FORETHOUGHT - Whyte Hirschboeck Dudek SC

WRITTEN CONTRACTS ARE
NOT ALWAYS SET IN STONE
Written by
Erin M. Keesecker
Written contracts give businesses and
individuals a sense of security and stability,
in part because they seem difficult to
break or modify. Most written contracts
contain a section that dictates what
the parties must do in order to change
the agreed-upon contractual terms.
This section often contains a “no-oralmodification”
(NOM) clause, indicating that
amendments must be “made in writing”
and “executed by both parties.” Here is an
example of such a clause:
No amendments or modifications
of this agreement shall be made
or be deemed to have been made
unless such amendments or
modifications are made in writing
and executed by the party to be
bound thereby.
In reading the NOM clause quoted above,
most people envision the parties returning
to the proverbial bargaining table,
negotiating the amendment, and then
signing an amended written document,
perhaps under very similar conditions as
existed when the original contract was
formed. For purposes of formality, there
may even be a notary present.
That, however, is no longer the only
scenario permitted by an NOM clause.
Because the term “writing” does not
necessarily mean putting pen to paper,
NOM clauses may no longer be enough
to bar contract amendments by informal
email exchanges or even instant
messaging (IM) conversations.
The Enforceable Email Chain
For instance, in 2009 the U.S. District
Court for the Central District of California
held that a series of informal emails
between two parties to a written contract
created an enforceable amendment,
even though governing law, much like
an NOM clause, required agreements
to “be reduced to writing, or some
memorandum, or notes thereof” and
“signed by the party to be charged
therewith, or some other person thereunto
by the party lawfully authorized in
writing.” The court ultimately employed a
“substance over form” type of analysis,
concluding that as long as a court can
“plainly determine” the essential elements
of the contract, i.e., “the identity of the
parties to the contract, the nature of its
subject matter and its essential terms,”
an email chain is an adequate vehicle for
amendment.
The $1.2 Million Instant Message
An even more dramatic example occurred
in 2011 in the U.S. District Court for
the Southern District of Florida. There,
the parties’ NOM clause stated that the
contract could be changed “only by
a subsequent writing signed by both
parties.” A dispute arose after the parties
discussed modifying certain terms
of the contract in a series of informal
conversations via IM. The plaintiff argued
that the IM conversation effectuated a
contract amendment and demanded
payment under the new terms; the
defendant disagreed and refused to
pay. More than $1.2 million in damages
were in play. The court concluded that
the IM conversation effectively amended
the contract. Among other things, the
court was influenced by the fact that
the IM messages not only showed that
the parties had come to an agreement,
but also contained the specific terms
of that agreement. Further, the court
was influenced by the fact that the IM
messages actually recorded the parties’
efforts to carry out the agreed-upon
amendments: “It is difficult to imagine
more specific and direct evidence of an
agreement than the two parties actually
sitting down simultaneously and doing
what they had agreed to do.”
LITIGATION 31