I serve on the editorial board of a publication that analyzes developments in the law. My focus is on Internet-related legal developments. I thought I’d comment on a recent case that dealt with the legal effect of “instant messages.”
Anyone who has a computer or smart mobile phone has probably sent or received an IM. They are an informal way of two-way communicating in situations where a telephone call would be impractical, such as where one or both parties are engaged in other activities at the same time.
Coin dealers do it from their desks and at shows all the time.
But are IMs so informal that two corporate executives couldn’t modify a major contract between their companies using only texts?
That was the issue in CX Digital Media, Inc. v. Smoking Everywhere, Inc. The defendant, a seller of electronic cigarettes, contracted with the plaintiff to place ads on the plaintiff’s third-party “affiliate” websites and track customer orders for defendant’s products.
The initial written contract limited plaintiff’s affiliates to only 200 sales per day, with plaintiff receiving $45 for each order to be split with the referring affiliate. The defendant paid a deposit of $5,000 and the plaintiff began making sales through the affiliates in August 2009.
The defendant’s vice president of marketing exchanged IMs sporadically throughout the day on Sept. 2, 2009, with one of the plaintiff’s account managers concerning changes to URLs (in computing, “uniform resource locator,” or Internet address) for directing defendant’s sales.
After several exchanges testing the new URLs, the plaintiff’s executive requested an increase to 2,000 sales per day.
The defendant’s executive replied, more than 30 minutes later, “NO LIMIT,” to which the plaintiff’s manager replied “awesome!”
The plaintiff’s sales of defendant’s products increased dramatically, but when the plaintiff submitted invoices totaling more $1.3 million, the defendant refused to pay. The court held that the prior written agreement had been modified through the IM exchange as to the URL changes and the amount of permitted sales.
The court found the IM record “reads most naturally when understood as two people negotiating and reaching a modification of an existing agreement.” The defendant argued that the time delays between IMs added “uncertainty to the meaning of the conversation,” but the court held the time delays were “typical of the medium” of instant messaging. The defendant’s primary argument was that the IMs should be treated as oral modifications to the prior written contract, and that they were not “specific and direct” as required under state law to avoid enforcement of a standard clause in the written contract requiring any modifications to be in writing and signed by the parties.
The court held IMs were an informal, unsigned writing so that the “same principle applies” to IMs as to oral modifications; however, the nature of IM communication was within the exception to the no oral modifications rule, the court noting that “[i]t is hard 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.”
The court awarded the plaintiff $1,240,655 for the balance owed for 670 sales completed before the modification and for the 27,459 sales after the “NO LIMIT” modification became effective.
The moral: during business discussions, make sure you mean what you IM.
Armen R. Vartian is an attorney and author of A Legal Guide to Buying and Selling Art and Collectibles.