Contract Law: Disputes in the Digital Age

The digital age has substantially transformed communication, making it faster and easier than ever before. However, the widespread use of direct and instant messaging (including disappearing messages), social media comments, and emojis in everyday business communications has blurred the lines on what constitutes a legally binding agreement.

Formation

There is no single prescribed method of entering into a contract. What matters is that the essential elements are present: an offer, acceptance, consideration, intention to create legal relations, and certainty of terms. For more information on this, please see our previous article on Forming a Contract.

Many still believe that a contract is only enforceable when formally signed however, that is not the case. In today’s digital environment, contracts can be formed in much more flexible ways than signing a traditional written agreement, for example, via email exchanges, direct messages, or even digital acknowledgements such as emoji reactions.

In recent times the courts have accepted that, in the right circumstances, simple emoji reactions such as a ‘thumbs up’ can constitute acceptance and formation of a legally binding contract (South West Terminal v Achter Land & Cattle). The key requirement is that acceptance of the contractual terms must be clear. Even if, for example, a message agreeing to a contract disappears after being sent, it does not mean that a contract has not been formed, only that there may be difficulty in proving this for the party seeking to rely on it, in the same way as oral agreements.

What appears to be of importance to the courts is the objective intention of the parties and what they have agreed upon based on their words or conduct, not their subjective state of mind. The court will focus on determining whether the parties intended to create legal relations and agreed on all essential terms, regardless of the medium of communication. 

It is therefore extremely important to be clear with the other party as to when you intend to enter into a legally binding agreement, no matter the method by which you are communicating.

E-signatures

That said, contracts can still be entered into in a more traditional format by signing or e-signing a document setting out the contractual terms agreed between the parties.

Electronic or e-signatures are now widely used and are recognised as the electronic equivalent of a handwritten signature, linking a person to the contents of an electronic document. They can take many forms, such as a scanned signature, a typed name, clicking ‘I accept’ on a website or a digital signature embedded into the code of a document.

The main functions of an electronic signature are:

• Evidential – an electronic signature is admissible evidence in legal proceedings e.g. to prove or disprove the identity of a signatory.
• Integrity – the use of electronic signatures can establish that the document has not been tampered with.
• Authentication – the main function of a signature, whether electronic or otherwise, is to demonstrate a party’s intention to authenticate a document and be bound by it.

A digital signature is a sub-category of electronic signatures and is an electronic signature produced using encryption technology. Computer code representing the digital signature is inserted into, or attached to, the document being signed and serves as the electronic signature. Digital signatures make use of ‘keys which comprise strings of numbers and letters, which, when applied by an algorithm, encrypt or decrypt the data.

Admissibility of electronic signatures

The Electronic Communications Act 2000 (ECA 2000) provides a statutory framework for the admissibility of electronic signatures in England and Wales. The ECA 2000 provides that in any legal proceedings:

1. An electronic signature incorporated into or logically associated with an electronic communication or electronic date, and
2. The certification by any person of such a signature shall each be admissible in evidence in relation to any question as to the authenticity or integrity of the communication or data.

Contracts can be executed electronically, as well as Deeds, as long as they are compliant with deed formalities, including witnessing.

If the authenticity of a document signed using an electronic signature were to be challenged, the guidance states that the courts give more weight to the identity, authority and intention of the signatory, rather than the specific form of the signature in question. It is likely the court would accept the document as prima facie (‘on the face of it’) evidence that the document was authentic and, unless an opponent provided some evidence to the contrary, that would be sufficient to deal with the challenge. It is therefore important to maintain audit trails to be able to provide credible evidence in defence of such claims. These are the same principles the courts would apply in relation to wet-ink signatures.

Deemed acceptance clauses

Just as actions or words in the digital world can form acceptance, it’s important to consider the legal effect of inaction or silence. Deemed acceptance clauses are widely used to assist in commercial projects, as a tool to keep the overall project moving along. They provide a window of opportunity for the receiver to raise any issues, and if no issues are raised, the contract will be deemed to be accepted.

This can be an attractive prospect to business owners who seek to minimise delays with clearly defined outcomes and processes. However, this can also give rise to disputes. If acceptance is not being communicated authentically but because of omission, silence on acceptance can still bind parties into commitments with legal ramifications once the relevant period, and if the parties' actions are consistent with acceptance.

Conclusion

As technology and methods of communication continue to evolve, so too does the landscape of contract law. The increasing reliance by both individuals and businesses on digital communication has transformed how agreements are formed, accepted, and enforced, and the courts are increasingly recognising agreements formed through digital communication, whether email, message or even emojis.

For businesses and individuals, the key takeaway here is that clarity matters. Whether it’s an email, message, symbol or emoji, make sure the other party knows when you are saying “yes” to a contract.