Q: Our agency manager emailed a hotel's sales department asking for group rates for a corporate client's big meeting. The property's assistant sales manager responded with an email offering 900 room nights at a discounted rate. The message contained all the key business terms, including the dates, room types, taxes and payment deadlines. Our agency manager responded by email stating, "It looks great. Let's do it." Of course, the manager really meant, "Send me a contract so that my agency's owner can review it and then have the client sign it." Eventually, the client decided to use another property, and we forgot about the email exchange. Now, the hotel claims that we have a binding contract and demands the $45,000 deposit. Is it possible that these email exchanges constitute a binding contract? If so, how do we get out of this predicament?
A: You may well have a binding contract based on the email exchange. It does not matter that there are no signatures or standard contract clauses.
Under the laws of every state and all other countries whose laws are based on English law, a contract can consist of any sort of oral or written exchange, as long as all the elements of a contract are present: an offer or a promise, an acceptance or a return promise, value to both sides and definite terms. No formalities such as signatures are necessary, except in a few limited cases such as sales of real estate.
Documents in paper or electronic form that do not look like contracts are called informal contracts. Here is what a leading legal authority has to say about informal contracts:
"A manifestation of mutual assent by the parties to an informal contract is essential to its formation, and the acts by which such assent is manifested must be done with the intent to do those acts; but ... neither mental assent to the promises in the contract nor real or apparent intent that the promises shall be legally binding is essential."
In other words, if it looks like the parties intended to be legally bound, it does not matter if one party thought otherwise.
With an email exchange such as yours, it is easy to see how the hotel could conclude there was a manifestation of mutual assent, as the manager's response certainly sounds like an acceptance of the terms.
Notwithstanding the law, your best strategy may be to deny the existence of a binding agreement. In litigation, it would probably cost so much to prove otherwise that the hotel might not pursue the matter.
For the future, you need to instruct your staff that, when obtaining rates or negotiating any contract terms, they must always make clear that you do not intend to be bound until there is a written document signed by both parties. In your case, if the manager had merely added, "Send me a contract," it would have been sufficient to negate any "manifestation of mutual assent."
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].