Email correspondence can vary a contract

Background

By way of reminder, a contract will typically contain:

• an interpretation clause at the beginning providing that “a reference to writing or written includes email” (which is self-explanatory); and
• boilerplate wording towards the end seeking to preserve a party’s rights if that party fails to take action in respect of a breach of contract, such as:
  “1. A waiver of any right or remedy is only effective if given in writing.
  2. A delay or failure to exercise, or the single or partial exercise of, any right or remedy does not waive that or any other right or remedy, nor does it prevent or restrict the further exercise of that or any other right or remedy.“

Together, these provisions mean that contractual rights (e.g. the ability to exercise a right or remedy under a contract) may be waived by email. Depending on the wording of the contract itself, a waiver may also be oral or inferred from conduct.

Case background

Little & Anor involved applications to set aside statutory demands related to a debt owed under personal guarantees to a facility agreement.

Most of the debt was for accrued interest, which the applicants (Little & Anor) claimed they did not owe due to a contractual waiver by correspondence and conduct. The key issue for the purpose of this article is whether there was an enforceable waiver of interest of the debt.

Judgment

The court determined that the contractual waiver argument failed as there was no explicit agreement to interest and the conduct of the parties did not support a valid waiver.

Interestingly, the judgment also confirmed that:

• A contractual waiver occurs when one party agrees to let the other party perform their duties differently from what was agreed in the original contract.
• Contrary to common belief, consideration is not an essential component of a contractual waiver unless it is appropriately characterised as a variation.
• The email exchanges relied on by the applicants did not explicitly ask the respondents to waive interest payments. However, emails do qualify as “writing” for contractual purposes and can be validly signed electronically if certain conditions are met. Those conditions being if individual names are included in the footers, an appropriate sign-off connects the name to the email contents, and the emails follow a conventional signature style by including names and contact details.

Comment

It is clear from this decision that contract drafters should consider whether something more than “in writing” is needed for a waiver/release to be effective (such as it being signed) to avoid the risk of an inadvertent release/waiver, although this will then add more process around this. Contract officers/administrators should be careful of taking any action that might inadvertently release/waive contractual obligations when this is not intended.

Contact our Corporate & Commercial team  if you would like advice on the drafting of your commercial agreements.

¹ Ciaran Charles Little & James Patrick O’Shea v Olympian Homes Ltd [2024] EWHC 1766 (Ch)