In the recent case of Jaevee Homes Limited v. Mr Steven Fincham, the English High Court has handed down judgment that an exchange of WhatsApp messages between the parties formed a basic and legally binding contract, providing a reminder to parties involved in pre-contract discussions to exercise caution.

Background facts

The case centred around a contractual dispute between a property developer, Jaevee Homes Limited (“Claimant”) and a demolition contractor, Steve Fincham, trading as Fincham Demolition (“Defendant”) who the Claimant had hired to undertake demolition works. The parties exchanged WhatsApp messages in April-May 2023 regarding the work with the Claimant confirming the job via WhatsApp on 17 May 2023. On 26 May 2023, a formal subcontract and purchase order was emailed on the behalf of the Claimant to the Defendant however, it was never signed or acknowledged.

The key issue in dispute was determining the exact terms of the contract between the parties, particularly in relation to the payment terms. The Claimant argued that the terms of the written subcontract which incorporated its standard terms and sent to the defendant on 26 May 2023 were binding. On the other hand, the Defendant believed that a basic contract had been formed as a result of WhatsApp messages exchanged on 17 May 2023.

Outcome

The basic criteria for concluding most types of legally binding contract under English is well established: one party makes an offer which the other accepts and some money (or something else of at least nominal value) must pass between the parties. Importantly though, in most cases there is no requirement for a contract to be reduced to writing and signed by the parties nor is there any requirement for acceptance to be formally communicated with acceptance by conduct or implication being very common.

In reaching a decision in this case, the Judge applied these principles, using a common sense and contextual approach when reviewing the WhatsApp messages which had passed between the parties. As a result the Judge confirmed that the messages “whilst informal, evidenced and constituted a concluded contract” as opposed to pre-contractual negotiations. Although the messages did not agree all aspects concerning payment, the messages did confirm the relevant fees, scope of work and final date of payment.

In particular, the Judge focused on a relatively informal exchange of messages between the parties on 17 May 2023 in which the Defendant asked “Are we saying it’s my job mate so I can start getting organised mate” to which the Claimant responded “Yes”, holding that meant a legally binding contract had come into force on that date.

The Judge went on to note that at this point “there was no express indication that the final terms of the agreement between the Parties depended upon agreement as to any other matter such as incorporation of the Claimant’s standard terms”. Therefore, the subcontract and purchase order issued to the Defendant on 26 May which had never been signed or acknowledged by the Defendant were irrelevant as a legally binding contract had already come into force nine days before.

Impact of the ruling

This judgment is a helpful reminder that under English contract law, it is easy to (inadvertently) create a legally binding contract and that caution should be exercised when engaging in informal pre-contract discussions. In particular, if a party’s position is that any award of work is made subject to its standard terms or the conclusion of a formal written contract, that should be clearly stated in discussions and work not allowed to commence until a formal written contract has been concluded. If a written contract is concluded, that should contain an “entire agreement” clause which seeks to exclude any pre-contract discussions to provide certainty that neither party will be able to rely on statements or representations made during discussions which are not reflected in the final written contract.