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It's The Law: A Contract Can Be Created By E-Mail

Question: I received an e-mail offer for a car I am selling. I sent back an e-mail accepting the offer, and now the buyer claims we did not have a contract because we did not sign a contract. Is the buyer correct?

Answer: A typical contract involves an offer and an acceptance. There must be what is known as a "meeting of the minds" on all essential terms. An essential term is an element that would be considered critical to the transaction.

In sale contracts, essential terms generally include price, description of the property being sold, and identity of the parties. If there is no agreement on these issues, there is no meeting of the minds.

Non-essential terms can be implied to reach a reasonable result. Time for closing the sale is not usually a critical element, so a reasonable time for performance can be implied. Other conditions, such as inspection or financing contingencies must be included in the contract and agreed to by the parties to be part of the transaction.

The contract can be written or oral, unless writing is required by statute. Contracts for real estate or which will require more than one year to perform are examples of contracts which are required to be in writing by statute.

A contract may not have to be signed if the parties otherwise express consent. E-mails can clearly express consent. A contract can be created where an offer is accepted by performance, as when someone offers a painter $5,000.00 to paint their house, and the painter paints their house without specifically accepting the offer.

A contract does not even require that everyone sign the same paper. Separate writings, if connected with each other so as to constitute one transaction, can create a contract. If both parties sign an identical document, although not the same document, a contract can be created. However, agreement must be communicated. If a party signs a contract document but does not give it to the third party or otherwise confirm acceptance, the courts will not generally find a contract to exist.

As long as the parties have agreed on all the essential terms, a court will normally find that the parties have a meeting of the minds and an enforceable contract. If the contract is illegal, the contract will not generally be enforceable.

In some cases, unenforceability of an illegal contract is specified by statute. Contracts by unlicensed contractors are unenforceable by statute. Agreements to pay interest, if usurious, are unenforceable. If the agreement provides for interest at a rate greater than 25 percent per annum, the lender may also be barred by statute from any collection of principal or interest. There are a number of exceptions to the unenforceability of high interest rate contracts, most of which favor credit card companies and the banking industry.

In many contract disputes, the central question is whether the parties intended a contract to be created. Even documents titled "Letter of Intent" may create contracts. Such documents can be dangerous where one party does not intend to create a contract and believes calling the document a "letter of intent" will allow him to find out if the other party would accept an offer rather than constitute an offer.

Contracts can be created by e-mail. In the recent case of Miles v Northwestern Mutual Life Insurance Company, the insurance company lawyer sent an e-mail to the lawyer for Dr. Miles which basically offered to settle the lawsuit on certain terms. The attorney for Dr. Miles replied by e-mail that, "Dr. Miles accepts your client's offer . . .". The trial was cancelled based upon the "settlement". The attorney for the insurance company prepared and sent a formal written settlement document to the attorney for Dr. Miles, but the document was rejected because it included terms which were not in the e-mail.

The insurance company claimed that there was no settlement. The subsequent trial was not on the original claim but on the question of whether a settlement contract was created. The court found that the e-mails contained all of the essential terms of an agreement and that the insurance company's offer had been clearly accepted. There was no question that the attorneys had authority to act on behalf of their clients. A contract was created and the insurance company was not allowed to change its terms.

In your case, it will be important to review the e-mails to see if all all essential terms are included. It will also be important to consider the cost of suit to enforce your agreement, including the attorneys' fees. Unless your agreement provides for recovery of attorneys' fees in connection with enforcement action, it is not likely you will get a judgment for attorneys' fees from your buyer. It will also be important to consider whether your buyer has money to pay a judgment. It may be throwing good money after bad to sue a penniless defendant. In any event, before proceeding further, you should discuss your case with an experienced attorney.

By: William G. Morris, Esquire

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