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Parties often believe that to have a valid contract, it is necessary to have certain formalities, like signing the agreement. As held by the Virginia Court of Appeals in a recent decision, such formalities are not necessary.
In Total Quality Logistics v. Riverside Turf, LLC, a representative from Total Quality Logistics, a freight broker, contacted Riverside Turf, a sod company, in 2020 asking if Riverside Turf needed the company’s services arranging freight transportation. Riverside Turf wanted sod from Kentucky delivered to a soccer field in Virginia, and the parties agreed that Total Quality Logistics would arrange the transportation.
Through a series of emails, they set the particular price, dates, times, locations, amount of sod to be transported and types and number of trucks to be used. Riverside Turf prepaid for the transaction, which totaled $16,200.
On the pre-arranged day for the first pickup of the sod in Kentucky, Total Quality Logistics could not secure the necessary trucks, and the sod did not survive and was unsalvageable. Total Quality Logistics refunded Riverside Turf the amount paid for the freight transaction, but did not reimburse it for the dead sod or expenses incurred for the workers and equipment on site at the soccer field to install the sod.
Riverside Turf filed a lawsuit for the damages incurred due to the failure to transport the sod. Total Quality Logistics argued that the parties did not adequately form a valid contract because they did not agree on all of the essential elements of the transaction, specifically, the perishability of the sod.
The court explained that “for an agreement to form a valid contract, there must be an offer, acceptance, and ‘valuable consideration.’” The court specified that “[i]n order to be binding, an agreement must be definite and certain as to its terms and requirements; it must identify the subject matter and spell out the essential commitments and agreements with respect” to that arrangement.
Here, the court determined that the series of emails that the parties exchanged in 2020 provided the terms of their expected transaction. The court concluded that the emails contained terms were “sufficiently definite” to give the agreement an “exact meaning.” Thus, the court concluded that the contract’s terms were complete, even though a provision about the product’s perishability was not included.
Ask General Counsel Insight: The takeaway from this case is that a formal document, signed by both parties, is not required to form a binding agreement. Here, the court concluded that the parties had created a binding contract through their email communications. The court made clear that to be binding, an agreement “must be definite and certain as to its terms and requirements; it must identify the subject matter and spell out the essential commitments and agreements with respect.” Here, the email communications contained an offer of services and acceptance of that offer, as well as sufficient clarity to lay out the essential terms of the agreement to make it binding.
Accordingly, parties need to be aware that email communications that similarly set out clear terms for an agreement may be determined to be a binding and enforceable contract. If that is not the desired outcome, business owners should ensure they are clear in their communications that they are not committing to a binding agreement. And, of course, when in doubt, you should contact legal counsel.
If you need more guidance or information, contact General Counsel, P.C. at 703-556-0411, or via email at email@example.com; or use this Contact Form. The attorneys at General Counsel, P.C. have tremendous experience drafting, negotiating, and litigating contracts. If you need assistance, please do not hesitate to contact us.