Parent Company Faces $54m Claim under Guarantee Created By Email

Businesses are often unaware that a legally binding contract can be made by a simple exchange of e-mails. The Court of Appeal has recently confirmed that an enforceable guarantee can be created by a series of e-mails authenticated by the online signature of the guarantor.

The case, Golden Ocean Group Ltd. v Salgaocar Mining Industries PVT Ltd., arose out of negotiations for the charter of a ship by Golden Ocean to Salgaocar's chartering arm, Trustworth Shipping Pte Ltd. In a series of e-mails, the parties agreed a number of amendments to a standard form document. It was intended that the parties would sign a full and complete agreement incorporating all the key terms agreed and including a guarantee to be given by Salgaocar. That was never done. Confirming an earlier High Court decision, the Court of Appeal ruled that the parties had intended to be bound by the terms in the e-mails.

It is very easy to become blasé about emails. Businesspeople sometimes think that there is some particular magic about having a formal written agreement signed by the parties. However, the general rule is that a contract does not have to be in writing (although with a deal of any complexity, it is always sensible to have written evidence of what has been agreed). One exception to the general rule relates to contracts to guarantee. A guarantee must be in writing signed by, or on behalf of, the guarantor. However, in the Golden Ocean case, the Court of Appeal confirmed that where a person puts his name on an e-mail to indicate that it is sent with his authority and that he takes responsibility for its contents, that will count as a signature. This will be the case even where only the first name, initials or possibly even a nickname is used.

To find out more, please contact David Dees or Nick Crook.

Filed: 22/05/2012 08:45:36