by Russell G. Benson of McCarthy Tétrault LLP
You know the situation. You have been communicating back and forth by e-mail with the other party and somewhere along the way it occurs to you, “Do we have an agreement here, or have we just been talking?” Your next call is to your lawyer.
In Nicholas Prestige Homes v. Neal (2010) EWCA Civ 1552 (released on December 1, 2010), the English Court of Appeal was asked to determine whether an exchange of e-mails created a binding agreement between a real estate broker and a potential seller of residential property. The facts were quite straightforward and may well sound familiar.
The seller contacted the plaintiff brokers to discuss matters relating to the sale, and the brokers visited her at her property. The next day, the brokers followed up by e-mail to thank the seller for her “instructions” and to “confirm the agreed arrangements.” They attached both a multiple-agency agreement which they said was to be effective for an interim period while the seller wrapped up matters with her previous broker, and a sole agency agreement which was to apply thereafter. They asked her to “acknowledge safe receipt.” When the brokers had not heard back for a few days, they called her to ask about the selling of the property after which she replied to the original e-mail (which had the listing contracts attached to it), writing, “Hi Mark, That’s fine, look forward to some viewings. Sally.” The agreements, however, were never signed.
The seller eventually sold the property through the previous broker but after the date the sole agency agreement with the new brokers purportedly came into effect. The new brokers sued, among other things, for loss of commission and were successful.
The England and Wales Court of Appeal found that the e-mail exchange between the brokers and the potential seller had created a binding agreement. In particular, the Court noted that the seller’s e-mail was a direct reply to the new brokers’ e-mail, rather than a new e-mail that did not reference the earlier message. The new brokers’ e-mail attaching the agreements left no confusion as to which of the two attached agreements was to operate at any particular time; that is, during the period for which they had sole selling rights, they were to be the only persons marketing the property. The Court found that, by permitting a broker other than the plaintiff brokers to sell the property, the seller breached the sole agency agreement with the new brokers that was in place at the time of the sale, thereby depriving the new brokers of their full commission.
Although this decision is not binding on courts in Canada, it is high authority and could be persuasive here in similar circumstances. It is also consistent with the approach that Canadian courts have taken. Take the case of Mira Bogdanovic and Van Buchanan, for example. They lived together in a same sex, common law relationship for nearly 20 years. When the relationship ended, they tried to negotiate a settlement without legal counsel. To this end, they discussed possible settlements almost entirely by e-mail. Ms. Bogdanovic found that the negotiations were not progressing and consequently brought an action against Ms. Buchanan who argued that the parties had reached a binding settlement in their e-mail exchanges. The B.C. Supreme Court accepted into evidence the various e-mails that allegedly constituted proof of an agreement, and considered the evidence to determine if the conditions for the formation of a valid and binding contractual settlement had been met. Ultimately, it found that the parties’ e-mails did not demonstrate the necessary level of consensus and, consequently, that no binding settlement had been formed. Applying similar principles to the English Court of Appeal in the Neal case, the Court found that, although there may have been a series of offers and counter-offers in the e-mail exchange, there had never been a true meeting of the minds.
Keep in mind, however, that there is relevant law that applies specifically to contracts relating to land. In particular, section 59 of the Law and Equity Act (British Columbia), provides that, subject to a couple of exceptions, a contract respecting land or a disposition of land is not enforceable unless, effectively, it is in writing signed by the parties, there has been “part performance” by a party of obligations that are consistent with the alleged contract or a party has relied on the existence of the contract to their detriment. The courts have interpreted the meaning of “a contract respecting land” quite broadly. However, the Electronic Transactions Act (British Columbia), would seem to override, in part, section 59 of the Law and Equity Act. Among other provisions, it states that “unless the parties agree otherwise, an offer or the acceptance of an offer, or any other matter that is material to the formation or operation of a contract may be expressed … in electronic form.” It also states that a contract is not invalid or unenforceable solely because information in electronic form was used in its formation, and that the use of the words “in writing” does not, by itself, prohibit the use of information in electronic form. In summary, the effect of the Electronic Transactions Act would appear to be that, with the exception of documents that create or transfer an interest in land and require registration to be effective against third parties (such as a transfer), electronic communications and signatures are sufficient to form a contract relating to land despite section 59 of the Law and Equity Act. Having said this, the provisions of the Electronic Transactions Act have not yet been tested in the land context before a court in British Columbia.
Depending on the facts of your situation, the advice you receive from your lawyer could well be that your e-mail exchanges with another party have created a binding contract, even though nothing has actually been signed.
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