A majority decision of the Saskatchewan Court of Appeal has given its approval to the internationally renowned “thumbs-up emoji” (👍) case. Our colleague, Darin Hannaford, K.C., wrote about the initial chambers decision. The focus of this article is the Court of Appeal decision: Achter Land & Cattle Ltd v South West Terminal Ltd, 2024 SKCA 115.
Understanding the implications of this case is crucial for businesses and legal professionals navigating contract formation in the digital age. As business transactions increasingly rely on text messages, emails, and even emojis, courts are adapting traditional legal principles to modern communication methods.
The new frontier of contract disputes: Electronic agreements & interpretation issues
With the steady rise in written electronic communication, such as emails, text messages, and social media, we can expect novel issues surrounding electronic contract formation and interpretation to continue to crop up in the near future. The central question for lawyers and courts being: how does the “electronic environment” impact the surrounding circumstances and factual matrix of an “agreement,” which is a critical part of discerning the contracting parties’ objective, mutual intentions.
Factual background
South West Terminal Ltd. (“SWT”) is a grain and inputs company and Achter Land & Cattle Ltd. (“ALC”) is a farming corporation owned and operated by Mr. C.A. (“C.A.”). The parties had dealt with one another since 2012, with SWT purchasing grain from ALC through various deferred delivery grain contracts. These contracts always took the form of SWT’s standard form “Deferred Delivery Purchase Contract,” which consisted of a double-sided piece of paper.
Beginning in 2020, ALC and SWT entered into several contracts remotely. An employee of SWT, Mr. K.M. (“K.M.”), would negotiate contract details with C.A. over the phone, including the type and volume of grain sought, the price offered, and the period of delivery. Once a verbal agreement had been reached, K.M. would draft a contract, apply his signature in ink, then take a photo of the contract to text to C.A., including a request for C.A. to confirm the contract. C.A. would then text replies such as “looks good,” “yup,” and “ok.” On each of these occasions, C.A. delivered according to the negotiated terms.
On March 26, 2021, K.M. sent out a ‘text blast’ to a number of producers, including ALC, offering to purchase flax seed. C.A. and K.M. discussed the flax seed purchase by phone and reached a verbal agreement for the sale of flax. After the call, K.M. drafted a contract for ALC to sell SWT 87 metric tonnes of flax seed at a price of $17 per bushel with a delivery period listed as “Nov.” As he had done previously, K.M. signed it, took a photo of the front page of the document and texted it to C.A. along with the text message: “[p]lease confirm flax contract.” Instead of his usual brief reply in words, C.A. simply responded to K.M.’s request to confirm the contract with “thumbs-up” emoji 👍. ALC did not deliver any flax seed in November of 2021, and SWT sued ALC for breach of contract.
The chambers judge concluded that there was a valid contract between the parties and that ALC breached by failing to deliver the flax. SWT was awarded damages in the amount of $82,200.21 plus interest. ALC appealed to the Saskatchewan Court of Appeal.
Issues on appeal
Chief Justice Leurer and Justice Caldwell, in the majority for the Court of Appeal, dismissed ALC’s appeal and upheld the lower court’s decision. On appeal, ALC raised issues relating to the formation of the contract and requirements under the Sale of Goods Act, RSS 1978, c S-1. This article focuses solely on the formation of contract issue.
Thumbs up = Valid acceptance
1. Parties objectively intended to enter contract
ALC asserted that C.A. never intended to convey acceptance of the agreement by sending a “Thumbs-up” 👍 emoji, but merely intended to communicate receipt of the offer by that symbol.[1] In advancing this argument, ALC submitted that there is inherent ambiguity in a “thumbs-up” emoji 👍 and that the common meaning of a “thumbs-up” emoji 👍 is not simply to convey acceptance.[2]
The Court of Appeal rejected ALC’s argument in this respect. It is irrelevant whether a “thumbs-up” emoji 👍 can, in other contexts, be taken to communicate other messages or ideas beyond acceptance or agreement.[3] Instead, what matters is the use to which this symbol was put by C.A. in the eyes of an objective observer in the circumstances.[4] It would have been an error for the chambers judge to conclude that a “thumbs-up” emoji 👍 invariably means “I agree” or always connotes something akin to that meaning; however, that is not how the chambers decision was reasoned. Rather, the chambers judge correctly “consider[ed] only how an objective observer, who was aware of the relevant circumstances in this case, would interpret the text message and, in particular, if that observer would conclude that an agreement was intended and reached” by the “thumbs-up” emoji 👍.[5]
The Court of Appeal reiterated the importance of the factual matrix (or “surrounding circumstances” to a particular contract) as a critical component in ascertaining the particular contracting parties’ mutual intentions with respect to their agreement. This is “because words alone do not have an immutable or absolute meaning.”[6] The chambers judge was properly alive to the realities of human communication, including its subtleties, ambiguities and uncertainties.[7] Although the use of the “thumbs-up” emoji 👍 presented a novel question about contract formation, the Court ultimately found that the law of contracts (and, particularly, its emphasis on context-specific factual matrix evidence) is well-equipped to handle the idiosyncrasies of modern electronic communication.[8]
Given the history of the parties’ commercial dealings and casual method of contract formation, the lower court reasonably determined that an objective observer – aware of this highly relevant context – would interpret a “thumbs-up” emoji 👍 as an expression of acceptance and intention to form an agreement in this case.
2. Parties reached agreement on the essential terms
ALC also tried to argue that the parties had not formed a binding contract because they had failed to agree on certain essential terms.
First, ALC argued that merely stipulating a delivery date of “Nov,” without a year, was insufficiently certain, and thus, the contract could not be binding for lack of certainty as to this essential term.[9] In rejecting ALC’s argument in this respect, the Court of Appeal pointed to two key findings by the chambers judge: (i) K.M. and C.A. had a prior verbal discussion that specified delivery of flax for November of 2021;[10] and (ii) in the parties’ prior “text message” contracts, the month of the proposed delivery (or an abbreviation) was listed without the year, and those contracts were fulfilled without dispute or uncertainty as to the delivery date.[11] Once again, the evidence of surrounding circumstances and historical arrangements/practices between these two parties was key to interpreting this term.[12]
Second, ALC argued that no agreement on the essential terms of contract was reached because K.M.’s text message of the “offer” only consisted of the front page of the two-sided contract form, and not the back side.[13] The Court of Appeal also rejected this argument, emphasizing the uncontradicted evidence that the photograph of the contract sent to ALC was: (i) clearly labelled a “Deferred Delivery Contract,” (ii) clearly stated it had terms and conditions printed on reverse, (iii) was in the same standard form that had been used by the parties previously, and (iv) Archter was familiar with the standard terms and conditions.[14]
Finally, ALC unsuccessfully argued that the contract failed because the parties failed to address the producer’s obligation to make delivery even in the event of a crop failure.[15] The Court of Appeal noted it had not been referred to any case in which such a term was deemed essential to a contract for the sale of goods,[16] and in any event, the contract in this case did adequately address the allocation of risk associated with a crop failure by leaving it with the producer.[17]
Takeaways
Ultimately, this decision confirms the modern trend in contract law that emphasizes interpreting the “words” (or in this case, symbols) of a contract within the context of the relevant surrounding circumstances and conduct of the parties. A proper determination of the contracting parties’ objective intentions at the time of contract formation must take into consideration the particular “factual matrix” at play, and not be conducted in a vacuum.
While the use of emojis or other new forms of digital communication might present an opportunity to make novel arguments about the meaning of human communication, the law of contract interpretation is sufficiently adaptable to meet these new, interpretive challenges.
Some key takeaways from this decision include:
- Objective intent prevails: As the Saskatchewan Court of Appeal emphasized, courts will focus on how an objective observer would interpret communications between the parties within the specific context and history of their commercial dealings. Despite the emoji’s potential ambiguity, the Court found that the history of communication between the parties and their prior dealings led to a reasonable conclusion that an agreement was intended.
- Contextual understanding of contract terms: The Court reinforced that contracts can be valid even if certain terms are not explicitly and precisely detailed in every instance. The surrounding circumstances, such as prior discussions and patterns in past contracts, can very well support the conclusion that terms are sufficiently clear and agreed upon.
- No need for additional force majeure clause: The Court rejected the argument that a contract for the sale of grain lacked essential terms because it did not include specific provisions about crop failure. It emphasized that the contract’s existing terms sufficiently addressed the allocation of risk, and the law does not require a specific clause for force majeure situation, like crop failure, to make the contract valid.
C.A. has recently sought leave to appeal from the Supreme Court of Canada, meaning this country’s highest Court has the opportunity to give either a “thumbs-up” or “thumb-down” to the use of emojis in contract formation.
Miller Thomson’s Commercial Litigation team can assist you in drafting enforceable agreements and in resolving disputes efficiently. If your business needs guidance regarding contractual interpretation or dispute resolution, please contact a member of Miller Thomson’s Commercial Litigation group.
[1] Achter Land & Cattle Ltd v South West Terminal Ltd, 2024 SKCA 115 at para 47
[2] Ibid at para 47
[3] Ibid at para 146.
[4] Ibid at para 146
[5] Ibid at para 50 (emphasis original).
[6] Ibid at para 62 citing Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 at para 47.
[7] Ibid at para 61
[8] Ibid at para 61.
[9] Ibid at para 70.
[10] Ibid at para 71.
[11] Ibid at para 71.
[12] Ibid at para 71.
[13] Ibid at para 73.
[14] Ibid at para 76.
[15] Ibid at para 78.
[16] Ibid at para 81.
[17] Ibid at para 81.
