Unexpected Electronic Contract

Text, Chat, Social, Video Records

Electronic media seep casually into B2B and B2G contracts.

US Defense Department contracts are known for formality.  That is why Mabus v. General Dynamics C4 Systems, Inc. (US Ct of Appeals, Federal Circuit 2/4/11) teaches important lessons about electronic commerce.

Facts of the Case

A contract between the government and a defense contractor said that orders under the contract could not be transmitted by electronic media.  However, in practice, the government and the contractor used email for these orders all the time.

Instant Message as
Written Agreement
A dispute arose over certain orders that had been transmitted by email. The contractor argued that email was not allowed under the terms of the contract, so the orders were ineffective.

However, the court ruled that email was an effective medium for sending the orders.  The court’s rationale was that the contractor was prevented from denying the effectiveness of the orders under an esoteric doctrine, “equitable estoppel.” The court’s reasoning ignited controversy among blogger experts.

But regardless of the court’s reasoning, the case teaches lessons of general applicability.

Lesson #1

The Mabus case reminds us that today we interact with trading partners through an ever-growing array of recorded media.  Messages through text, chat, mobile apps and social networks feel informal, even trivial . . .  but they are recorded.

Lesson #2

Courts tend to accord the same weight to an electronic business message as they do to a formal, paper letter signed with a handwritten ink autograph.

Contracting parties should therefore treat all electronic messages seriously.   This is why I’ve been teaching how to make legal records of important text and cell phone messages.