?
- If so, was the contract that was reached via email nonetheless conditional upon the execution of a formal written agreement?
- Had the parties agreed on the essential terms?
Relying on contextual factors, such as the impending start to the hockey season and the mutual desire from both parties to continue their business relationship, the Court upheld the trial judge’s conclusion that both parties had an intention to be bound by the email exchanges.
The Court also concluded that the contract reached by the email exchanges was not conditional on legal review and formal execution. In reaching this conclusion, which was upheld on appeal, the trial judge placed significant weight on the fact that Canon had not expressly stated in any email that the renewal of the Existing Agreement was conditional on formal execution.
The Court of Appeal also held that the parties had agreed on the essential terms of the contract. The pre-existing contractual relationship between the parties was central to the Court’s reasoning, as it interpreted the July 11 email from Canon as implicitly incorporating the terms of the original Existing Agreement. While there was evidence of Canon’s internally held reservations regarding the co-terminus clause, they were never communicated to the Canucks prior to acceptance of the Canon offer.
As a result of finding that there was a binding agreement, the Court dismissed Canon’s appeal on liability for breach of contract.
Organizations need to be alive to the possibility of emails creating a binding agreement
Despite the often informal nature of email communications, contractual negotiations via email should not be considered as any less legally binding than other more formal mediums of communication. Unlike negotiations that take place via telephone or face-to-face, the evidence necessary to establish the requisite elements of a legally binding contract are well-documented in email communications.
Ensure it is clear that the parties are not to be bound until a formal, written agreement is signed
Any informal “agreement in principle” should be made under the express caveat that the parties are not intending to be bound and that any agreement in principal remains conditional on legal review and formal execution.
Extra caution is required when renegotiating an existing relationship
Parties negotiating the renewal of a contract(s) must exercise additional caution as a pre-existing contract may be readily inferred as forming the essential terms of a subsequent (disputed) contract.