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A cautionary note on email contracts

The Western Australian Supreme Court of Appeal delivered the decision of Vantage Systems Pty Ltd v Priolo Corp Pty Ltd [2015] WASCA 21 on 30 January 2015.  The court found that a binding agreement for the lease of office premises existed resulting from email negotiations between the parties despite the fact that no formal lease was entered into.

The tenant, Vantage, leased office premises from the landlord, Priolo, and prior to expiry of the lease in West Perth the parties entered into negotiations for a new lease of the premises.  A proposal was emailed followed by a revised proposal.  The email negotiations concluded with the phrase:

“We have received our sub-tenants [sic] approval of the terms as well.

Please proceed with wrapping this up.”

The landlord’s solicitor prepared and sent a formal lease to the tenant for execution.  The tenant never executed the lease and following expiry of the lease advised the landlord it had no intention of executing the new lease and would be vacating the premises.  The tenant argued there was no concluded agreement.  The landlord brought proceedings against the tenant claiming there was a concluded agreement which arose from the email communications between the parties.

The trial judge held that there was a binding agreement and that the essential terms of contract existed in the emails between the parties.

The tenant appealed the decision but the Western Australian Supreme Court of Appeal upheld the decision of the trial judge.

This decision is a reminder to be careful of what you include in emails when attempting to negotiate a commercial contract or agreement.  If you do not wish emails to be construed in a legally binding manner then ensure that appropriate wording is used to avoid this result.

Tait and Co Business Lawyers can provide you with independent legal advice if you need assistance with negotiating a contract, reviewing a contract or handling a commercial dispute.