Negotiating contracts by e-mail

The Court of Appeal has overturned a decision by the lower court that a share purchase agreement had been concluded by email.? The case illustrates the perils of negotiating contracts by email without making clear at what point you intend there to be a legally binding contract.

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A buy out clause in the shareholders' agreement was triggered entitling one of the two shareholders, a Mr Bragg, to buy the shares of the other, a Mr Grant. Various email correspondence ensued about the terms of the share sale agreement. Finally, an email was sent on Mr Bragg's behalf to Mr Grant informing him that, if he would accept the solicitor's original draft of the agreement, Mr Bragg was still willing to proceed with the purchase. Mr Grant e-mailed Mr Bragg stating that he was now prepared to accept the original draft of the agreement and that the sale of the shares could be completed. The agreement, however, was not signed by the parties.
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The draft contract had not become binding for three reasons.
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First, Mr Grant's last e-mail to Mr Bragg had purported to accept Mr Bragg's offer to buy the shares.? However, earlier e-mails in the exchange showed that Mr Grant had in fact rejected Mr Bragg's offer. Once rejected, an offer cannot be accepted subsequently.

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Second, Mr Bragg's offer had been subject to a time limit and this had expired by the time Mr Grant sent the last e-mail. It is not possible to accept an offer which has lapsed.

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Third, negotiations had been impliedly conducted on a "subject to contract" basis. In other words, the parties did not intend a binding agreement to come into effect unless and until the solicitor's original draft of the share sale agreement was signed.

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Case: Grant v Bragg and another

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