Whether Electronic Communication Forms A Legally Binding Contract?

• Published date: 24 June 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Taylor McCaffrey
• Author: Mr Simon Garfinkel

It is no secret that technology is becoming more and more pervasive. It is also no secret that it is becoming a primary mode of communication for many individuals in the business and legal world.

Contractual and other business matters are being discussed via text message, email, or even on social media. Negotiations are taking place on these mediums too. While the ability to negotiate a contract via text message is certainly convenient, it ultimately raises the question of whether agreements entered into via electronic communication are legally binding.

This article will explore some recent Canadian case law which has considered these situations.

Vancouver Canucks Limited Partnership v Canon Canada Inc, 2015 BCCA 144

In Canucks, the BC Court of Appeal was asked to review a decision from the Supreme Court of British Columbia, which held that through a series of emails, the parties had entered into a multi-year sponsorship agreement.

At trial, the Vancouver Canucks had successfully argued that Canon had entered into a five-year sponsorship agreement with them. Despite the fact that the parties had not reached an agreement on a key term, both parties had made it clear that any agreement was subject to review by their respective legal teams, and neither party had actually signed anything.

Canon had been a long-standing sponsor and office equipment supplier of the Canucks, and in the course of the parties negotiating a renewal, they exchanged numerous emails setting out the terms of the renewal.

The lower court held that the emails created a legally binding contract to renew the sponsorship arrangement despite Canon's argument that the "Contract Emails" were subject to review by legal counsel, had not been formally signed, and not all of the terms of the contract were settled as the negotiations were ongoing. This decision was upheld on appeal.

Ultimately, the Court of Appeal held that a binding contract arose because the "Contract Emails" exchanged between the parties satisfied the three-part test set out below.

1. A reasonable bystander would conclude the parties intended to be bound by the terms of the "Contract Emails";
2. That the emails included all essential terms and
3. Whether the agreement was conditional on subsequent review and approval, including the execution of a formal contract or whether the execution was just a formality.

With regard to the first of the three elements discussed above (the intention of the parties), the Canucks decision stated:

74 The governing legal principles are...