Mariam Azzo
Special Counsel •
Sydney
Canadian Court gives thumbs up to emoji in contract case – would an Australian court?
Time to read: 3 minutes
Processes followed should be sufficiently formal to mitigate the risk that a counterparty could later rely on, and a court could construe, patterns of conduct to find a valid contract exists where one was not intended.
Is a "thumbs up" emoji, without more, capable of establishing a legally binding contract? In June 2023, a Canadian Court held that it was in the case of South West Terminal Ltd v Achter Land & Cattle Ltd, 2023 SKKB 116. The Emoji Case is not the first time a court has been called on to consider and interpret the meaning of an emoji, and, in Australia, the NSW District Court has in the past found that an emoji carries defamatory imputations.
Considering Canada and Australia's similar legal traditions – and an acknowledgement by the Judge in the Emoji Case that courts need to adapt to the "new reality" of how people communicate – it's worth considering how a court in Australia could determine a similar case.
Two men, one emoji – and a contract?
Since at least 2015, grain buyer, South West Terminal (SWT) and farming corporation, Achter Land & Cattle Ltd (ALC) had been engaged in regular business through their respective representatives, Kent Mickleborough and Chris Achter.
In March 2021, Mickleborough and Achter had a telephone conversation about a sale of flax. On this call, Mickleborough and Achter agreed that ALC would sell 87 metric tonnes of flax to SWT, with delivery to occur in November 2021. They further agreed that Mickleborough would draft a contract to reflect this (as had been the parties' practice). Mickleborough then signed the drafted "Deferred Delivery Production Contract", took a photo of it on his phone and sent it to Achter in a text message requesting that Achter, "Please confirm flax contract". Achter replied with a "thumbs up" emoji and did not make further contact with anyone from SWT to discuss the contract.
When ALC failed to make delivery, SWT sued for breach of contract and damages. ALC defended the claim by arguing:
- it hadn't entered into the contract;
- the contract was unenforceable as there was no note or memorandum of the contract made or signed by the parties;
- Achter's reply was merely a confirmation that he had received the contract and was not acceptance to be bound by it; and
- the contract was void for uncertainty, as the photo attached to Mickleborough's text message only contained the price, quantity and delivery date and did not contain the applicable "General Terms and Conditions".
Mickleborough gave evidence that throughout the parties' business relationship, particularly when negotiating contracts, he would primarily deal with Achter and discuss key terms orally. Achter would then request that Mickleborough draft and send to him a contract, and it was common for SWT to finalise contracts with ALC via text message – Achter had previously confirmed contracts with replies of: "Ok", "Yup" and "Looks good", sent from his personal number.
Why an emoji was good enough in Canada to create this contract
The Court accepted Mickleborough's evidence and stated that the deal was "at least verbally struck" during their telephone call and that Mickleborough and Achter's conduct was "just as they had done on numerous occasions before without any issues", citing the "multiple previous contract negotiations resulting in contracts". The Court considered the use of the "thumbs up" emoji in the context of the specific case, including that, in several like-contracts (albeit for the sale of durum), Mickleborough would send Achter a message saying "Please confirm the durum contract" to which Achter would signify acceptance, and ALC would later deliver the goods. The Judge concluded that "a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item [sic] – a meeting of the minds – just like they had done on numerous other occasions."
On the question of certainty – as SWT and ALC had entered into multiple "Deferred Delivery Production Contracts" in the past on like terms, the Court determined that Achter was aware of the contract terms and so the contract could not be invalidated for uncertainty.
Finally, rejecting ALC's public policy defence – that permitting a "thumbs up" emoji to signify acceptance "would open up the flood gates" for the courts to interpret other emojis – the Judge said, "this Court cannot (nor should it) attempt to stem the tide of technology and common usage… courts will have to be ready to meet the new challenges that may arise from the use of emojis and the like."
Can a "thumbs up" emoji be a substitute for a signature in Australia?
Although the Emoji Case was substantially informed by the parties' prior dealings and patterns of conduct, at least in theory (given the similarities between Australian and Canadian contract law), an Australian court could reach the same conclusion in the appropriate factual scenario.
Australian courts will apply an objective test of what a "reasonable bystander" would regard as being the intention of the parties, and, as in Canada, this involves making inferences from the parties' acts and conduct (including patterns of previous dealings).
Making sure your commercial agreements are binding
Some day-to-day arrangements may not require formal execution of a document in order to be binding on the parties. For more significant (and often larger) transactions, most companies to which the Corporations Act 2001 (Cth) applies execute agreements under section 127 of the Act to benefit from assumptions elsewhere in the Act. As these provisions require the document itself to be signed, or a seal affixed (however rare in practice), it would be a difficult argument to mount that an emoji or other electronic symbol should be considered a binding and valid replacement for the signatory requirements in an agreement that expressly provides for execution under section 127 of the Corporations Act.
That being said, companies (as well as others engaging in commercial contracting) should be aware of this judgment and its potential to be replicated in an Australian context. With more courts evidencing their willingness to recognise and interpret emojis in modern day communications, parties to commercial agreement should avoid the casual use of emojis / electronic symbols when contracting.
Beyond emojis and emerging electronic symbols, companies and directors should remain alert, generally, to their own contracting practices. Processes followed should be sufficiently formal to mitigate the risk that a counterparty could later rely on, and a court could construe, patterns of conduct to find a valid contract exists where one was not intended. Parties should always confirm in writing that something is agreed (noting that Australian legislation requires certain contracts to be in writing), notwithstanding the use of any emojis or other electronic symbols.
If you would like further advice on ensuring certainty in your commercial transactions, please get in touch.
Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.