03 Aug Watch what you say (or emoji) – Contract Formation in the Modern Age
By Daniel Nancoo
Contracts are part and parcel of our daily lives. Whether you are conscious of it or not, you enter into contracts every day. If you are employed, then you entered into a contract with your employer to perform work in exchange for the payment of a salary. When you buy groceries at the supermarket you enter into a contract with the supermarket, exchanging money for groceries. On a commercial level, businesses may enter into contracts with their suppliers in exchange for money to enable them to fulfil customer orders, which will be contracts themselves. Simply put, a contract is an agreement between two or more parties that gives rights to and imposes obligations on these parties.
Another part of our daily lives is emojis. These digital pictograms, used to express a range of objects and ideas including human emotions, signals, food and animals, have pervaded our communication to the point where messages seem cold or strange if sent without them. Given the rapid increase in emoji usage in our everyday communication, people are still trying to determine their true impact. The recent Canadian case of Southwest Terminal Ltd and Achter Land & Cattle Ltd 2023 SKKB 116 highlights the potential consequences of using emojis from a legal perspective.
For those of you who may have missed it, the Court in Southwest ruled that the “thumbs-up” “👍🏼” emoji was a valid means of accepting the terms of a contract, thereby creating a legally binding contract between parties. The Southwest decision has gripped not only the legal community but the general public with numerous articles being published in the UK Guardian, the New York Times, Business Insider and even CNN, each giving their own run down on this unique case.
The case considered whether a farmer in Saskatchewan had entered into a valid, binding contract to sell 87 tons of flax to a grain buyer. The facts of the case were relatively simple. After a telephone discussion between the parties, the buyer drew up and signed a contract for the sale of the flax and then texted a photo of the signature page to the farmer, along with the message “Please confirm flax contract”. The farmer succinctly responded by texting a “thumbs-up” emoji. The farmer did not deliver the flax as per his obligations under the contract by which time the price of flax had increased significantly. The buyer sued for damages of $82,000.00CAD, roughly equivalent to $420,000.00TTD.
There are several legal requirements that must be satisfied in order for a valid, legally binding contract to be created. These include an “offer” and the “acceptance” of that offer. Generally, an offer is defined as an “expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed.” The receiving party may either reject the offer and make a counteroffer, or it can accept the offer, which forms the basis for an agreement between the parties.
In Southwest, the buyer made an offer to buy flax on the terms set out in the contract that he drew up and sent to the farmer. The issue was whether the farmer’s “thumbs-up” emoji amounted to an acceptance of that offer, or, as the farmer argued, simply an acknowledgement by the buyer that he had received it. It is important to note that in determining whether or not the emoji was sufficient to amount to contractual acceptance, the Court was concerned not with the farmer’s own subjective understanding of what the emoji meant, but what an informed objective bystander would have understood it to mean. The Court is not bound to the parameters of the ostensible agreement but will consider all circumstances of the case including the nature and relationship of the parties and the interests at stake.
The Court noted that the buyer and the farmer had history of doing business together. In previous deals between them, the buyer would text a contract to the farmer, to which the farmer would reply by texting various iterations of acceptance or confirmation of its terms, such as “looks good”, “ok” or “yup”. Both parties would then follow through on the terms of the contract – the farmer would deliver the goods being bought and the buyer would pay the agreed purchase price. On this occasion, famer had responded with a simple “thumbs-up” emoji. The Court had to determine what that emoji meant. The farmer attempted to defend its usage saying that it was only confirmation that he received the contract but not confirmation that he had agreed to its terms. This was not persuasive to the judge who considered the more literal, every day meaning of the emoji, adopting the www.dictionary.com definition of the “thumbs-up emoji”. This definition stated, “it is used to express assent, approval or encouragement in digital communications, especially in western cultures.” This definition, the parties’ previous course of dealing and the fact that the farmer never contacted the buyer for any further details on the contract, led the Court to believe that a reasonable bystander would conclude that the farmer had accepted the buyer’s contract by sending the emoji, and was legally bound by it.
In addition to determining whether the thumbs up emoji amounted to valid acceptance, the Court also had to consider whether the contract satisfied the requirements of the Canadian Sale of Goods Act, which requires contracts to be signed, and the Canadian Electronic Information and Documents Act which defines an electronic signature as, “information in electronic form that a person has created or adopted in order to sign a document and that is in, attached to or associated with the document”. The Court held that, based on the factual circumstances of the case, the “thumbs-up” emoji did amount to an electronic signature. It was sent by the farmer from his own unique cell phone and there was no issue regarding its authenticity.
If that seems surprising, it is worth noting that Southwest is not the first time that a court has accepted non-traditional means of electronically signing a document. For example, in 2021, a Mississippi Court held that the automatic “Sent from my iPhone” line that attaches itself on emails sent from iPhones “may satisfy a trier of fact that the user had the requisite intent to adopt the closing as his or her signature for mobile emails.” Notably, an emoji does not automatically appear on emails or texts – it has to be deliberately added by the user and typically emanates from their personal device. In this regard, an emoji has an arguably greater claim to signature status than an automatically generated messages.
While Canadian legislation does not apply in T&T, our Electronic Transactions Act does provide for (a) contractual offer and acceptance to be expressed in electronic form and (b) electronic signatures. Electronic signatures are defined broadly as information in electronic form affixed to, or logically associated with a data message which may be used to identify the signatory in relation to that data message; or indicate the signatory’s approval of the information contained within that data message. There are specific criteria that must be satisfied in order for a party to rely upon an electronic signature in a transaction, intended to verify the reliability and integrity of the signature. However where, as in the Southwest case, the authenticity of the communication is not in issue, it may potentially be open to our local Courts to accept emojis, or other non-traditional means of electronically signing a document.
You may wonder if an emoji as a form of acceptance would open the floodgates for all interpretations of different emoji meanings in contract formation. Indeed, emojis can cause confusion in daily life (are the two hands with blue sleeves held together clapping or praying?), let alone commercial contracts and other legal situations. The Court in Southwest had this to say to the naysayers – “…this Court cannot (nor should it) attempt to stem the tide of technology and common usage – this appears to be the new reality in Canadian society and courts will have to be ready to meet the new challenges that may arise from the use of emojis and the like.”
Emojis may not be as clear-cut as words, but the courts have long acknowledged that acceptance does not need to be couched in words. Courts have found that handshakes, head nods and even silence in exceptional circumstances can constitute contractual acceptance. when coupled with conduct that objectively signifies acceptance. Each individual case will naturally be determined based on its own facts and circumstances. However, with the Southwest case now extending the form that contractual acceptance may take to include emojis, parties should take care to ensure that their communications during contractual negotiations are clear and unambiguous, lest they run the risk of unintentionally conveying acceptance when they do not intend to do so.
Technology has moved and continues to move in the direction of alternative communication to words (emojis, memes, gifs) and so the legal system must move with it. Certainly, the business world has. Long gone are the days where contracts were a “long song and dance” to use the local parlance with many modern-day contracts now being made and modified on our mobile phones or tablets. They are being executed by parties who may be on opposite sides of the world or who may have never even met. The speed and convenience of our new era of communication clearly comes fraught with legal minefields. Contracting parties need to be acutely aware that texts, emails, tweets, all of these different forms of communication can have contractual implications. It should not be taken for granted that the informality of these forms of communication immunise the parties from being contracts. So watch what you 👍🏼, it may cost more than you think.
For more on the Electronic Transactions Act, check out our previous blog post, here: https://trinidadlaw.com/electronic-signatures/