Are WhatsApp Agreements Valid Contracts? High Court Rules in Jaevee Homes Limited v Fincham

In today’s fast-paced commercial world, agreements are often reached quickly and informally through digital communication platforms like email and WhatsApp. But can a conversation on WhatsApp truly form a legally binding contract under English law? A recent High Court case, Jaevee Homes Limited v Mr Steve Fincham (trading as Fincham Demolition), has provided important clarity on this question.

What is a Contract?

At its core, a contract is a legally binding agreement between two or more parties. This agreement gives rise to obligations that are enforced or recognised by law. Contracts are fundamental to almost all commercial activities.

Under common law, there are several basic essentials required for the creation of a valid contract:

1. Agreement: The parties must have reached an agreement. This is generally achieved when one party makes an offer which is accepted by another party.
2. Contractual Intention: The parties must intend their agreement to be legally binding.
3. Consideration: Generally, a promise is not binding as a contract unless it is supported by consideration. Consideration is “something of value” given for a promise, which is required to make that promise enforceable. It can be a promise to do something, not to do something, or to provide something of value. Both parties must provide consideration. An informal gratuitous promise does not amount to a contract.
4. Capacity: The parties must have the legal capacity to enter into a contract. This typically includes entities like companies and individuals aged 18 or over who can fully comprehend their obligations. Certain individuals, such as intoxicated people, may lack capacity.
5. Legality: The purpose of the contract must be lawful. Contracts involving illegal conduct or prohibited by statute may be void and unenforceable.

Once these elements are present, a legally binding contract exists.

Does a Contract Have to Be Written?

A common misconception is that a contract must be in writing to be legally valid. However, this is generally not the case. Most contracts can be formed orally, by conduct, or through various forms of communication. An informal exchange of promises can be as binding and legally valid as a written contract. While written contracts provide a clear record, unwritten contracts do not require any formalities.

Contracts can be made and varied through numerous methods, including face-to-face conversations, email, SMS messages, and WhatsApp messages. The form of communication is irrelevant, except where specific statutory requirements mandate writing, such as for leases over 3 years or contracts for the sale of land.

Offer vs. Invitation to Treat

In determining if an agreement has been reached, it is crucial to distinguish between an offer and an invitation to treat. An offer is an expression of willingness to contract on specified terms, made with the intention that it is to be binding once accepted. An invitation to treat, conversely, is an express or implied request for someone to make an offer; it cannot be accepted to form a contract. Examples of invitations to treat include advertisements or displays of goods. Whether something is an offer depends on whether a reasonable person would understand the maker intended to be bound by an unequivocal acceptance.

The Jaevee Homes v Fincham Case: WhatsApp Contract Under Scrutiny

The question of whether a WhatsApp exchange could constitute a valid contract was directly addressed in the High Court case of Jaevee Homes Ltd v Mr Steve Fincham (trading as Fincham Demolition).

Background: Jaevee Homes Ltd, a property developer based in Norwich, brought a claim against Steve Fincham, a demolition contractor, concerning demolition works at the former Mercy nightclub in Norwich. Jaevee argued that a formal written agreement was required for the circa £248,000 + VAT project. Mr Fincham contended that his contract with Jaevee was based on an exchange of emails and WhatsApp messages.

Prior to the High Court case, Mr Fincham had already won an adjudication against Jaevee for unpaid invoices. Jaevee had not paid the adjudicated sum, leading to further legal action. The primary issue in the adjudication was whether the invoices were valid payment applications, which depended on the terms of the contract formation. The adjudicator determined that the contract was formed by the WhatsApp messages on 17 May 2023.

The High Court Ruling: In the High Court claim, Jaevee sought declarations, including that the contract was subject to their standard written subcontract terms or, alternatively, a basic contract formed by email and WhatsApp requiring monthly payment applications. Mr Fincham maintained the contract was agreed via WhatsApp on 17 May 2023, with an entitlement to payment 28-30 days after invoice.

Mr Justice Roger ter Haar KC, sitting as a Deputy High Court Judge in the Technology and Construction Court, was tasked with determining when and on what terms the parties entered into a contract. The judge ruled that the WhatsApp exchange on 17 May 2023 constituted a valid contractual agreement.

Key Exchange and Reasoning: The relevant WhatsApp conversation occurred on 17 May 2023 between Ben James (CEO of Jaevee) and Steve Fincham. The exchange included Fincham asking if the job was his, James asking if he could start on Monday, Fincham confirming he could, and Fincham again asking if it was his job so he could get organised. James replied simply: “Yes”. A few minutes later, the discussion moved to payment terms, with James saying “Monthly applications” and Fincham asking “Are you saying every 28 or 30 days from invoice that’s a yes not on draw downs then good”. James replied “Ok” and “Chat in the am”.

The judge held that this exchange, though informal, evidenced a concluded contract. He found that the parties had agreed the scope of works, a price of £248,000 plus VAT, and payment terms (monthly applications to be paid 28 to 30 days following the date of invoice submission). The judge rejected Jaevee’s argument that essential terms were missing on 17 May 2023. He noted that the absence of detailed payment terms is not fatal to contract formation in construction contracts, as the relevant statutory scheme can fill such gaps.

The High Court also addressed the validity of Mr Fincham’s invoices as payment applications under construction legislation. The judge concluded that, based on the WhatsApp agreement allowing monthly applications paid 28-30 days after invoice, three of the four invoices were valid. One invoice was invalid because it was the second submitted within the same monthly period.

Ultimately, the High Court ruled in favour of Mr Fincham, confirming that the contract was formed by the WhatsApp messages and that Jaevee was liable to pay a substantial portion of the sums claimed, subject to the ruling on the invoices.

Download the Judgment Here

Implications

The Jaevee Homes v Fincham case serves as a crucial reminder that informal digital communications, including WhatsApp messages, can indeed form legally binding contracts in England, provided the essential elements of offer, acceptance, consideration, and intention are present. The court applied an objective test, looking at what a reasonable person would infer from the words and conduct, rather than the parties’ subjective intentions.

The ruling also underscores the importance of clearly defining key terms, particularly payment terms, even in seemingly informal exchanges. While the court took a common-sense, contextual approach, especially for smaller entities, lack of detail in the agreed terms may lead to the application of statutory default provisions. This case highlights that parties should be mindful of the contractual implications of their digital communications.

Expert London Commercial Contract Dispute Lawyers

Understanding the complexities of contract law, especially concerning modern forms of communication, is vital for businesses and individuals. Disputes arising from informal agreements, like those made via WhatsApp, can be challenging to navigate. Our team of expert solicitors and barristers has extensive experience in advising on contract formation, interpreting contractual terms, and resolving commercial contract disputes.

Whether you are trying to determine if an informal agreement constitutes a valid contract, need assistance in drafting clear and enforceable contracts, or require representation in contractual disputes and litigation, we can provide the strategic legal advice and robust representation you need. We can assist if you believe you have entered into a WhatsApp contract and require guidance on its terms or enforceability.

To discuss your specific situation and understand your legal position, instruct us for an initial consultation conference with our expert solicitors and barristers. Call us today on ☎ 02071830529 or email us at [email protected].