A recent lawsuit involving a Canadian farmer and a “thumbs up emoji” has generated a good deal of media attention.  The court’s opinion in South West Terminal v. Achter Land & Cattle is an interesting look at contract law meeting new technology.

Image by Sallman Hayat from Pixabay

Background

South West Terminal (“SWT”) is a grain and crop input company.  Kent Mickleborough is a grain buyer for SWT.  Achter Land & Cattle (“the Farm”) is a farming operation owned by Chris Achter and his father, Bob.

Since 2012, SWT purchased grain from the Farm through various deferred grain contracts.  Kent and Chris primarily negotiated these prior contracts, of which there were about 15. Kent testified they would typically have a conversation in person or over the phone, and then Chris would ask Kent to write up a contract and send the contract to him.  Kent stated he has frequently done contracts with producers via email or text message, and this increased with the pandemic in 2020.

Kent pointed to a July 2020 contract with the Farm where he wrote and signed the contract and then took a photo and sent it to Chris with the message, “please confirm terms of the durum contract.”  Chris texted back, “Looks good.”  The Farm delivered on this contract without issue.  Again, in September 2020, after a call with Chris, Kent prepared a contract, signed it, and texted a photo to Chris with the message “please confirm terms of durum contract.”  Chris texted back “Ok.”  The Farm delivered on this contract without issue. Once more, in October 2020 after discussing a contract with Chris, Kent prepared a contract, took a photo, and sent it to Chris with the same text seeing confirmation.  Chris responded with, “Yup.”  The Farm delivered on that contract without issue.

On March 26, 2021, Kent sent a text message to a number of producers, including Bob and Chris, offering a flax contract.  Following the text message, Bob called Kent.  After that conversation, Kent called Chris.  Based on that phone call, Kent drafted a contract for the Farm to sell 86 metric tonnes of flax to SWT at $17/bushel (which is $669.26/tonne) with November delivery.  Kent signed the contract in ink, then took a photo of the contract with his cell phone.  He texted the photo of the contract to Chris along with the words, “Please confirm flax contract.”  Chris texted back with a “thumbs up emoji.” Kent testified he believed this was Chris’ agreement to the contract.

Chris testified that the “thumbs up emoji” confirmed only that he received the flax contract, not that he agreed with the terms thereof. He believed the full terms of the contract would follow by fax or email for him to review.  He said he would not have entered into the flax contract without reviewing and, specifically, without it containing an “Act of God clause.”

The Farm did not deliver flax to SWT in November.  At the time delivery was due under the contract, the spot price for flax was $41/bushel ($1,614.09/tonne).

Lawsuit

SWT filed suit seeking to enforce the contract.  The Farm argued there was no valid contract.  SWT moved for summary judgment.

Court Opinion

The court sided with SWT.  Read Opinion here.

Contractual Formation

Under Canadian law (as with US law), a contract is formed only when there is offer, acceptance, and consideration.

Here, the court relied heavily on the parties’ prior business activities.  The court noted that there is an “uncontested pattern of entering into what both parties knew and accepted to be valid and binding deferred delivery purchase contracts on a number of occasions.” The court relied on Kent’s texts and Chris’ short replies of “looks good,” “ok,” and “yup” to constitute a confirmation of the contractual terms, not just a receipt of the contract.  The court found the parties’ prior actions “very similar” to the flax contract. The court found there to be “no other logical or creditable explanation because the proof is in the pudding.  Chris delivered the grain as contracted and got paid.  There was no evidence he was merely confirming the receipt of a contract and was left just wondering about a contract.”

As to Chris’ testimony that he understood his “thumbs up emoji” to mean merely that the contract was received, the court found this “somewhat self-serving.”  The court noted that from that point on, Chris never contacted Kent or anyone at SWT to discuss the flax contract further.  He never followed up to ask for the copy of the contract he claims to have expected by email.

In analyzing the two witness’ testimony, the court said it was “satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a ‘thumbs up emoji.'”  The court was satisfied the parties came to a meeting of the minds, just like they had on prior occasions with similar contracts.

The court rejected concern from the Farm’s attorney that by allowing the “thumbs up emoji” to constitute acceptance, the court would “open up the floodgates” to allow all sorts of cases coming forward asking for interpretations as to what various different emojis mean.  The court agreed that the case is novel but says that the court cannot “attempt to stem the tide of technology and common usage.”  Instead, courts will have to be ready to meet the new challenges that come from the use of emojis.

Electronic Information and Documents Act

The court also found the “thumbs up emoji” to constitute an “action in electronic form” allowed to express acceptance under the Electronic Information and Documents Act,” a Canadian law passed in 2000.  Under this law, the acceptance of an offer may be expressed “by means of information in a document on an electronic form.”  The “thumbs up emoji” falls within this category, the court held.

Certainty of Terms

The Farm argued that even if the emoji constituted acceptance of the contract, the contract was invalid because it did not contain the required certainty of terms. Specifically, the Farm complained that the photo Kent texted to Chris showed only the front page of the contract.  It did not include the “General terms and conditions” which were included on the back page. The Farm also argued that the delivery date of “Nov.” is impermissibly vague.  The court disagreed.

First, the court noted that the parties had a longstanding business relationship prior to the contract at issue and entered into many similar contracts. Because similar contracts had been accepted and completed between the parties before, the court held the lack of Chris seeing the back of the contract does not make it void for uncertainty. “Chris would have known from the many previous contracts what the terms and conditions on the flax contract would be since the front page was clearly titled ‘Deferred Delivery Production Contract.'”  Further, the court noted that the essential terms of the contract were contained on the first page, which Chris received via text message photo.  The parties, property, and price were clear on the front page.  With regard to the Nov. delivery date, the court held that based on prior dealings, the parties would have known what was meant by that language.

Sale of Goods Act

The Farm claimed the contract did not satisfy the Sale of Goods Act under Canadian law.  This Act requires that a note or memorandum of contract must be signed by the party charged for the sale of goods over $50.  The question, then, was whether the “thumbs up emoji” constituted the required writing signed by the Farm. The court held that an emoji, while non-traditional, was a sufficient means to “sign” a document under these circumstances.

Damages

In light of this, the court awarded damages to SWT in the amount of $82,200 (Canadian dollars) plus interests and costs.

Potential appeal

I know nothing about Canadian law, but I assume there may be an appeals process available should the Farm wish to appeal this decision.  It does not appear such an appeal has been filed yet.

What About in the US?

It is important to keep in mind this is a case filed in Saskatchewan, Canada, applying Canadian law.  Which leads to the question…how would this be handled in the United States?

We have looked and can find no reported cases in the United States addressing the question of whether an emoji can constitute acceptance of a contract.  We were interested, however, in whether text messages could constitute a contract.  At least a few courts across the country have found text messages can constitute a contract at least in certain circumstances.  See Karaduman v. Grover (Ithaca City Ct. 2019)(court held text messages between landlord and tenant constitute contract); St. John’s Holdings LLC v. Two Elecs., LLC, 2016 WL 1460477 (Mass. Land Ct. April 14, 2016) (unpublished)(text message with typed name at the end sufficient under Massachusetts Statute of Frauds in land sale case where texts detailed parties’ intent); Donius v. Milligan, 2016 WL 3926577 (Mass. Land Ct. July 25, 2016)(“Text messages and emails can potentially satisfy the Statute of Frauds, provided that they, like other writings, contain the essential terms of the transaction and are signed by the parties to be bound or their authorized agents.”).  In one California case, Starace v. Lesington Law Firm, (E.D. Cal. 2019), the defendant sent a proposed arbitration agreement by text message.  The plaintiff responded “Agree.”  The court held this to be a valid agreement and enforced the arbitration agreement. For an interesting article discussing these issues and cases, click here.

While Texas courts appear not to have addressed whether text messages constitute a contract, they have reached the issue of whether emails can do so.  At least two courts have held that emails with a signature block or a typed name at the bottom can constitute a signed writing for contract purposes. See Perdido Properties LLC v. Devon Energy Production, 2023 WL 3511234 (Tex. App. Eastland May 18, 2023); Williamson v. Bank of New York Mellon, 947 F. Supp. 2d 704 (N.D. Tex. 2013) (applying Texas law).  The court in Khoury v. Tomlinson, 518 S.W.3d 568 (Tex. App. – Houston [1st] 2017), went further, holding that a person’s email address in the “from” line of an email was sufficient to satisfy the Statute of Frauds.  The Ft. Worth Court of Appeals, however, disagreed in Cunningham v. Zurich American Insurance, 352 S.W.3d 519 (Tex. App. – Ft. Worth 2011), finding that a signature block at the end of an email did not constitute a valid signature.

 Key Takeaways

There are a number of important principles to keep in mind.

First, it is important to understand that requirements can differ based upon the type of contract and applicable law. Laws differ by state, and though contract formation laws are likely quite similar, there could be other applicable statutes that come into play in this type of case.  For example, in a case for the sale of grain in the US, the UCC for the particular state would likely apply.  If it were a contract for the sale of real estate, then the state’s statute of frauds would likely apply.  Each law may have different requirements for executing a contractual agreement.

Second, as noted in this case, the text of the alleged contract is also important.  Generally speaking, a contract must include at least the key terms to be valid.  To the extent that text messages can constitute a contract, it will depend on the level of detail and the actual content included in the messages.  This makes it impossible to say definitively whether a text message can constitute a contract without knowing the actual content of the message.

Third, a critical piece of the decision in this case appears to be the parties’ prior course of dealings together as evidence of their intent to be bound.  The court seemed to heavily rely on the fact that numerous contracts made in almost the exact same factual situation had been completed by the parties over several years.  Without this course of prior conduct, I do think the outcome might have been different. For example, in Copano Energy, LLC v. Bujnoch, the Texas Supreme Court held that a series of emails did not constitute a contract even though all key terms were included because there was no evidence of the parties intent to be bound by the contract.  In this case, it was the prior dealings by which the court found such intent to exist.

Lastly, and perhaps most importantly, one should always seek to have contracts reduced to a written document signed by both parties if at all possible, rather than planning to rely on text messages or emojis to prove the existence of a contract.   Here, although SWT was able to successfully prove a contract, it came with significant litigation costs and time, which might have been avoided had there been a more traditional written and signed contract.