As recently reported by the Federation of Small Business, a new court ruling now means that an informal exchange of emails can count as a variation in the terms of a contract even when the contract states that any variation must be in writing with the signed agreement of both parties.
In the case of C&S Associates UK Limited v Enterprise Insurance Company PLC the High Court held that the electronic signature file in an email satisfied the requirement for a signature and that both parties did not need to have their signatures on the same piece of paper for it to be valid. This resulted in a change in the terms of the contract between the two parties.
It is important to keep in mind that the court also took the view that both parties intended to be bound by the emails.
This raises the possibility that payment could be delayed based on non compliance of revised contractual terms as agreed in an informal exchange of emails between two parties.
For example, what if a supplier agreed in an email to include an extra piece of work as a goodwill gesture while the original contractual agreement stated that final payment would not be made until all agreed work had been complete? The supplier could find themselves in a situation where they are invoicing for final payment while still completing the goodwill part of the job. As a result, an unscrupulous customer might then withhold final payment until all work, including the goodwill gesture was complete. With staff wages to pay, this could be a problem for the supplier.
The the above example might not be a legitimate interpretation of the precedent but all it takes is a small gap in the fence for a less than ethical customer to find grounds to withhold payment and while the dispute rumbles on the supplier goes unpaid.
The most important thing that suppliers can do is to learn as much about their customers as possible and then structure their working relationship accordingly. In this example they might avoid making any offers or agreeing any changes via email… or otherwise insert a clause to the effect that the changes shall not affect the already agreed upon payment terms.