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This article taken with thanks from the Painsmith Solicitors blog. Original article here

In University of Plymouth v European Language Centre Ltd [2009] EWCA Civ 784 the Court decided that in legally binding e-mail correspondence it is essential to have an unequivocal offer and acceptance, together with agreed contract terms.

In the case itself , the parties had been in a contractual relationship since 1998. The University of Plymouth had provided European Language Centre Ltd (ELC) with student accommodation and teaching facilities, by a series of annual written contracts. Until 2005, previous contracts had recognised both parties’ intention to continue the contractual relationship in the coming year. However, the 2005 contract contained no reference to contractual obligations for the coming year, 2006.

During 2005, the parties had discussed by e-mail correspondence, the possibility of the University reducing the number of student accommodation available for ELC to use. ELC did not initially reply, but then in later e-mail correspondence expressed that they found the reduction unacceptable and the parties did not therefore formally produce or agree to a contract. ELC later alleged the University was in breach of contract by failing to provide the reduced beds and submitted that that the email of May 2005 constituted an offer of a reduced number of beds, which it had accepted and relied upon.

The Court noted that the parties had established a degree of mutual trust since 1998, and that it was usual for negotiations to be formally concluded by an annual written contract. The Court therefore held that the e-mail correspondence was lacking in detail and considered that it did not amount to an offer nor a clear acceptance. The Court held that an acceptance must be communicated in a way that objectively sets out on what basis the acceptance was being given and based on the facts before them ELC had done nothing which amounted to acceptance, either by words or conduct. The parties’ comments within the exchange of emails together with the previous contracts were not enough to determine that an unequivocal offer and acceptance had been made.

This decision emphasises the importance of the four essential elements which must exist for there to be a legally binding contract that is; offer, acceptance, consideration and an intention to create legal relations.

Agents are therefore advised to ensure that there is clear communication with Landlords and Tenants and ideally all negotiations should be concluded by written contracts which are clear and free from ambiguity. We have noted that many agents automatically place the phrase ‘Subject to Contract’ within their signature which will have the effect of preventing any contract being concluded this way. However, they should ensure that they obtain instructions and clarify that they or their clients do not want to be bound by informal email or telephone exchanges and should not assume that this is the best position.