Communicating by email may be quick and convenient, but it can also be extremely hazardous and, as a High Court case reviewed by litigation expert David Watson showed, employers should beware their staff entering into high-value contracts with just a few strokes of a keyboard.
The case concerned emails that passed between a saleswoman who worked for a cosmetics company and a buyer employed by a retail chain. The saleswoman requested confirmation of a commitment that the chain would purchase a minimum quantity of a particular range of products over a 12-month period. The buyer responded that he was ‘happy’ with that arrangement.
Sales of the range were disappointing, and the chain’s orders dried up within about four months. The cosmetics company responded by launching a breach of contract claim, seeking about £980,000 in respect of losses arising from the shortfall in orders, plus storage charges for unsold stock and interest.
In its defence, the chain argued that the buyer had no authority to confirm orders of stock from any supplier, something which could only be done by the issue of a formal purchase order. It was asserted that, in common with other large retailers in its sector, the chain never made volume commitments.
In rejecting those arguments, however, the Court found that the buyer had, by his email, entered into a binding agreement that the chain would place orders sufficient to meet the minimum annual quantity sought by the saleswoman. Even if he did not have the chain’s actual permission to make that commitment on its behalf, from the saleswoman’s point of view he had apparent or ostensible authority to do so.
The Court was also unpersuaded by the chain’s plea that there was an established industry practice never to commit to minimum purchases and that the saleswoman must have been aware that that was the case. Having found that none of the chain’s lines of defence had any real prospect of success, the Court entered summary judgment in favour of the cosmetics company. If not agreed, the amount of damages payable by the chain will be assessed at a further hearing.
If you want to ensure an agreement is honoured and will withstand a legal challenge, make sure it is recorded in proper form.
If you are facing any such issue, or require any advice relating to contract issues, our experts can advise. Call David on 01254 30 10 44, or complete our online enquiry form and one of our experts will contact you.