Your E-Mail Message May Become a Binding Contract

January 15, 2007

E-mail has become a preferred means of engaging in business communications. The convenient and instantaneous nature of e-mail messages increases the productivity and efficiency of business operations. It may also increase the risk that an informal message, perhaps written without the effort associated with a more formal type of correspondence, becomes an element of a binding contract. The Michigan Court of Appeals, in the case of Kloian v. Domino's Pizza, LLC, recently held that the exchange of e-mail messages between attorneys for the respective parties to a lawsuit constituted a valid and enforceable settlement agreement. Traditionally, a settlement agreement is a written document signed by the parties or their authorized representatives. In the Kloian case, days before the scheduled trial, the parties' attorneys exchanged e-mail messages agreeing that the defendant would pay the plaintiff $48,000 in exchange for a release from any further claims. The parties never signed a formal settlement agreement, apparently because the plaintiff had second thoughts. Two months after the e-mail exchange, defendant filed a motion with the trial court to enforce the terms of the settlement agreement based on the e-mail exchange. The trial court agreed that all of the necessary elements of a contract had been satisfied through the e-mail exchange. Plaintiff appealed and, on December 28, 2006, the Michigan Court of Appeals affirmed the lower court's ruling. Courts are likely to follow the reasoning of this decision by construing e-mail on the same level with more formal or traditional means of correspondence. E-mail messaging should be approached with the potential that what is said can be used against the author.