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Beware the Power of E-mails—They Can Amend Contracts

December 1, 2008

Courts are starting to rule that e-mails can modify contracts as “signed writings” of amendment between contracting parties. Witness the recent New York Appellate Division case of Arthur H. Stevens v. Publicis S.A.

The facts—The plaintiff, Arthur H. Stevens, sold his New York-based public relations firm, Lobsenz-Stevens (L-S), to defendant Publicis S.A., a French company. The sale involved an employment agreement under which the plaintiff was to continue as CEO of the new company, PDNY, for three years. Stevens’ duties were to be the “customary duties of a chief executive officer.”

Within six months of the acquisition, signs of financial problems appeared. Stevens was removed as CEO of the business and was given several options, including leaving the firm, staying and working on new business, or coming up with another alternative.

Thereafter, Bob Bloom, former chairman and CEO of Publicis USA, became involved as he and Stevens exchanged a series of e-mails, culminating in a message from Bloom setting forth his understanding of the parties’ terms regarding Stevens’ new role at PDNY: “Thus I suggested an allocation of your time that would permit the majority of your effort to go against new business development (70 percent). I also suggested that the remaining time be allocated to maintaining/growing the former Lobsenz-Stevens clients (20 percent) and involvement in management/operations of the unit (10 percent). This option…offers the best opportunity for you to achieve your stated goal of a full earn-out. When I suggested this option, you seemed to have considerable enthusiasm for it and expressed your satisfaction with it so I, of course, assumed that it was an option you preferred.”

By e-mail the next day, Stevens wrote:

“I accept your proposal with total enthusiasm and excitement… I’m psyched again and will do everything in my power to generate business, maintain profits, work well with others and move forward.”

Bloom replied the same day: “I’m thrilled with your decision. You have my personal assurance that all of us will continue to work in the spirit of partnership to achieve our mutual goal and function together as close senior collaborators in a climate of respect and dignity for all.”

The ruling: For the French company, because the parties had agreed in writing to modify Stevens’ duties under the employment agreement, through the e-mail exchange in which both sides expressed their unqualified acceptance of the modification to the agreement.

The reasoning: The employment agreement contained a clause allowing modification through subsequent written documents signed by all parties. New York, like most states, had a “statute of frauds” state law requiring “signed writings” (i.e. written contracts) for contracts extending beyond one year. E-mails qualified. And there was no contract clause prohibiting e-mails as constituting signed writing for the purpose of amending this employment agreement.

Lessons of this case:

• Sloppy e-mails can bind parties to contract changes, and

• Other forms of digital media (such as transcribed voicemail or text messages) may not be far behind. MF

Technologies: Management

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