Guarantee by e-mail

If you negotiate by e-mail, you may unwittingly form a guarantee. In the recent High Court case of Golden Ocean Group Limited v Salgaocar Mining Industries PVT Limited, the Court decided that an e-mail exchange was sufficient to constitute a guarantee that defeated the statutory defence available to a guarantor under the Statute of Frauds Act 1677 – i.e. that a valid guarantee must be an agreement in writing and signed. Usually in the case of e-mail exchanges the parties are unable to manually sign e-mails, however, in this case, the Court reasoned that it would make “good commercial sense” to consider all documents as part of the guarantee, even e-mails which had not been signed. Therefore, this case highlights the risk of parties forming binding obligations by way of e-mail exchanges made pursuant to pre-contract negotiations. So the moral of this case is, be very careful what you state in e-mails as you may unwittingly form a binding obligation through the exchange of e-mails, even where those e-mails are unsigned.