Unlike many posts on this blog, which are written by Will Newman, this post is by Charles Nerko, a partner at Barclay Damon LLP in New York City and Albany. He is the team leader for data security litigation in Barclay Damon’s Data Security & Technology Practice Area. He helps businesses increase their bottom line by litigating defenses to commercial contracts and extricating clients from unfavorable deals. Charles can be reached at cnerko@barclaydamon.com and 212.784.5807.

Think an emoji can’t land you in hot water? Brace yourself for the new age of contracts, where a thumbs-up emoji can be as binding as a signature on a dotted line. The ease with which contracts can be entered into shows why you should bolster your vigilance to avoid unwanted costs and risks.

Why should you read this post on unsigned contracts?

Ever thought a thumbs-up emoji was just a friendly gesture? Not so. It could accidentally land you in an $82,200 contract. It’s the most expensive thumbs-up you’ll never want to give.
Discover how writing “this pays all monies owed” on a check can turn an unremarkable small payment into a legal masterstroke. It’s like writing “I’ve done all the dishes” and never having to clean up ever again.
Learn how sharing newsletter articles with your colleagues could cost more than your monthly Netflix subscription. Or even more than 4 years’ of college tuition. And even 10x more than that. We’re not saying your colleagues aren’t worth it, but maybe there’s a legal reason for sticking to cat memes?

Image credit: https://commons.wikimedia.org/wiki/File:Sidney_Paget_-_The_Boscombe_Valley_Mystery_02.jpg

Emojis, once seen as playful expressions, now carry significant legal implications. A recent Canadian court ruling offers a stark example. It determined a thumbs-up emoji acted as a digital signature, binding a business to an $82,200 contract. This ruling underscores that emojis are not mere decorative flourishes; rather, they can bear legal significance in business transactions.

But the minefield of unintended contracts isn’t limited to emojis. You can just as easily bind yourself to a contract by other seemingly harmless actions: interacting with a website containing terms of use, paying an invoice or cashing a check that includes contract terms, discussing deal terms through emails or texts, or failing to opt out of an auto-renewing contract. These actions, even if unintentional, could weave a contract as binding as any traditional ink-signed agreement.

The publisher Energy Intelligence Group has leveraged its surprising contract terms into a revenue stream. The publisher has ensnared dozens of its own customers, including large banks and businesses, in costly copyright infringement lawsuits. These arise when its own customers share articles with coworkers—a practice barred by language buried in the publisher’s invoice and website terms of use. In these lawsuits, the statutory damages for copyright infringement can soar into the millions, dwarfing the cost of a newsletter subscription.

Even law firms are not immune to these pitfalls. A New York State appellate court ruled against a law firm in a dispute with a vendor due to a single sentence in the vendor’s invoice limiting the vendor’s liability to the fees the law firm paid for the service. That single sentence doomed the law firm’s suit against the vendor, even though it was not in a traditionally signed contract.

An intriguing case of unintended contract formation occurred when a business paid a partial amount for goods with a check marked “this pays all monies owed.” A court ruled that the seller, by cashing the check, accepted these terms and could not recover the remaining balance.

Charles Nerko is a partner at Barclay Damon LLP in New York City and Albany.

To nonlawyers, a “contract” generally evokes images of paper and pens. But to courts, contracts are not just formal paper documents. Rather, they can take on many forms and be accepted by mere conduct. So take the following steps to protect yourself against unintentional and costly legal commitments:

Ensure purchases and other paths to contracts receive proper legal review. In particular, pay special attention to employee credit card purchases, which often bypass the stringent legal review associated with company check payments.
Vet contracts for risk level, not just price. In the example of the Energy Intelligence Group litigation, a modestly priced newsletter subscription can morph into a multimillion-dollar liability for copyright infringement. Thus, license agreements, regardless of price, have outsized liability that should be reviewed by your legal team. Other contracts with potential outsized liability include contracts involving personal or confidential information.
Avoid systems that could automatically accept contract terms without proper review. This includes automated systems for purchasing goods and services or cashing checks.
Whenever possible, use your own contract form when acquiring goods and services. Contracts should require that changes be made in an obvious manner.
For auto-renewing contracts, set reminders for the deadline to opt out.
Consult skilled contract litigation attorneys to find ways to exit unfavorable contracts. For instance, a New York statute protects against some auto-renewing contracts. But opting out of an auto-renewal is the simplest approach.

Tread carefully and give appropriate legal review to potential agreements to fend off unwanted costs and risks. As business is increasingly conducted electronically, the need to understand and navigate this new terrain of contract formation is more important than ever.

Beyond Ink: Navigating the New Age of Contracts