Procido LLP

Contracts. The magical world where handshakes can legally bind people and emojis carry the weight to impact a party’s financial obligations. Before one can fully appreciate contracts, and more specifically the act of accepting a contract, it is necessary to understand what a contract is. Fundamentally, contracts require three components: an offer, acceptance and consideration.

The advent of technological breakthroughs has ushered in a new era of challenges for the three foundational components of contract law, demanding innovative and unconventional thinking for effective adaptation. Artificial intelligence, biometrics and virtual reality have the power to significantly reshape the landscape of contract law. 

Offer

An offer is the spark that starts the magic. It is the first piece of the three-piece puzzle to create a contract. The utility of an offer lies in its specificity. Offers should outline essential terms in a contract, such as price, quantity and conditions, all of which aid in creating a roadmap for the parties to follow. When an offer is before a party, they can accept, decline, propose modifications, or abstain from responding. At the offer stage, parties contemplate bringing a contract into existence. However, an offer alone is not enough for one to leverage the power of the legal system against another. The creation of a contract is a three-part affair, and acceptance and consideration will be necessary for this contract to make it into the realm of legally-binding existence.

Acceptance

Contractual acceptance is the act of agreeing to be legally bound by an agreement based on the offer of another party. Acceptance is a crucial component of a contract –  the contract cannot become legally binding without acceptance. Acceptance crystalizes the party’s intent to engage in legally-binding commitments. The acceptance of a contract solidifies preliminary negotiations into a valid agreement, affirming the mutual consent of both parties. 

Consideration

Consideration is the third vital element in the formation of a contract. Consideration in contract law is the exchange of value between parties, serving as the final legal glue that binds the parties. Reciprocity is crucial to demonstrating consideration. There needs to be an exchange of value, whether that comes in the form of money, a promise or a tangible item. The idea that one is being exchanged for another is essential to demonstrating valid consideration and sustaining the existence of a newly-formed contract.

Is a thumbs-up emoji legal acceptance of a contract?

While traditional methods for contractual acceptance are generally used, such as a handshake, signature or verbal confirmation, contract law has had to jarringly adapt to accommodate the current digital revolution. An example of this is the case South West Terminal Ltd. v. Achter Land & Cattle Ltd., 2023 SKKB 116, where an emoji was held to legally bind a farmer to pay $61,442 for an unfulfilled contract.

Justice Keene of the Court of King’s Bench in Saskatchewan heard this matter concerning a grain buyer, South West Terminal Ltd., who sent a mass text to clients seeking to purchase 87 tonnes of flax at a price $669.26 per tonne. The buyer spoke to the farmer and sent a picture of a contract with the message “please confirm flax contract.” The farmer responded with a thumbs-up emoji but failed to deliver the flax as per the “contract.”

The farmer argued the thumbs-up emoji only indicated he had received the contract and not that he was accepting it. Accepting a contract should be done with clear indications, conveying the consent of the contracting parties. Ambiguity is best resolved earlier in the process, which clearly is not always the case. In this case, Justice Keene found the following: “This court readily acknowledges that a thumbs-up emoji is a non-traditional means to ‘sign’ a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a ‘signature.’” Just like that, the courts now recognize a thumbs-up emoji as a valid way of accepting contracts.

What will “acceptance” look like moving forward? 

The use of an emoji to accept a contract is the tip of the iceberg of how contract law is going to have to adapt to survive the digital renaissance. Technology is going to stretch the confines of the historically slow-moving and adapting area of contract law, specifically AI, biometrics and VR.

Virtual reality

As Justice Keene has considered and allowed emojis to constitute contractual acceptance, there is now a higher degree of likelihood that contracts signed in a virtual space could have the capacity to become valid and legally binding contracts. While these immersive technologies promise unparalleled experiences, their integration into the realm of contractual acceptance raises a plethora of legal concerns. As we step into the virtual frontier, the legal community must grapple with the implications of VR and augmented reality on the formation and acceptance of contracts.

VR and AR technologies redefine the boundaries between the physical and virtual worlds. In the context of contractual acceptance, the challenge lies in determining the equivalence of actions performed in these immersive environments to traditional forms of acceptance. The legal community must ask: can a nod or gesture in VR be as legally binding as a written signature in the physical world?

One of the core concerns revolves around the authentication and verification of parties in virtual and augmented spaces. How can the legal system ensure the actions undertaken by avatars accurately reflect the intentions of the purported real-world individual behind them? Establishing the authenticity and authority of these virtual identities becomes a pivotal task in determining the valid legal acceptance of contracts within these environments. Balancing the promise of innovation with the need for legal clarity will be essential to ensure contractual relationships formed in the virtual realm are robust, secure and aligned with established legal principles. 

Biometrics

Biometrics could very easily be incorporated into contract law. Contracts could be signed through facial scans and fingerprint scans in the not-too-distant future. Various concerns stem from this. Would the use of biometrics result in an increase in piracy and identity theft? Would the acceptance of facial scans and fingerprints lead to more contracts being “accidentally accepted,” similarly to what was argued by the defendants in South West? 

The integration of biometric authentication into contractual acceptance introduces concerns about the sensitivity and security of biometric data. Legal frameworks will need to address issues related to consent, storage and potential misuse of biometric information in the context of contractual relationships. 

Automated systems and AI

As ChatGPT has bulldozed its way into popular culture and schools have struggled to react to the advent of AI-generated essays, contract law, as it exists today, could find itself ill-equipped to deal with AI.  In the near future, AI may function as an autopilot, guiding users through their online experiences and automatically accepting boilerplate contracts to streamline access to content. This raises a fundamental question: is an AI capable of accepting contracts on behalf of its individual user, and would AI accepting such a contract be considered true legally binding acceptance?

This scenario poses unique challenges for Canadian contract law, which has recently grappled with issues related to the significant power imbalances between large corporate entities like Facebook or Uber and individual users. The enforceability of boilerplate contracts has been called into question based on these power disparities. With the removal of a human component in accepting these terms of service or other boilerplate contracts necessary to use popular websites, this could lead to boilerplate contracts becoming entirely unenforceable.

With our legal system now recognizing an emoji as a valid form of acceptance, it becomes uncertain whether AI-assisted web browsing, acting as a proxy for users in accepting contracts, would be exempt from the principles of contractual acceptance. As technology continues to redefine the boundaries of traditional legal concepts, individuals and corporations may find themselves, grappling with novel questions about the nature of contractual acceptance in a world increasingly influenced by AI.

Conclusion

The court’s adoption of emojis as a valid form of contractual acceptance marks the dawn of a new era in the evolution of contract law. Embracing these digital symbols as legitimate expressions of intent expands the traditional boundaries of how contractual offers are extended, accepted and the consideration that underpins them. This shift not only broadens the avenues for formalizing agreements but also invites a broader conversation on how technology and contemporary modes of expression can influence the very essence of contractual relationships. 

As technology continues to advance, contract law will inevitably face novel challenges and opportunities. Legal frameworks will need to adapt to ensure the principles of contract law can address the intricacies introduced by emerging technologies.

Businesses, corporations and individuals will have to take proactive measures in response to these technological advances. Parties will have to alter how they draft and interpret contracts, as well as keep up to date on technological advances to understand, interpret and ultimately enforce contracts moving forward. Failing to stay up to date on how contract law evolves with these technological advances could lead to unintended consequences, possibly surfacing as an innocuous emoji causing unexpected and legally binding contractual obligations.  

Procido LLP is a law firm that prides itself on its tech savviness. Procido LLP’s technology, intellectual property, corporate/commercial, privacy, and contract experts are uniquely positioned to assist clients with their future legal concerns.

Disclaimer: This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice. Contact Procido LLP (www.procido.com) if you require legal advice on the topics discussed in this article.