Early in June, the Court of King’s Bench for Saskatchewan made headlines when it handed down an $82,200.21 judgement against Achter Land & Cattle Ltd. (“Achter”) for the breach of a flax purchase contract.
Normally, one wouldn’t expect a failure of flax delivery to capture the spotlight, but South West Terminal Ltd. V. Achter Land & Cattle Ltd. (“South West”), had one unusual feature: the Court held that Achter bound itself to a contract by texting a thumbs-up emoji to South West Terminal Ltd. (“SWT”).
The judgement has led to concerns about accidentally accepting contracts through the flippant use of emojis – but how valid is this fear? This article will examine the current law of contract formation and how South West will impact that law.
How do courts decide that a contract has been formed?
At first glance, it may be of concern that Achter was bound to a contract that it had never signed. However, subject to some exceptions, a signature or even a written document are not necessary for a Court to find that there is a binding agreement between two parties.
A binding contract will exist where the following common law requirements are satisfied:
- There is offer and acceptance;
- There is certainty as to the essential terms of the agreement;
- There is mutual consideration, meaning that both parties are receiving something from the contract; and
- There is an intention by the parties to create a legal relationship.
According to common law, a contract does not come into existence until there has been a definite offer and an unconditional acceptance of the offer communicated to the offeror.
An acceptance may be communicated in any number of ways through other means such as a verbal communication of acceptance or through a party’s conduct.
The test for whether an offer has been accepted is not whether a party intended to accept the offer. Rather, the test is whether an objective third party in the position of the offeror would conclude that their offer had been accepted by the other party.
In rare cases, a party may accidentally accept and be bound by a contract if their conduct was such that the offering party could reasonably conclude that they have accepted the contract.
Will South West change the way contracts are formed?
While the use of an emoji to communicate acceptance is a novel issue, under Canadian common law there is no principled reason why an emoji could not be used to communicate acceptance in the right context.
SWT had texted a photo of the contract to Achter accompanied by the words “please confirm flax contract”, to which Achter responded with the impugned thumbs up emoji.
Achter argued that their intent in sending the emoji was not to communicate acceptance, but rather to communicate receipt of the contract. However, the question is not what Achter intended, but rather whether SWT could reasonably assume that the emoji was meant as an acceptance.
Critically, the parties had a history of dealing with one another through similar text exchanges. When the Court considered these previous exchanges, a clear pattern emerged where SWT would text a photo of a contract and ask Achter to confirm, and Achter would respond with something to the effect of “Looks good”, “Ok”, or “Yup”.
Each time, Achter performed its obligations with no further indication of acceptance. In this context, the Court concluded that it was objectively reasonable for SWT to interpret a thumbs up emoji as acceptance of a contract.
South West may feature a novel dispute, but that dispute was resolved through existing common law principles relating to the acceptance of contracts.
The case serves as an important reminder that businesses should always be mindful of the way that their conduct could be interpreted by the parties that they are negotiating with.
Businesses in the habit of making informal or verbal agreements run the risk of inadvertently entering into binding agreements through their conduct.
James Wilding is an associate with Perley-Robertson, Hill & McDougall LLP/s.r.l.
He joined the Business Law Group at Perley-Robertson, Hill and McDougall LLP/s.r.l. in 2022.
James maintains a general corporate/commercial practice and is capable of assisting clients with a broad range of transactions. He also regularly assists clients with the preparation of their Wills and Powers of Attorney.
To contact James, click here: https://perlaw.ca/people/james-wilding/
