In the digital age, our methods of communication have evolved drastically, with emojis becoming a staple of modern conversations. But what happens when these simple symbols take on significant legal meaning? A recent decision by the Saskatchewan Court of Appeal has drawn attention to the power of emojis, specifically the thumbs-up emoji, in the context of contract law. This groundbreaking case demonstrates that even the most casual-seeming forms of communication can carry serious implications, including being interpreted as acceptance of a binding agreement.
The Emoji Case: A Flaky Batch of Flax
An Emoji is defined as “a small digital image used to express an idea or emotion on social media, on the internet, in emails, etc.” One emoji in particular became the focus of South West Terminal Ltd. v Achter Land, a 2023 case at the Court of King’s Bench in Saskatchewan between two agricultural companies, Achter Land & Cattle Ltd. and South West Terminal Ltd.
South West Terminal sent a text message containing photos of a proposed $58,000 contract to purchase flax from Achter Land. Achter Land responded to the message with a thumbs-up “👍” emoji. South West Terminal assumed the emoji denoted that Achter Land had accepted the contract.
But Achter Land never delivered the flax.
Achter Land later argued that they had not accepted the contract, despite the infamous emoji. South West Terminal sued them for breach of contract under section 6 of Saskatchewan’s The Sale of Goods Act and won.
Can an Emoji Create a Binding Contract?
Achter Land appealed to the Saskatchewan Court of Appeal, hinging on the question of whether an emoji can create a legally binding contract.
The Court of Appeal upheld the lower court’s decision that Achter Land had indeed accepted the contract. The parties’ prior business relationship indicated that the use of the thumbs-up emoji was typical of how they had previously communicated when entering contracts for purchase orders. The Court declared the emoji to be “an action in electronic form that can be used to express acceptance” as per Saskatchewan’s Electronic Information and Documents Act, 2000.
South West Terminal was awarded $82,200 in damages, plus interests and court costs.
The idea that an emoji can amount to a contractual agreement between two parties raises interesting questions about the intersection of law and technology. But Achter Land v. South West Terminal ultimately revolves around the simple notion of acceptance in contract law. Accordingly, it is important for business owners and entrepreneurs to review the basics and fundamentals of business contracts.
The Fundamentals of Business Contracts
While South West Terminal Ltd. v Achter Land is a decision coming out of Saskatchewan courts, Ontario judges may find a decision like this convincing, and may subsequently choose to follow this case law in future decisions. It is therefore important to understand how this case fits into the bigger picture of Canadian contract law.
Types of Business Contracts
A business contract is a legally binding agreement between two or more parties. Entering contracts of various kinds is part and parcel of running a business. Examples of contracts that business owners frequently enter include the following:
- Agreements of purchase and sale
- Service agreements
- Employment contracts
- Real estate contracts
- Sale of goods contracts
It is crucial that business owners ensure their contracts are written clearly and comply with relevant laws and regulations. Doing so is key to preventing problems from arising down the line.
Key Elements of Business Contracts
Each contract is a product of the specific needs and interests of the parties involved. However, six foundational elements are common to nearly all business contracts. These are:
- Offer: The offer is a proposal by one party (the offeror) to another party (the offeree). The offer contains the terms and conditions of the agreement.
- Acceptance: Acceptance occurs when the offeree agrees to the terms and conditions of the contract.
- Consideration: Consideration is the benefit that each party receives upon entering the contract. Consideration is often monetary; however, it can also take other forms, including goods or services, promises, land, etc.
- Consent: Consent refers to the parties’ understanding of the contract. A valid contract requires voluntary consent.
- Capacity: Capacity is the legal ability of the parties to enter a contract. It is based on each party’s understanding of the nature and consequences of the agreement. A contract in which one of the parties lacks capacity (due, for example, to mental disability) is not binding.
- Legality: Contracts must adhere to certain legal standards. Legality ensures that the terms and conditions of the contract are binding and enforceable.
Consequences of Defective Business Contracts
South West Terminal v. Achter Land turned on the first of the six elements—acceptance—as the court considered whether the thumbs-up emoji constituted an electronic signature and could form a valid contract. But a contract that lacks any of the above elements, or is otherwise unclear or ambiguous, can be challenged and can lead to significant issues. Some of the consequences of a defective contract include:
- Conflicting expectations: Problems might arise when parties have different understandings of the meaning of a contract. In South West Terminal v. Achter Land, for example, the parties had differing beliefs about whether the contract had been accepted.
- Business losses: Dealing with the fallout from a contract that is unclear, ambiguous or error-ridden can be costly. Businesses might suffer financial losses, reputational damage, missed opportunities, and expensive litigation.
- Unenforceability: If any elements of a contract are missing, a court can deem it unenforceable. When this occurs, the parties are not legally bound by the terms and conditions contained in the agreement.
When drafting and negotiating contracts, businesses should bear these risks in mind.
Avoiding the Pitfalls of Defective Business Contracts
It is better to be safe than sorry, especially where a contract is concerned. When drafting contracts, businesses should consider implementing the following suggestions:
- Include all essential elements: A binding contract requires offer, acceptance, consideration, consent, capacity, and legality.
- Be clear and concise: Avoid language that is complex or convoluted. This can reduce the potential for misunderstandings.
- Seek a legal opinion: Before signing an agreement, have it reviewed by a qualified lawyer who specializes in business law. They will ensure that the business’s interests are protected and identify any potential issues.
Thoughtful Contracting: Think Before You ‘Emoji’
The main takeaway from South West Terminal v. Achter Land might be to think before you text—especially if you’re tempted to use an emoji when drafting or negotiating a contract. But the case also highlights the importance of understanding the fundamentals of business contracts, particularly that of the contract principle of acceptance. Familiarity with these basic concepts can empower business owners and help them avoid the consequences of a defective contract.
Contact the Corporate and Commercial Lawyers at Baker & Company in Toronto for Advice on Business Contracts
The seasoned corporate and commercial lawyers at Baker & Company regularly guide clients through various business-related matters, including drafting and reviewing complex business contracts. In addition, we help our clients develop comprehensive and practical business strategies to address their ongoing needs and advise them on issues that arise on a day-to-day basis. Call us at 416-777-0100 or reach out to us online to schedule a consultation to learn how we can help you meet your business needs.
