Contract formation is at the heart of contract law. First-year law students are taught that a contract will only be validly formed where there is an offer by one party that is accepted by the other to create a legal relationship supported by consideration. Recently, a Saskatchewan Court dealt with a unique contract formation issue pertinent to our increasingly digitized society. On June 8, 2023, the King’s Bench for Saskatchewan determined that a “thumbs-up” 👍 emoji was sufficient acceptance of a contract. While the result may appear surprising to some, the facts of the case revealed that the parties intended to be bound to the contract.
The plaintiff, South West Terminal Ltd (SWT), brought an action against the defendant, Achter Land & Cattle Ltd (Achter), for breach of contract after the defendant failed to deliver the goods provided for under the contract. The defendant denies entering the contract and maintains that any agreement is unenforceable because it contravenes s. 6(1) of the Sale of Goods Act, RSS 1978, c S-1 [SGA].
The contract in dispute was executed on March 21, 2021, after a phone call between Chris Achter and Kent Mickelborough. During their discussion, Achter agreed to sell, and SWT decided to purchase 87 metric tonnes of flax for $17.00 per bushel ($669.26 per ton) to be delivered in November of that year. After the phone call, Mr. Mickelborough sent Mr. Achter a photo of the contract outlining the agreed-upon terms and asked him to confirm the flax contract. Mr. Achter responded with the “👍” emoji.
Was there a “meeting of the minds?”
The Court’s decision essentially turned on the fact that the parties had a longstanding business relationship whereby several contracts have been executed similarly, and Achter has performed without fail. The Court accepted the testimony of Mr. Mickelborough, where he highlighted how he typically completed contracts on behalf of SWT with Mr. Achter, stating that “we would typically have a conversation, either in person or over the telephone, agree on price and volume of grain, then Chris would ask me to write up the contract and send it to him. I have done approximately 15-20 contracts with Achter during my time with SWT.”
Mr. Mickelborough recalled that in July 2020, he sent Mr. Achter a signed contract outlining the terms they discussed on the telephone. He explained that Mr. Achter replied to the contract by simply saying, “Looks good,” which he understood to be his way of accepting the agreement because Mr. Achter routinely signalled his acceptance with short affirmative phrases like “Yup” or “OK.” In this context, the Court determined that the “👍” emoji was indeed a valid acceptance of the contract sent by Mr. Mickelborough.
Conversely, Mr. Achter maintained that the emoji could not be understood as a signature of the contract because he intended not to accept the contract but rather to indicate that he had received it. Mr. Achter argued that he would never have signed an agreement for future production without an “Act of God” clause. However, Mr. Achter never mentioned his desire for an Act of God clause to be included in the contract nor did he contact anyone from SWT to further discuss the contract until September 2021, when he became concerned about a possible crop failure.
The Court found that based on their prior business dealings, Mr. Achter knew or ought to have known that he was accepting the flax contract by sending the thumbs-up emoji. However, the Court emphasized that subjective beliefs do not determine the legality of contracts. In assessing whether a contract was validly formed, the courts apply what is known as the objective reasonable person standard. The question is not what the parties individually thought but rather whether a reasonable person in the same circumstances would conclude that they were to be bound by the contract.
In their analysis, the Court concluded that a reasonable bystander knowing all the background information, would understand that the parties had reached consensus ad idem – there was a meeting of the minds – as they had done on several prior occasions.
Is the 👍 emoji valid under the SGA?
Mr. Achter tried to rely on s.6 of the SGA, which requires a contract to be “signed” and “in writing” for it to be valid. When confronted with whether the 👍 emoji was classified as a signature, the Court determined that the emoji was an unconventional yet valid type of signature. In his decision, Justice Keene explained that by sending the 👍 emoji, Mr. Achter satisfied the dual purpose of the signature requirement under section 6 of the SGA, as it was sufficient to identify him and convey his acceptance of the contract.
Lessons to be learned
In finding that the contract was formed validly, the Court ordered Achter Land & Cattle Ltd. to pay $82,200.21 in damages to SWT for breaching the flax contract. The damages reflect the difference between the contract price ($17.00 per bushel) and the market price ($41.00 per bushel) of the goods on the day the flax should have been delivered.
Failing to clarify and confirm the contract terms cost the defendant nearly one hundred thousand dollars in damages. This case is a useful reminder that contracting parties can never be too careful in their dealings, especially as electronic signatures and other unconventional methods become commonplace. It is also a reminder that a contract’s validity at law is determined by an objective standard rather than a subjective one. Depending on the circumstances, it may not matter if someone does not intend to be bound by a contract if a reasonable person would have taken their conduct to mean that they did intend to be bound. Therefore, carefully crafting agreements and ensuring that all parties understand their duties and obligations under the contract will help avoid these disputes.
We encourage Niagara residents and businesspersons to contact Daniel & Partners LLP for assistance with any contract drafting or dispute needs. Our team can offer you expert legal advice when entering contractual relationships and will ensure that your best interests are protected when disputes arise.
Blog post written by Summer Student, Emily Slessor.