The Dangers of E-Mail and Other Traps to Avoid When Consummating a Business Deal

Over the last few years, e-mail has largely replaced "snail mail" as the standard means of communication, as its speed and ease of use are vastly superior (not to mention more cost-effective and environmentally friendly). This revolution is not without its drawbacks, however.

First, almost everyone I know has, at one time or another, mistakenly hit the wrong button, and sent a sensitive e-mail to the wrong person.

Second, as New York's courts have increasingly made clear, many small business owners remain unaware that their seemingly innocuous e-mails can have far-reaching legal consequences for their businesses. Indeed, New York's highest court has ruled that a foreign business can be sued in New York if its e-mails seek to engage in a "sustained and substantial transaction of business" in the State. And that remains true even if the business never entered New York State.

In a parallel vein, although many states still require a "subscribed writing" before a contract may be deemed valid, it bears mention that the legislatures and courts are recognizing with increasing frequency the validity of electronic documents, i.e., those that do not bear a handwritten signature (See, e.g., the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§7001-7006, and the New York State Electronic Signatures and Records Act). That being said, here are three (3) more traps to avoid when negotiating a business deal:

(1) Never Do Business on a "Handshake"

Ironically, the handshake deal did not begin with a show of trust in the other side to a deal; it originated from each party trying to assure the other that neither was carrying a weapon. The same holds true today: If the other side is not willing to reduce a fair agreement to writing, you should not be willing to do business with them. Simply put, it is unreasonable to ask you to risk the financial security of your family and employees on a relative stranger's "good will."

Moreover, notwithstanding the courts' growing recognition of unsigned electronic documents, oral contracts are still not binding under many circumstances and in many jurisdictions. Consequently, absent a signed agreement, you may be left without any recourse if a dispute arises later about the other side's performance (or failure to perform) under the agreement. Stated plainly, there is little to no justification for failing to assure that you have a signed agreement.

(2) Remember That Silence Does Not Equal Assent

Although this should be self-evident, unless it is established in concrete terms what the other side is willing to do for you in return for your services or payment, you cannot have a "meeting of the minds" between the parties. And without a meeting of the minds, there is no agreement.

(3) A Well-Detailed Agreement Will Save You Both Time and Money

A detailed agreement that "dots each 'I'" and "crosses each 'T'" may prove somewhat tedious, and will cost you a modest sum of money in the short term. But the better-crafted agreement which specifies each party's obligations will not only afford greater protection for your assets and reduce your potential liabilities, it will diminish, if not eliminate, uncertainty and misunderstandings between the parties, and therefore, help prevent litigation, which almost certainly would prove far more costly.

Copyright (c) 2008 Law Offices of Jonathan Cooper