A Canadian Court has held a farmer liable for over CA$80,000 after he failed to follow through on a delivery that he was found to have confirmed with a ‘thumbs-up’ emoji. The decision highlights the evolving landscape of contract law and electronic communications, writes Commercial Litigation Senior Associate Georgia Taylor and Lawyer Timothy Wright.
What is a contract?
Despite what many may think, contracts don’t only have to be signed in ink or electronically by two parties to be classed as a contract. Contracts can also be formed orally, or even partly oral and partly in writing. A contract can also be made in writing through the exchange of text messages, emails, or letters. It all comes down to the essential elements of a contract, which are:
- Offer and acceptance;
- Intention to create legal relations;
- Consideration; and
- Capacity.
Note: in some cases, there are other requirements of how a contract must be documented to be enforceable.
With the widespread use of emojis in everyday communication, a recent legal case in Canada grappled with a modern issue in determining whether a ‘thumbs-up’ emoji sent via text message could be interpreted as ‘acceptance’. In other words, can it be seen as a form of communication equivalent to a traditional “yes” or “okay” when it comes to forming a legally binding contract or agreement?
The decision saw widespread media attention and serves as a reminder that even casual communication can establish a legally binding contract. The implications are particularly pertinent for those working in industries that are increasingly using text messages and emojis as a way of communicating in business.
Even if a contract or agreement is not signed in the traditional sense, the law recognises other ways that a contract can be formed, whether that’s an employment contract, lease agreement, or service contract absent of any other legislative requirements on how that contract must be formed to be enforceable.
Here, we summarise the case and look at some of the ways in which individuals or businesses who transact informally should consider their legal obligations and whether they have unintentionally entered into legally binding relations.
The case: South West Terminal Ltd. v. Achter Land & Cattle Ltd., in the King’s Bench for Saskatchewan
The defendant, Achter Land & Cattle Ltd., was ordered to pay damages totalling over CA$80,000 to the plaintiff, South West Terminal Ltd, after failing to deliver 86 tons of flax.
Although the case played out in Canada, the Australian courts may take guidance from the judgment in the event a similar question comes before our Courts, which is why it’s worth taking stock of the reasons behind the judge’s ruling.
On deciding whether this agreement was legally binding, the Courts assessed whether the parties reached a consensus on the agreement (i.e. whether there was a “meeting of minds”), and whether there was certainty of the terms.
The issue centralised around a text conversation that took place in March 2021, which followed a telephone call between the two parties discussing the details of the potential deal.
In this text exchange, the plaintiff’s grain buyer sent the owner of the defendant a screenshot of a clearly titled Deferred Delivery Production Contract indicating the product, price and parties involved. The defendant responded with a thumbs-up emoji.
After this text conversation, the plaintiff considered that the delivery of the flax, pursuant to the screenshot of the production contract, was due in November 2021, but the delivery date rolled by without any shipment arriving. The price of flax per bushel had more than doubled in that time.
The plaintiff had argued that the thumbs-up emoji implied “I agree” or “I accept” what was outlined in the text conversation, forming the acceptance of the contract.
Meanwhile, the defendant had argued that the emoji confirmed that he had received the flax contract, not that he agreed on its terms.
Despite the defendant’s arguments, the Court found that the parties had a valid contract and that the defendant had breached the contract when the flax was not delivered. The defendant was ordered to pay damages worth CA$82,200.21 plus interest.
The plaintiff had bought grain from the defendant for several years, and the Canadian judge took into account the history of the transactions between the parties. They often would finalise their business through text messages. The defendant would often respond to the plaintiff’s offers via text message with “okay,” “yep” or “looks good.” The judge found a pattern of engagement, with the only difference on this occasion being that the defendant had used a thumb’s up emoji as a response rather than plain language.
“In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad idem – a meeting of the minds – just like they had done on numerous other occasions,” the judge said.
The judge also cited a description of the thumbs-up emoji on Dictionary.com: “it is used to express assent, approval or encouragement in digital communications, especially in western cultures.”
Communicate clearly – mind your Ps, Qs, and emojis
This decision is one of many we can expect to see in the future as technological communication evolves and seeps its way into businesses. In any event, it’s always best to be careful in your communication with clients or business partners, and don’t assume that text messages won’t form part of a legally binding agreement or contract.
Experienced in the evolving business landscape, Attwood Marshall Lawyers are well placed to guide our clients and provide advice on their contractual obligations.
Particularly within our construction and building practice, we often deal with “informal” communications exchanged via text messages between tradespeople and builders. These messages involve discussions about project terms and expected working hours, as well as agreements related to asset purchases, sales, and the delivery of goods.
We always encourage clients to review current contracts and any informal arrangements that they may have struck in the past, to make sure they are aware of all their legal obligations and liabilities that may arise.
What you should check for
For the Building and Construction Industry, as outlined in our recent blog, a contract for works greater than $3,300 in NSW and $5,000 in QLD must be in writing and contain the requisite details as prescribed by the relevant jurisdiction’s governing legislation.
Of course, we understand that agreements can be formed outside the scope of these legislative provisions and often, that is where tradespeople and sub-contractors get caught out. Communications between the head contractor and subcontractor or the builder and the homeowner often take place via text message and frequently discuss:
- hours to be worked;
- rate of pay;
- works to be performed; and
- the date for which the works are to be carried out.
To safeguard your contractual position, you should always:
- comply with the legislative requirements to form an enforceable contract;
- ensure that each party understands the scope of work to be performed;
- understand who pays for what (e.g. materials/labour/machine hire);
- confirm when an agreement is formally accepted;
- ensure the parties exchange terms and conditions including deposits and timeframes for payment; and
- where possible or necessary, confirm the informal discussions/texts in writing via email.
Be careful, sending a thumbs-up emoji may be construed as formal acceptance of the terms.
Attwood Marshall Lawyers – helping you protect your rights and resolve disputes effectively
When entering into a new business agreement or contract, it is always best to obtain legal advice to ensure the contract will safeguard your interests and ensure that all parties have a clear understanding of their respective rights and responsibilities from the outset.
Properly executing contracts from the start can save you considerable time and prevent anguish in the event of any future misunderstandings.
If you are embroiled in a dispute over a contract, it is imperative to seek trusted legal guidance promptly. This not only provides clarity about your rights but also facilitates effective negotiations to swiftly resolve the matter.
If you would like more information about contract matters or resolving disputes over contracts, please contact our Commercial Litigation Department Manager, Amanda Heather on direct line 07 5506 8245, email aheather@attwoodmarshall.com.au or free call 1800 621 071.
