Franchise agreements typically contain a provision limiting contract changes to those agreed to in writing and signed by the parties. Prior to the advent of the internet and the widespread use of email as a vehicle for communication, proving the existence of an agreed amendment was as simple as producing a piece of paper. Given that email communication has to a certain extent replaced oral exchanges between franchisors and franchisees, franchisors may inadvertently be deemed to have agreed to franchise agreement amendments by virtue of a set of email exchanges that take place subsequent to the initial execution of the contract. Although there is no Canadian case law directly on point, provisions in Ontario’s Electronic Commerce Act and a recent United States decision would indicate that email exchanges between parties to an agreement altering one or more of its terms constitute an executed writing.
In a US case which arose in the employment setting, an executive had entered into a written agreement with his employer which contained a provision that “no amendment to or waiver or discharge of this agreement will be valid unless in writing and signed by both of the parties hereto.” Subsequent to the making of the contract and because of the 2000 recession, the employee in an email to his CEO concurred with the company’s proposal to reduce his salary by 20%. On resigning his employment a few years later, the executive sought to enforce the superior compensation terms in effect prior to the reduction. The court had this to say with respect to the employee’s position: “in this modern age, this Court considers email communications, in which the sender and recipient are clearly identified, to constitute writings. And when there is a string of emails, each signed off by two people … this Court considers the entire string to be signed by both parties.” Even though the emails did not refer to the employment contract explicitly, the court nevertheless held that the string of emails was sufficient to evidence a written amendment to the contract.
The reasoning in this decision is also consistent with the Electronic Commerce Act which states that an electronic signature found at the end of an email satisfies the requirement that a document be signed. Furthermore, the Act goes on to state that the requirement that a document be in writing is satisfied even if it is in electronic form.
For harried franchise executives with overburdened agendas, casual email exchanges with franchisees agreeing to concessions departing from franchisee obligations may well lead to unintended consequences. It is important therefore that all staff with franchise responsibility be alert to the issue in order to avoid the unintended consequences of making a binding amendment to the franchise agreement. In addition, the franchisor should have strict policies in place that any communications with franchisees representing a departure from the obligations under the franchise agreement be reviewed by the franchisor’s legal counsel.