Covid-19 enhanced the speed of digital transaction multi-folds. Generally, we finalized the terms of our arrangements via email, even on WhatsApp (instead of having signed and stamped agreements). Is such agreement (concluded on email/WhatsApp) legally enforceable? What points should we keep in mind while entering a deal via email? Can we sue someone for breach if they violate any term of the agreement concluded on email, like the agreement duly signed and sealed? These are crucial legal questions for every creator, entrepreneur & professional. In this article, we will understand the legality of such an arrangement. At the end of the article, you shall receive #AFCProTip to enhance the enforceability of an agreement entered via email. Let’s begin with a practical illustration!
Priya is an actress. Karma Production is a production house producing a short film. It approached Priya to offered her a role in a short film. She had to give her four days (at the specific date) to the production house for the shooting. In return, the production house shall pay her INR 1,00,000/-. It shall also be reimbursed for her travel and stay cost. The Production house emailed Priya with these terms and conditions. Priya reverted the email, stating that she could give three days for the shooting, and her fee should be INR 1,20,000/-. Rest everything is acceptable to her. She is getting her ticket done. She conveyed that she is highly excited about this project. She booked her flight and hotel room and sent the production house the invoices for the flight and the room. After 4-5 days, the production house reverted that they were not casting her for the film. Priya is furious! She said that she and the production house had entered into an agreement via email. Based on the agreement, she booked her flight and hotel. Now, the production house cannot randomly deny casting her. Production house reverts that the contract was never concluded. Hence, they are not legally bound. What do you think? Was there a legally enforceable agreement between Priya and the Production house?
Let’s see what’s the law says. The Indian Contract Act, 1872, govern contracts in India. For an agreement to be enforceable in law, there should be (a) an Offer, (b) explicit and unconditional acceptance, (c) by the parties having the legal capacity to contract with intention, (d) free consent, (e) lawful object (f) valid consideration. Hence, any transaction confirming the above basic requirements is legally enforceable. In our illustration, Priya received an offer, but she did not give her unconditional acceptance of the offer. Hence, her email does not contain the acceptance but a counteroffer. In case the Production had replied to her counteroffer that they are okay with the same, then she can claim that there is a valid contract between her and the production house. Therefore, the above illustration shows the negotiation stage only. It cannot be called to be a concluded agreement.
Now, if Karma Production accepts the counteroffer by Priya unconditionally, can they, later on, deny casting her on the ground of unsigned agreement? The answer is “No.” Indian Contract Act, 1872 does not specify a fixed written format for a contract. If all the essential elements of the agreement (as explained in the previous paragraph) are met, the agreement becomes enforceable in law. It includes the agreement concluded on Email, WhatsApp, or any other medium. In the case of Trimex International Fze Limited v. Vedanta Aluminium Limited, 2010, the Honourable Supreme Court of India held that an agreement entered via email is a valid agreement. If the contract entered via email is correct, why do we do the execution formalities? Why do we take it on paper, stamp it and duly sign it? It is because if we duly execute the agreement, then we do not individually need to prove all essential elements of the contract separately. The copy itself becomes the primary evidence of the existence of the deal. Further, the Stamp laws in India require the document to be appropriately stamped. Otherwise, you need to pay specific penalties if you wish to present that contractual document as evidence in a court of law.
Now, coming to #AFCProTips, if we intend to agree to an agreement, please ensure the following steps;
Firstly, conclude all your negotiations. You can take confirmation on each point on message/email. Once both parties come to a consensus, then draft a new email. You can take the help of a lawyer in drafting that email. You can send this email to another party. Since both parties have agreed to all points, the other party should send clear, unconditional, and unambiguous acceptance. Email may be a preferable medium in the case of simple and straightforward contracts (E.g., Contract between a coach and student, dietician and client, lawyer and client, etc.). In the case of complex contracts (E.g., Film production contracts, collaboration contracts between two business houses, partnership contracts, etc.), it is always advisable to have a full-fledged well-drafted agreement. Suppose you are a service provider (E.g., Logo designer, photographer, dietician, online coach, video editor, etc.), and you are worried about a well-defined structure to capture your commercial relationship with your client. Also, it is impractical to make your client sign an agreement every time. Hence, the best way forward shall be to send your invoice and your service terms to your client via email. Your client can acknowledge the same via email. It is simple, hassle-free, and legally binding.
In sum, the contract via email/WhatsApp can be enforceable provided you can prove all the essential elements of an agreement. In case of breach, we can sue the defaulting party. I suggest you avoid WhatsApp as that's not a standard medium and may not be very solid in the evidence stage (in the case of a dispute). If you want to know anything in detail on this topic or our help in drafting a standard email template for a binding contract, feel free to reach us at firstname.lastname@example.org.
Disclaimer: Articles published on this blog is for education purpose and does not substitute the legal advice.