Do guarantees have to be signed and in writing? What about emails?

September 2012

In English law most contracts don’t need to be written down. You just need to agree something for consideration, ie each side gives something in return for the other’s agreement, even if it’s tiny. Traditionally people agreed on a peppercorn if in doubt – I know, weird isn’t it? – or more usually nowadays you just say it’s for a £1 (eg what Coldplay were paid to perform at the Paralympic closing ceremony).) If you want to sue on it, you will of course need to persuade the judge that there was an agreement – which is why it’s better to have something in writing signed by the other party, rather than relying on your word against theirs.

Guarantees are different. Since I started in the law, and indeed since some 288 years earlier, the 1677 Statute of Frauds has required that a guarantee needs to be signed and in writing.

Of course, back in 1677 and indeed until some time after I became a lawyer, we didn’t have email. So what happens if someone purports to give a guarantee by way of an email exchange? In a very recent case, the Court of Appeal got all pragmatic about this. The case involved a chain of emails, in the course of which reference was made to the deal being ‘fully guaranteed’ by an affiliate of one of the parties.

The court ruled that:

• the Statute of Frauds’ requirement for an ‘agreement in writing’ could be met in a single document or in a small number of documents, provided that the parties intended to be bound.

• The Statute of Frauds’ requirement for the guarantee to be ‘signed’ was satisfied if a person puts their name on the relevant email to indicate that it comes with their authority and that they take responsibility for its contents. Even if the wording in the email exchange is quite ‘non-businessy’, as emails often are; and even if the name is given quite casually, eg ‘Cheers mate, Andrew’. It helps if the person’s standard email signature and other business details are at the bottom of the email.

Tips:

• If at any time you don’t intend to be bound by something you’re putting in an email, add the words ‘subject to contract’ to it.

• If you’re dealing with a company, make sure that the person you are dealing with actually has authority to bind his company. He does if he is a director (which you can find out for sure by doing a company search) or if he has ‘ostensible authority’, eg he has been held out by a director of the company as having authority to bind his company to the arrangements he is discussing with you, or if his job title as shown on his company letter head clearly indicates he has appropriate authority. Some common sense is required here, eg when I pay for a MacDonald’s I can usually assume that the bloke behind the till has authority to sell it to me.

• Keep an audit trail of all emails which could be said to form part of the negotiations leading up to an agreement.

• Ideally, where you have agreed things over an exchange of emails, you should produce and agree and sign off with the other party on a single document which accurately sets out the agreement you have reached. (And of course, always run it past your lawyer!)

(Case: Golden Ocean Group Limited v Salgaocar Mining Industries PVT Ltd and another [2012] EWCA Civ 265)