Can Email Negotiations about a Property Sale be Binding?
Case Note: Queensland Court held email negotiations may form a binding land contract even where contract not physically signed.
A recent decision in Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd [2015] QSC 119 has laid the groundworks for the court’s acceptance of email correspondence as an effective means of creating a binding contract in an increasingly electronic environment.
Facts
In late 2014 the defendant (seller), appointed an agent to sell freehold land and an accompanying business. Expressions of interest were sought and negotiations took place with representatives of the parties. Most of those negotiations were by email and phone.
The seller then asked for the terms of the offer to be confirmed in writing, to which the buyer’s representative sent an email to the seller’s representative stating:
further to our various discussions, I can confirm our offer of $1,600,000 for the business and freehold of the above property. As advised the freeholds are purchased by an entity related to the two Directors/Owners of United Petroleum, which in this case will be Stellard Pty Ltd.
This offer is of course subject to contract and due diligence as previously discussed. We are hopeful of effecting an exchange of contracts next Monday but need acceptance of our offer immediately so we are in a position to instruct the appropriate consultants to carry out the necessary investigations.
I look forward receiving your client’s confirmation that our offer is accepted as clearly both parties are now going to start incurring significant expenses.
A draft REIQ Commercial Sale Contract had previously been provided to the buyers by the seller’s representative.
The seller’s representative subsequently provided correspondence to the buyers indicating the seller’s intention to withdraw the offer. The plaintiffs (the buyers) claimed that a contract for the sale of the property was validly executed by way of email exchange between the party’s representatives.
Among other arguments, the defendants claimed relief under the statute of frauds, which states that a contract for the sale of land is not enforceable unless the agreement or some memorandum of the agreement is in writing and signed by the party to be charged. This is reflected in section 59 of the Property Law Act 1974 (Qld) (the “Property Law Act”).
Decision
The Court considered:
- Whether there a binding contract was formed despite the reference to the agreement being subject to execution of a formal contract; and
- Whether the agreement evidenced by email correspondence was enforceable when applying section 59 of the Property Law Act.
It was held that section 14 of the Electronic Transactions (Queensland) Act 2001 (Qld) could be supplemented with extrinsic evidence. As such, an agreement of terms generally in the negotiation stage, such as the provision of an earlier draft contract, may be binding even where the agreement is subject to a written contract.
What this decision means
Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd appears to be the first reported decision where a Queensland Court has applied provisions of the Electronic Transactions (Queensland) Act 2001 (Qld) to a contract relating to the sale of land.
The decision in Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd emphasises the importance of all parties to a transaction, and their solicitors, exercising due care and precision while drafting emails when negotiating a contract.
Courts in Queensland have increasingly shown an inclination to accept the typing of a party’s name into an email as a signature for contractual purposes.
Parties must be aware of the importance of communicating in a clear and comprehensible way throughout negotiations so that a binding contract is not inadvertently created.
