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Variation By Email

View profile for Alim Shariff
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A recent case in the High Court (C&S Associates UK Ltd v Enterprise Insurance Company Plc [2015] EWHC 3757 (Comm)) held that an informal exchange of emails between the parties was sufficient to vary the terms of the contract even though the contract included a clause providing that any contractual variation had to be in writing and signed by or on behalf of both parties.

The case involved parties concerned with motor insurance claims and C&S Associate UK Ltd dealt (“C&S”) with these type of claims on behalf of Enterprise Insurance Company Plc (“Enterprise”).  Enterprise terminated its agreement with C&S because C&S refused to deliver files to Enterprise’s auditor and it subsequently claimed that termination of the agreement was justified because of C&S’ poor performance.  C&S issued a claim against Enterprise for wrongful termination and sought damages.

One of the issues which arose was a variation to the contract following an exchange of emails between the parties.  This related to various issues including increasing the C&S’ fees under the agreement and the duration of the contract.

The contract itself contained a standard variation clause which 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.”

On the evidence the Judge found that the email exchange varying the agreement was valid.  It was said that the clause was sufficient to introduce a degree of formality into the requirements for varying the contract to ensure that the parties were not bound by oral agreements or any informal unsigned written documents but the clause did not go so far as to specify that the signatures must be on the same document or whether it required manuscript signatures or paper documents.

The Judge held that the email correspondence which included signature blocks would be sufficiently formal to satisfy the terms of the variation clause provided the other requirements of contract formation and variation (such as both parties having the intention create contractual relations and to be bound) were present.  The emails had been ‘signed’ by the appropriate individuals with one using a signature block and the other was worded “Many thanks Myles, much appreciated. Mike”.

It was therefore held that the requirements were satisfied in this case and the contract was accordingly varied.

Considering the amount of correspondence and business that is conducted by email it is now particularly important that care is taken when exchanging emails about contract terms even though the contract in question contains a variation clause like the one in the above example.  As was seen here, emails using signatures can be deemed to satisfy the requirement for a signed written variation.  It may also be useful when drafting an agreement to specify that manuscript signatures are required or that any reference to the term ‘writing’ in the agreement does not include email communications.