Procurement · 17 October 2018

Is my office provider illegally withholding a deposit? Electronic contracts explained

To form a legally binding contract, there are 5 essential elements that must be present

As a Business Advice reader finds themselves in a legal dispute with their office provider over unpaid rent, Grid Law founder David Walker clarifies the elements of a legally binding electronic contract to lay out a potential resolution.

Question

Hi David

I read an article you wrote about electronic contracts and wondered if you could offer me some advice.

My wife has a serviced office contract which ends at the end of this month after a 6-month period. We formally ended the contract by giving three months notice towards the end of June 2018 and the company accepted this on 28 June 2018.

We asked if we needed to confirm in writing as the notice was given via an online login portal. We told them that we would consider continuing to rent an office on a month-to-month basis at the end of the contract but we were still looking at options.

They responded saying:

“Yes, we have received your termination so you don’t need to give it in writing again. This will terminate end of October. We can do a monthly agreement for you moving forward, I can get this arranged and send over to you”

We did not actually ask or agree to a new period but on 28 June 2018, they sent a new contract to us.

The day after, on 29 June, we responded saying:

“Will not return the acceptance straight away, will do so closer to the time just in case our plans change”

They responded the same day saying:

“That’s fine no problem. Have a great weekend”

We heard nothing further although we had been asking them if there were other offices available at other locations or in the same building on another floor. We were also looking at other offices provided by other companies.

They did send us details of an alternative office and we responded by saying we would not sign until closer to the time as we had not yet decided what we wanted to do.

On 28 September, completely out of the blue, we received an invoice for rent and a deposit for a new agreement commencing 1 November 2018. They said that we had accepted their agreement by clicking on an “Accept” button in their email.

I have no recollection of doing this (but accept that it could have inadvertently happened as I was scrolling through the email).

When we initially entered into our original agreement with them, we had to type in the name and date the agreement. It clearly shows the name of the person who e-signed and the date.

We contend that clicking the “accept” button is at odds with the email that we sent to them, we contend that we did not sign any such agreement and our communication with them the day after clearly shows that we were unaware of signing or agreeing to anything.

They contend otherwise. They are intending to hold the two months deposit that we gave under the existing contract to offset the deposit and rent for the disputed contract.

They told us that we would have to formally end the new contract if we don’t want it. We did so on their advice so even though we contend there is no agreement, they say we are liable for the rent for the month.

Any advice on this matter would be appreciated.

Answer

Thanks for your question.

The issue here is whether or not a new contract was formed for the second office.

To form a legally binding contract, there are 5 essential elements that must be present. These are:

  1. An offer;
  2. Acceptance of the offer;
  3. Consideration;
  4. An intention to be legally bound by the contract; and
  5. Sufficient certainty regarding the terms of the contract.

So, are all of these elements present to form a new contract?

It appears that the office provider did make an offer by providing you with the details of an available office. However, there is some doubt over whether or not you accepted that offer.

Clicking an “accept” button under normal circumstance is certainly enough to accept an offer. After all, we do this all the time when shopping online. In your circumstances, I think the situation is different. You had clearly communicated to the office provider that you were not ready to enter into a new contract with them. However, they could argue that by clicking “accept” you were now ready to enter into a new contract and this action overrides your previous email.

I believe you have strong grounds to counter their argument and prove you had not decided to enter into a new contract. This is because acceptance must be final and unqualified. If you had made a final and unqualified decision, why were you continuing to look for new offices (even with the office provider)? It simply doesn’t make sense.

__________________________________________________________________________________
contracts

 

How to ensure your electronic contracts are legally binding

Agreeing contracts electronically can be a risky business if you don’t get the right process in place. Here, Grid Law founder David Walker advises readers how to ensure electronic contracts are safe and secure.

__________________________________________________________________________________

The next essential element is consideration, but I shall discuss this further below.

Another argument as to why there is no contract for the new office is that you made it quite clear to the office provider that you had no intention of being legally bound to a new contract until closer to the time it was needed.  This supports the point above about you not accepting their offer.

If you had accepted their offer and intended to be legally bound by it, you would not have continued your search for a new office.

Whilst these arguments are strong enough on their own to refute their claims, there may also be a question over certainty.

Did you have a chance to look at the new office they offered you?

If not, you can argue that there isn’t sufficient certainty in the terms of the contract as you did not know whether the office is suitable for your needs. The office provider could probably counter this argument by saying that as a previous tenant of theirs you had sufficient information/ knowledge of their offices to make an informed decision without seeing it.

Either way, I don’t think this will make too much difference to the final outcome of the dispute. The previous arguments about you not accepting their offer and having no intention of being legally bound to a new contract are strong enough on their own.

If the office provider believes that a legally binding contract was formed between you, and that the rent is due, they must prove it. They will have to provide evidence to show all five essential elements of a legally binding contract are in place.

Now, back to consideration. Consideration is the money due under the terms of the contract so in this case ,it’s the rent for the office. If no contract has been formed, no rent is due and the office provider cannot charge you for it.

I note that the office provider is trying to retain your deposit from the old office to cover what they say is due for the new office. In my opinion, they have no legal right to do this. The two contracts are two entirely separate issues so the office provider should refund your deposit when you move out of your old office (subject of course to you vacating on time and there being no damage to it).

If they do not repay your deposit voluntarily, you may have to threaten them with legal action to recover it. This should be a very straightforward claim and I can’t, for one minute, imagine they would want to defend it.

I hope that you’re able to resolve this situation but if you have any further questions, please feel free to email me again.

Sign up to our newsletter to get the latest from Business Advice.


 
TAGS:

ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

Q&A

If you’ve found the article above useful, but have a more detailed and bespoke question, then please feel free to submit a query to our expert. We at Business Advice will get in contact with them on your behalf and arrange for a personalised response. These questions and answers will then be collated on the site for any other readers who have similar queries.

Ask a question

Procurement