A Canadian grain company call South West Terminal, Ltd. (“SWT”) had done four previous grain deals with Canadian farmers Bob and Chris Achter. The parties began negotiations for a fifth deal through a series of calls, and eventually SWT drafted and sent to Chris Achter a photo on his mobile phone a copy of the contract, along with the message “Please confirm flax contract.” In response, Chris Achter responded with no more than a simple thumbs-up emoji. But when the due date came for the SWT to receive the flax which had been the subject of the deal, nothing showed up. By this time, the price of flax had risen from $17 per bushel at the time of negotiations to $41 per bushel — a sizeable difference.
Litigation soon followed in the Canadian courts, and the Achters defended by claiming that the thumbs-up emoji was only meant to indicate that he had received the contract, not that he had accepted it. In the end, however, the court disagreed with this position and instead held that the thumbs-up emoji amounted to a legal acceptance of the contract. In awarding SWT the amount of $82,000 in damages, the court wrote:
“I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a [thumbs-up] emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions.”
ANALYSIS
The lesson of this case is an ancient one that has been updated to modern times, which is that in a business transaction it is important to be clear in communications regarding that transaction. While everybody is now very comfortable with the amazing informality in how folks communicate with each other, particularly electronically, that same need to be clear about what one means is as important as ever.
Every law student learns in the first week of Contract Law I that a contract fundamentally consists of three elements: An offer, an acceptance, and consideration. Here, there was clearly an offer (the contract sent to Chris Achter’s phone), and the consideration was that SWT would pay the Achters for their flax at $17 per bushel. Was there an acceptance?
What we end up with the thumbs-up emoji is a response that is arguably ambiguous. Contract law deals with that also, through a rule of law that basically posits that if an ambiguity occurs between the parties, the ambiguity is ordinarily to be resolved against the party who created the ambiguity. Here, Chris Achter caused the ambiguity by sending the thumbs-up emoji, so under contract law the ambiguity was resolved against the Achters and in favor of SWT. That means that we have an acceptance here and thus a contract.
It is this rule which is very important for those who engage in transactions to remember: Ambiguities are ordinarily resolved against the party who created the ambiguity. This is why it is so critically important that folks take the time to clearly state what they mean, and not lazily respond with what amounts to electronic shorthand.
It is interesting to consider what might have happened had the price of flax dropped from $17 per bushel, say down to $5 per bushel where SWT would be the party desiring to avoid the contract. In that case, SWT might argue what Chris Achter did — that the thumbs-up emoji only meant to convey his receipt of the contract and not his acceptance of it — and that there was thus no acceptance and no contract. In that case, the rule interpreting an ambiguity would still presumably apply against Chris Achter because he was the one who created the ambiguity, and SWT might have been able to avoid the contract.
On the other hand, the Canadian judge seemed to conclude that a thumbs-up emoji amounts to a “yes” in which event the court might have held that there simply was no ambiguity, and the contract would have been as equally binding on SWT as it ultimately was on the Achters.
But see the mess that is created by not taking the time to be clear? No commercial party with any sense desires to be in litigation, and thus the necessity of being clear in business communications and not responding like somebody’s teenage kid to a selfie sent to them by a buddy.
It’s an ancient lesson, going back literally centuries and pre-dating even the early Romans that parties should be clear in their communications when transacting business. It doesn’t mean that one has to adopt the stilted and long-winded language required of contracts in Elizabethan England, but what is conveyed needs to be clear and unmistakable. That’s the lesson that we cannot forget, no matter how popular emojis or anything similar becomes in contemporary society.
Read the full article here