11-01-2012

Court gives guidance on key contract term in e-marketing contracts

An e-marketing business that promised to email and SMS ‘opted-in’ football fans for a client failed to deliver when it bought in email addresses from a third party.

A business bought in email addresses from a third party in order to carry out an emailing and SMS campaign to 1.25 million football fans for a client who ran a football website.

It was a condition of the contract with the client that the recipients would be ‘opted-in’ – ie that they had agreed to receive electronic communications of this type, but the bought-in recipients were not opted-in. When the client found out, it terminated the contract, on grounds that the business’s actions amounted to a repudiatory breach, entitling it to terminate and claim compensation.

The legal test of whether there has been a repudiatory breach is whether, from the perspective of a reasonable person in the position of the innocent party, looking at all the circumstances, the contract breaker has shown a clear intention to altogether refuse to perform the contract.

The Court agreed there had been a repudiatory breach by the business. It said that the key purpose of the contract was to create commercial opportunities for the client by promoting his website to recipients who would be interested in it. The bought-in recipients, who had not previously dealt with the client or were not aware of the website, did not meet this criterion. Therefore the business had substantially failed to deliver the main benefit of the contract, which was a repudiatory breach.

Recommendation

Clients commissioning e-marketing services from agencies should ensure the contract between them is clear when opted-in recipients are key requirements, and get binding assurances from the agency that the appropriate opt-ins will have been obtained.