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Email contracts come of age

By Adv. Dor Heskia

Published on: Haaretz - TheMarker

What is the validity of a contract signed by email? Can the exchange of promises by email be considered as valid and binding contracts?

An Israeli court has recently affirmed this question, stating that agreements and executions could be undertaken via email, thereby approving the legal validity of so-called online contracts. New business means

In her judgment, judge Noa Grossman of the Tel Aviv Magistrates Court recognized the online contract as a "new business means with binding legal validity.

The court thus gave official imprimatur to what has become a common and popular form of communicating agreements and executing undertakings.

Acknowledging the Internet’s function in turning the world into a ’global village’, Grossman ruled that it was possible for agreements and undertakings to be signed online / electronically. The document need not be printed as hard copies with the signatures of all parties appearing on the paper.

The case pertained to an Israeli company that ordered electric transformers from a German company by email.

The German company, the plaintiff in this action, claimed that the defendant had not performed its obligation under the contract and had not notified the plaintiff of its cancellation.

The plaintiff submitted that he acted upon the provisions of the agreement he had arrived at with the defendant through the electronic correspondence and delivered the product ordered by the defendant.

The correspondence by email included details of the products ordered, an estimate of when the products where to be delivered as well as other clarifications regarding the parties’ (contractual) relationship.

Reviewing this correspondence, Grossman held that it served the same purpose as a written agreement. The electronic communications expressed the mutual agreement between the parties and could therefore take the same effect as signing a written agreement, namely constitute a binding contract.

In upholding the contract, judge Grossman applied the basic principles of contract law, such as terms and conditions, breach of contract, cancellation notice, rescission and damages bringing the rules of contract into the realm of electronic communication. The court ordered the defendant to pay half of the sum claimed by the plaintiff. Adjusting to (modern) reality

The fact that the judge acknowledged the function of online contracts as a means of forming binding and enforceable contracts does not in any way compromise the validity of conventional hard copy contracts.

Judge Grossman relied on opinions of scholars like Dr. Nimord Kozlovski, Prof. David Libai and Supreme Court Judge Mishael Cheshin, who believe that the courts in upholding the law must adjust their positions and evolve in coherence with technological developments, as the ever increasing influence of the internet and other electronic means cannot be denied.

Advocate Jonathan Bar-Sadeh argued that contracts executed online should be valid only if they conform in formal and substantial terms to which standard ’conventional’ contracts are subjected. Other countries recognized electronic contracts several years ago. In Europe and the U.S. it became a matter of extensive legislation and discussion in the courts.

According to American law, the fact that an agreement is executed by electronic means does not by itself warrant invalidation. The courts’ prime concern is to look at the substance of the online contract and how it was executed.

Many contracts in Israel are in fact made online: retail agreements such as ’click here to accept’. Clicking on an ’I AGREE’ button constitutes valid acceptance of the contract.

The drafting of contracts is replaced by the communication and negotiation of the parties via email. Today most business relations rely heavily if not entirely on the communication by email. Judge Grossman’s ruling is of importance because she was the first to uphold an online contract, recognizing the Internet as a business tool of ever increasing importance.

The judgment may also induce users to be more cautious in their correspondence by email because of its recognized legal validity, despite the relative lack of form, inherent in written contracts. On the other hand, now that online contracts have been fully instated, parties may feel more inclined to enter into them. Parties will, however, need to save their correspondence in case they want to prove their claims in court in the future.

A critical issue is the use of emails as evidence at trial, unlike written documents there is the valid concern that it will be more difficult to verify the authenticity of an email as it is subject to relatively simple means of falsification or manipulation. The new ruling adds to the legal debate revolving around the impact of the new communication technologies on the business and legal world. Only now are the courts stepping up to present practice, applying the rules of contract law to the business practices where online transactions, agreements and undertakings have long since been a reality. 


This article and the information above may not be taken as a legal advice whatorever. The writer disclaims responsibility towards the reader and users of this website.


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