Accidental contracts – take care when negotiating with clients via email

In this article, commercial solicitor Leigh Ellis explains why contractors should be careful when negotiating with potential clients, as you could unwittingly enter a binding contract during an email conversation if you don’t use the correct terminology.

The colloquial use of the term “contract” can be divorced from the legal reality.

The word “contract” may conjure images of a beautifully crafted document with structured clause numbers, sub-clauses, text, headings, and space for signing.

The law, however, looks to the substance of documents rather than their form to decide whether a contract exists. Or in stricter legal parlance, when there exists: offer, acceptance, consideration, existence of an intention to create legal relations and contractual capacity of the parties.

Adults enter dozens of contracts every day, and the general rule is that there is no requirement for a contract to be in writing.

There are exceptions, usually where the subject matter of the contract is potentially very valuable, or there is serious liability attaching to the type of agreement.

For instance, the Statute of Frauds 1677 requires that all guarantees must be in writing and signed.

Commercial Contracts in the Digital Age

The majority of exceptions to the usual principles of contract formation are well established and generate few problems.

However, with the advent of technology, the applicability of these exceptions to digital communication has been called into question.

For example, would a digital letter be sufficient to satisfy the writing requirement in the Statute of Frauds? Or to what extent can an e-mail be used in the formation of a binding contract?

Many of these questions still attract judicial clarification from time to time, particularly in cases where a lot is at stake.

An important ruling in this area was laid down by the Court of Appeal in Golden Ocean Group Limited v Salgaocar Mining Industries (2012).

The claimants were negotiating with a third party, Trustworth Shipping, for the charter of a shipping vessel. During email correspondence, Trustworth mentioned that the deal was being ‘fully guaranteed’ by an affiliate of theirs – Salgaocar Mining.

When Trustworth repudiated the contract, the claimants sought to enforce the guarantee. In response, Salgaocar argued that the guarantee was unenforceable for failing to comply with the Statute of Frauds.

The Court of Appeal sided with the claimants and ruled that the guarantee was effective.

It found that email correspondence was sufficient to demonstrate that the agreement was in writing, as required to satisfy the Statute.

The signature requirement was also deemed to be met by virtue of the sender typing his name, ‘Guy’ (Salgogar’s Broker Mr Guy Hindley), at the end of the email.

Implications for email negotiations

This case is significant for several reasons.

Most importantly, it illustrates the potential for accidental contracts to be entered into through email, even if no single document codifies the agreement.

Therefore, adequate care and attention must be taken when drafting emails as they may, in fact, represent part of a contract. If a person does not wish to be bound by the contents of an email, they must make this clear in the correspondence by using terms such as ‘subject to contract’.

It also establishes the important precedent that signing one’s name at the bottom of an e-mail is sufficient for the purposes of the Statute of Frauds. The judgment is in line with the traditional English law approach of ensuring that contracts can be freely entered into.

Tips:

1. When negotiating a contract via email, insert “Subject to Contract” at the very top of each new email;
2. If there is a potential dispute in the air about the interpretation of terms of a contract, use “without prejudice”.

There is no reason why you cannot use both if you are negotiating the terms of settlement of a dispute.

Written by Leigh Ellis

Many thanks to Leigh Ellis, a leading business contracts solicitor, for providing this advice.

Recent Developments (2025–2026)

This section was added by the ITContracting team in 2026.

Messaging apps like WhatsApp, Teams, and Slack form binding contracts

The Courts apply the same rules as email.

In Jaevee Homes Ltd v Fincham (2025, High Court), informal WhatsApp exchanges alone created a binding construction contract – no formal document needed.

Similar 2025 rulings (e.g. via Eversheds Sutherland, Osborne Clarke, Gowling WLG) confirm typed names or auto-signatures can count as signatures, echoing Golden Ocean (2012).

“Subject to Contract” is essential—and must be consistent

Recent cases stress using these words it in every message (email, chat, WhatsApp) to avoid accidental binding.

Drop it, and courts may find intent from the full conversation (e.g., 2025–2026 guidance from BCLP, Slaughter and May, Clarke Willmott). Pair with “Without Prejudice” for dispute talks.

IR35 risks for IT contractors

Casual digital chats about rates, scope, or guarantees can evidence “inside IR35” status or create side agreements HMRC might review.

With ongoing scrutiny in 2026, clearly mark non-binding discussions to protect your limited company status.

Some best practice tips for contractors

• Start every negotiation message with “Subject to Contract – Not Binding Until Signed Agreement”.
• Avoid words like “agreed”,  “confirmed, or “guaranteed” prematurely.
• Finalise in a formal document and don’t rely on chat logs.
• Save evidence (screenshots/exports) as courts accept digital chains.

The original advice from Leigh Ellis is more vital than ever in our always-connected world. A few protective words can prevent costly disputes.