In today’s digital world, your emails can be as powerful as a signed contract. A recent Court of Appeal ruling has reinforced the principle that email correspondence can form legally binding contracts.
The Respondent sought to convert its funds held with the Appellant from Nigerian Naira to Kenya shillings. The Appellant, via email, informed the Respondent that the Appellant would convert the funds at a rate of 0.18%. The Respondent agreed to this rate by email. The Appellant credited the Respondent’s account with KES 21.14 million on the basis of the rate of 0.18%. The Respondent later found out that the rate published by the Central Bank of Kenya (the CBK) at the time was 1.18%. This led to a dispute between the parties with respect to a difference of KES 12.3 million. The Respondent sued the Appellant, claiming that an employee of the Appellant misled it into thinking that the applicable CBK exchange rate at the time was 0.18%. The Respondent argued that the Appellant should have converted the funds using the prevailing CBK rate, on which basis they would have received an amount of KES 34.3 million. Email correspondence between the parties showed that the Appellant had shared their rate with the Respondent, that they had never stated that their rate was pegged to the prevailing CBK rate and that the Respondent had agreed to convert their money on the basis of the Appellant’s internal rate, without referring to the prevailing CBK rate.
The High Court found that the Appellant owed the Respondent a duty of care and should have provided the Respondent with the basis of their exchange rate of 0.18%.
Findings
The Court of Appeal overturned the High Court decision and held that the exchange between the parties, via email, formed a legally binding and enforceable contractual agreement. The Court of Appeal held that the parties were bound by the terms of the contract and that it was not for the court to rewrite such contracts.
Conclusion
This ruling makes it clear that a contractual agreement can be created by way of email correspondence. This ruling serves as an important reminder for everyone to exercise caution when discussing matters by email. If parties do not intend to create legally binding obligations, then they should make this clear in their correspondence.
We do not expect this ruling to apply to transactions involving the sale or purchase of land, nor to charge documents. This is because the Law of Contract Act provides that contractual agreements concerning transactions of this nature must be in writing and must be signed by the parties to the transaction.
