The High Court in C&S Associates v Enterprise Insurance has held that a fairly informal exchange of emails was sufficient to vary the terms of a contract where this included a clause providing that any contractual variation had to be in writing and signed by or on behalf of both parties.
The judge held that email correspondence including signature blocks would be sufficiently formal to satisfy the terms of the clause, provided that the other requirements of contract formation and variation were also present (such as intention to create contractual relations). In this case, the requirements were satisfied and the contract was accordingly varied.
The claimant in this case handled motor insurance claims for the defendant. The defendant terminated its agreement with the claimant for repudiatory breach of contract.
The claimant brought an action for wrongful termination, and one of the issues which arose was whether the contract had been varied so as to:
- Increase the fees payable to the claimant.
- Vary the duration of the contract.
The clause in question stated:
“Any variation of this Agreement shall not be effective unless made in writing and signed by or on behalf of each of the Parties to this Agreement.”
The judge said that the clause was sufficient to introduce a degree of formality into the requirements for a contractual variation, and meant that the parties would not be bound by oral agreements or by informal, unsigned written documents.
However, the judge held that the clause in question did not require manuscript signatures, paper documents or both parties’ signatures to be on the same document. He held that the requirement for a signature was satisfied by an electronic signature, and was satisfied in this case where an email auto-signature was used by one party and the other party stated “Many thanks Myles, much appreciated. Mike.”
The parties clearly did objectively intend to be bound by the exchange of emails, despite the fact that they also clearly contemplated that their agreement would subsequently be recorded in a formal contract.
Given the amount of business which takes place by way of email, it is important that clients are aware that notwithstanding the existence of a contractual written variation clause, an exchange of emails using email signatures appears to satisfy the requirement for a signed written variation. Parties should take care in their drafting to exclude the possibility of variation of their contracts in this relatively informal and possibly unintended manner.
One suggested approach would be to include the wording “No variation of this agreement shall be effective unless it is in writing and signed by the parties (or their authorised representatives).” The “Interpretations” section could then provide that “A reference to writing does not include email.”
