It’s hard to imagine today, but there was once a time when email didn’t exist. Back in the day, lawyers would have to use snail mail (and later, fax machines) to send one another requested changes to contracts and then when a transaction closed, everyone would be in the same room together to sign all of the documents in ink. Let’s recap that: Snail mail. In-person meetings. Needing a black (not blue or any other color) pen. Oh, the horror!
When I started my legal career, email was widely used (I’m not THAT old), but there were attorneys at my firm who would have their assistants print out their emails for them because the attorney refused to actually use email. And then the attorney would dictate a response for their assistant to type up and then use to respond to the email. The fact that today you can hold meetings over Zoom and sign documents on your computer would absolutely blow those people’s minds.
So, how did we get here – where it’s ok for contracts to be signed electronically and where you run the risk of inadvertently entering into a binding agreement via email? Fasten your seatbelts, folks, because we’re going back to law school.
The Three Elements of a Contract
In order for a valid, binding contract or agreement to exist, there must be three elements present: offer, acceptance, and consideration.
An offer is exactly what you think it is – a promise to do (or not do) something in the future. Let’s use a wedding planner’s client service agreement as the continuing example here. In a service agreement for a wedding planner, the planner is offering to perform certain services for the people getting married by providing a contract that lists what the planner will do for them.
Acceptance is also exactly what you think it is – an affirmative agreement to accept whatever it is that the other party is promising to do (or not do). In the planner’s service agreement, by signing it, the people getting married are accepting the list of services that the planner is offering (and promising to do).
What people tend to miss, though, is the consideration piece. If there is an offer and there is an acceptance, then there must be MUTUAL or RECIPROCAL consideration amongst all of the parties involved. That means, each party must receive some kind of benefit from the agreement, otherwise, the agreement will fail for lack of consideration. In the context of a planner’s service agreement, the benefit that the people getting married are getting is the planner’s services, and the benefit that the planner is getting is payment of the planner’s fee. You therefore have mutual consideration and, once the agreement is signed by both parties, a binding contract.
Now, what if the planner wasn’t getting paid? Then technically, in order to have a valid, binding contract, the planner would need to receive some kind of benefit from the arrangement. In some cases, that could be the clients’ promise to share the wedding photos on social media and tag the planner, thereby promoting the planner’s business. That would be valid consideration. Or there could be an agreement to trade services – maybe in exchange for the wedding planning services, one of the people getting married agrees to provide their virtual assistant services to the planner for a year. That also would be valid consideration. But if the planner is agreeing to provide their services out of the goodness of their heart and getting absolutely nothing in return, if there ever was an issue, the planner could argue that there was a failure of consideration and therefore no binding contract. (Now, there could be other factors at play so that alone may not get the planner out of their obligation to perform, but you should see how this example illustrates what constitutes consideration.)
Can an Email Serve as a Contract?
What you may have noticed above is that an individual’s signature is NOT a requirement for a valid contract. Now, in most cases, a signature is what’s going to clarify that an official offer and an official acceptance has been made, but not every situation requires a physical signature to enter into a contract.
Let’s look at an email exchange as an example. Disclaimer, I don’t want you to be entering into agreements this way, but it IS possible. Let’s say you’re a photographer and a friend emails you about hiring you to do a 1-hour family session with them. It’s a friend and it’s only an hour, so you don’t feel the need to send over your full-blown contract. Instead, you respond to the email saying that you are happy to do a 1-hour family session for them for $500 (the offer). Your friend replies back and says great, that pricing works, let’s do it (the acceptance). And in this case, you’re getting $500 and your friend is getting a 1-hour family session plus the resulting photos (mutual consideration). Boom, a binding agreement.
That’s an example of a binding agreement that you intended to enter into via email. But if you’re not careful, you can inadvertently enter into a binding agreement via email (and even text message), too. If you find yourself with an unhappy client post-wedding, they email you to request a partial refund, and you offer a compromise amount in return, depending on the language that comes next, an agreement could be formed. Heck, a court in Canada recently ruled that a thumbs up emoji in a text message can legally bind someone to an agreement. Language (and now apparently emojis) matters.
Are Electronic Signatures Valid?
So, how did we get from the requirement that contracts be signed in person in ink to accepting someone’s typed name on a computer as a valid signature? Well, we have the E-Sign Act of 2000 to thank for that. That piece of legislation made it clear that contracts and agreements could be signed with electronic signatures and still be valid and binding. That’s what makes platforms like Rock Paper Coin indispensable because they add so much ease and efficiency into the contract process with your clients. Technology is truly a wonderful thing, unless, of course, you find yourself accidentally entering into a contract with a smiley face emoji.
Disclaimer: All of the information in this article is for general information purposes only and is written for a variety of audiences. Nothing in this article should be taken as legal advice for any individual case or situation. The information in this article is not intended to create, and the viewing of this article does not constitute, an attorney-client relationship.
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