Bound by email
Leasing companies know that a party seeking to avoid
liability for debts that it has guaranteed will use all arguments
available to enable it to do so.
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One recent argument has been that a
guarantee contained in a chain of emails without a manual signature
having been appended to it is unenforceable. This is because the
Statute of Frauds 1677 requires a guarantee to be in writing and
“signed” by the guarantor.
This was the position in Golden
Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd and another
(2011). The case related to the negotiations for a charter of
a ship by the claimant to the first defendant. The negotiations
were conducted mainly by email and referred to the charter being
fully guaranteed by the second defendant.
The exchange of emails covered the
basic terms of the charter and certain conditions that were
subsequently satisfied.
Negotiations concluded and versions
of the contract were circulated but not signed or authenticated by
the defendants.
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By GlobalDataThe defendants then refused to take
delivery of the vessel denying the existence of a contract or a
guarantee.
The claimant claimed under the
guarantee on the basis the charterer had failed to honour its
obligations by refusing to take delivery of the vessel.
It claimed that the exchange of
emails and documents passing between the parties was sufficient to
establish a guarantee.
The defendants contended that the
email chain and draft documents were too disjointed and
insufficient to constitute a guarantee within the meaning of the
Statue of Frauds 1677.
The judge held that there was an
arguable claim that the emails and documents passing between the
parties were sufficient to establish the guarantee and that the
matter should
proceed to a trial.
The judge was “entirely satisfied”
that it was well arguable that the Statute of Frauds had been
satisfied.
It was not necessary for the
guarantee to be separately documented or for the final email in the
chain at the end of the negotiations to recap all that had gone
before. The court was entitled to look at all the documents which
were said to constitute the agreement.
He held that such email
correspondence and dealings were not uncommon. Furthermore, a
series of emails may follow more closely the sequence
of offer, counter offer and acceptance, by which a contract is
made, than many other forms of negotiation between business
persons.
The electronically printed
signature of the senders of the emails was sufficient to constitute
a signature for the purposes of the Statute of Frauds.
Things to
consider
The court did not rule definitively
on whether there was a guarantee, but it appears to be highly
arguable.
This might prove useful if leasing
companies find they need to rely on email communications with a
guarantor to enforce a guarantee.
Likewise leasing companies should
equally take care not to find themselves inadvertently bound by the
use of email communications. Taking a guarantee in a standard
written form and duly signed is still recommended.
Greg Standing is a partner in Wragge & Co’s motor
finance litigation team
