Yes, Emojis are Contractually Binding 😮

As if keeping track of all your contracts wasn’t already hard enough, now you need to check everyone’s phone. If one person gives a thumbs-up emoji when another person texts a photo of a contract, then that may very well give rise to a binding agreement. That, at least, is what happened to a Saskatchewan flax farmer, ultimately costing him C$82,000 plus court costs.

In this case, the Court ruling was probably influenced by the fact that several previous contracts had been agreed and delivered upon via similar text exchanges: “OK”, “Yup” and “Looks good”. It was hard to see how the thumbs-up emoji was different from those earlier text replies. The real difference in this case was that the spot price for flax had moved much higher by the delivery date, so the farmer wasn’t keen to sell at the lower contracted rate.

The Canadian decision is by no means the first court ruling in favor of contracting via text.  This Reuters article summarizes several United States court decisions, including:

• A New York decision that a Landlord and Tenant were contractually bound to a text-based settlement agreement relating to defective premises (Karaduman v. Grover, 2019);
• A Massachusetts decision that a binding contract for the sale and purchase of real estate was formed when the brokers exchanged clear, unambiguous text messages confirming the sale (St. John's Holdings LLC v. Two Elecs., LLC, 2016);
• A California decision that an agreement to arbitrate was validly formed when one party sent an agreement, and the other texted "Agree" in response (Starace v. Lexington L. Firm, 2019). 

This is a bit of a nightmare for contract managers and legal ops teams. If nothing else, you should alert your sales, procurement, and other deal-making teams that texting can result in binding contracts. Specifically, everyone should think twice before responding to an incoming contract, whether via text, Slack, Teams, or any other messaging platform. Rather than giving it the old thumbs-up, better to say “OK, I’m sending this to legal for review.”

It's also worth asking anyone dealing in contracts whether they have any text or messaging exchanges regarding contracts that might not have landed in your central contract repository. As always, better to discover these “surprise contracts” before anything bad happens.

How long, I wonder, before legal teams start using emojis during negotiations? This would probably make playbooks more fun…

You want exclusivity? 👎

Termination for convenience? 🤣

Uncapped liability? 😠

New York law? 👍

Perhaps we’ll leave the emoji contract playbook for another post. 😉