Are they Valid?

Once every couple of months litigation associates from our firm spend a day offering pro bono advice to self-represented parties at the Small Claims Court as part of Pro Bono Law Ontario's duty counsel project. As anyone who has visited the Small Claims Court knows, the cases run the gamut and a docket rarely has two similar cases in a day.

Given the variety of (frequently unusual) fact scenarios encountered, we have been surprised by the number of times litigants ask whether they can sue on a contract formed through an exchange of text (aka Short Message Service or SMS) messages. The initial reaction, based on nothing more than basic principles of contract law, is that such an agreement is as valid as an oral contract or one printed on paper. That is, it should be enforceable, subject to getting the messages before the judge to prove the content of the agreement.

After this question came up yet again recently, we began having second thoughts about the validity of the “text message” contract. Was it, in law, really the same as any other type of contract? If so, when and where was it formed? Clearly some digging was in order.

The answer to our queries lies in Ontario’s Electronic Commerce Act, 2000, which was enacted to regulate the formation of contracts by “electronic” means. In particular, section 19(1) of the ECA provides that an offer and the acceptance of an offer may be expressed through “electronic information”. “Electronic” is broadly defined in the ECA to include that which is “created, recorded, transmitted or stored in digital form”. An exchange of SMS messages, then, as digitally transmitted information would appear to have the potential of creating a binding contract under the ECA.

Of course, as with all legal research, it is nice to have a court decision to confirm the interpretation of a statute. Unfortunately, despite the fact that (according to teacher acquaintances) nine year olds are regularly negotiating the sale of used Bieber paraphernalia via text in the schoolyard, we couldn’t find any reported Canadian cases confirming how a court would treat an agreement made by SMS.

Not to be deterred, we expanded our search beyond Canada’s borders and found an answer in Jafta v. Ezemvelo KZN Wildlife, a decision of the South African labour court. In Jafta, the Court directly considered whether the acceptance of an offer through an SMS would result in an enforceable contract.

Jafta had interviewed for a General Manager position with Ezemvelo KAM Wildlife (“Wildlife”), a conservation organization in South Africa, and received an offer of employment via e-mail just as he was about to leave home for an extended trip. Jafta e-mailed his acceptance to Wildlife while travelling and later that same evening received an SMS from Wildlife’s HR Manager stating that Wildlife needed to know whether Jafta was going to accept its offer. Jafta replied by SMS:

Have responded to the affirmative through a letter emailed to you this evening for the attention of your CEO. Had problems with email I had to go to internet café.

At trial, the HR Manager denied receiving Jafta’s e-mail but admitted receiving the text, although she could not recall seeing the word “affirmative” in it. Wildlife ultimately hired the next candidate on its list and Jafta sued for breach of the employment contract. At trial, Wildlife took the position that there was never a contract, because its offer had not been validly accepted.

In Jafta, a central issue was whether SMS was a valid method of communicating acceptance of Wildlife’s offer. The Court ultimately held that Jafta’s SMS reply “to the affirmative” was a direct and unequivocal acceptance of the offer and formed a valid contract.

In reaching this conclusion, the Court referenced South Africa’s Electronic Communications and Transactions Act (“ECTA”) which, like Ontario’s ECA, is based on UNCITRAL’s Model Law of Electronic Commerce. Both Acts are intended to reflect the reality that electronic communications are borderless and designed to address the need for predictability in commercial transactions regardless of where the parties are based.

In Jafta the court concluded that Jafta’s SMS was an “electronic communication” within the meaning of the ECTA and was a valid method of accepting the offer. In the result, Jafta was awarded damages for breach of contract.

Although the ECA does not contain language identical to the South African legislation, the Jafta decision will be a useful precedent when this issue is inevitably litigated in Ontario. Moreover, a number of useful lessons can be drawn from Jafta and a review of the ECA.

First, electronic communications are now clearly standard forms of transacting business. Whether it is a complicated business transaction or the purchase and sale of a labradoodle, Courts have indicated they will, and indeed must, encourage the use of new communication technology. Text messages are simply one example of evolving ways of doing business.

Second, as pointed out in Jafta, while text messages may seem casual, it would be a mistake to treat them as having no legal effect. A valid and enforceable contract can be formed through the exchange of text messages. Bear this in mind the next time you offer your co-worker $100 to respond to that partner’s e-mail about who might be available for a “little doc review" this weekend.

Third, the ECA addresses, among other things, the legal questions of when and where an electronic contract is formed and modifies the traditional common law rules. For example, the postal acceptance rule that a contract is formed when and where the acceptance is mailed is not relevant in an age of near-instantaneous electronic communications. Instead, the ECA addresses various scenarios in order to determine when the contract is formed.

Given the clear trend towards a greater variety of electronic communication, it is inevitable that disputes will arise over agreements made by SMS or other non-traditional modes of electronic communication. Fortunately Ontario has legislation in place to assist in resolving such disputes. Ontario lawyers ought to be familiar with the provisions of the ECA and its application to disputes between both domestic and international parties. We hope you agree this is GTK.

About the Authors

Kyle Magee is associate in the advocacy department of Gowling Lafleur Henderson LLP in Toronto.

Niklas Holmberg is a recent graduate of the University of Ottawa Faculty of Law and is currently articling at Gowlings.