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E-Mails, Documentary Evidence and Contract Formation

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  • Posted on: Apr 6 2018

On March 29, 2018, the New York Court of Appeals decided Kolchins v. Evolution Markets, Inc., a case that addresses several important practice issues.

Plaintiff in Kolchins was a commodity trader who, in 2005, joined defendant as a commodity broker.  In 2006, and again in 2009, the parties entered into three-year employment agreements.  The 2009 agreement, which had an end date of August 31, 2012, provided for various forms of compensation including a base salary, a “sign on” bonus, a production bonus and minimum guaranteed compensation.  In June of 2012, in anticipation of the expiration of the 2009 agreement, defendant’s CEO sent plaintiff an e-mail stating that the terms of a new employment offer were the same as those under the parties’ 2009 contract, but for a minor issue that was not challenged by plaintiff.  Plaintiff replied to the CEO one month later with an e-mail that stated, “I accept, pls send contract”.  The happy CEO then responded by e-mail stating, “Mazel. Looking forward to another great run.”

Thereafter, defendant’s general counsel unsuccessfully attempted to “reduce the parties’ mutual understanding to a more formal written instrument.”  On September 1, 2012, plaintiff was notified that his employment ceased upon the expiration of the 2009 agreement.

Litigation ensued in which plaintiff alleged that his breach of contract claim was supported by the parties’ e-mails, which constituted a “valid and binding contract setting forth the terms of continued employment with defendant.”  Defendant, relying on the parties’ e-mails, letters and prior employment agreements, moved to dismiss the complaint pursuant to CPLR 3211(a)(1).   The Kolchins Supreme Court denied the motion to dismiss.  Among other things, Supreme Court held that e-mails are not the types of documents that can be considered “documentary evidence” under CPLR 3211(a)(1) and that, even if considered documentary evidence, such documents in this case, did not conclusively refute that the parties entered into a binding contract.

Defendant appealed.  Appellate Division, First Department, found that Supreme Court properly denied defendant’s motion, while rejecting Supreme Court’s conclusion that e-mails cannot be considered documentary evidence for the purposes of a CPLR 3211(a)(1) motion.  In this regard the Kolchins Appellate Division stated:

Preliminarily, we reject Supreme Court’s conclusion that correspondence such as the emails here do not suffice as documentary evidence for purposes of CPLR 3211(a)(1).  The Court has consistently held otherwise…. [T]his Court found drafts of an agreement and correspondence sufficient for purposes of establishing a defense under the statute.  Similarly,… this Court found documentary evidence in the form of emails to be sufficient to carry the day for a defendant on a CPLR 3211(a)(1) motion.  Likewise,… this Court granted a CPLR 3211(a)(1) motion on the basis of a letter from the plaintiff’s counsel that contradicted the complaint.  Therefore, there is no blanket rule by which email is to be excluded from consideration as documentary evidence under the statute.

[Citations and internal quotation marks omitted.]

The Kolchins Court of Appeals recognized the Appellate Division’s holding in this regard and agreed that, based on the documentary evidence supporting its motion, defendant failed to “meet its burden to conclusively refute the allegations of the complaint that the parties entered into a new contract.”

The Court of Appeals noted that the first level of analysis in determining if the parties entered into a contract is whether “there is a sufficiently definite offer such that its unequivocal acceptance will give rise to an enforceable contract.”  The Court also reiterated that: when faced with determining the issue of whether the parties’ course of conduct and communications created an enforceable contract, “it is necessary to look to the objective manifestations of the intent of the parties as gathered by their expressions, words and deeds” (citations and internal quotation marks omitted);  and, that certainty as to material terms is also critical to the finding that a contract exists.

Against this backdrop, the Court of Appeals concluded that a reasonable fact-finder could determine that the documentary evidence presented on the motion could support the finding that a binding contract was formed by the parties.  The CEO’s initial e-mail stated that the terms of the new contract offer were largely the same as under the prior contract.  This, the Court concluded, “could reasonably be inferred [to] constitute[] a valid offer by defendant.”  As to the acceptance and the parties’ intent to be bound, the Court stated:

In response to that email, plaintiff wrote “I accept. pls [sic] send contract,” to which Ertel replied, “Mazel. Looking forward to another great run.” Affording plaintiff the benefit of every favorable inference, this exchange — in essence, we “offer” and “I accept,” followed by an arguably congratulatory exclamation, coupled with a forward-looking statement about the next stage of the parties’ continuing relationship — sufficiently evinces an objective manifestation of an intent to be bound for purposes of surviving a motion to dismiss.

[Footnote omitted.]

TAKEAWAY

As technology advances, folks tend to become increasingly more informal.  Care should be taken to ensure that one or more informal communications cannot be pieced together to create a binding agreement where none was intended.

This Blog previously addressed the issue of e-mails and contract formation here and here.

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