You’ve probably seen that Elon Musk (founder of Tesla) and Mike Cannon-Brookes (the billionaire founder of Atlassian) were bantering over Twitter last week in relation to fixing South Australia’s power problem through Tesla installing a 100MW battery farm.

To see such an arrangement negotiated in a public forum, and so quickly, is currently very rare but did their exchange give rise to a contract that one or other could enforce?

In this case, probably not but it may easily have.

Many people think that if they don’t have a signed written contract, they don’t have obligations that could be enforced against them.  That’s not correct as, except in some very limited cases (such as for the sale of land), legal rights and obligations can arise in the form of a contract without a written agreement.  It’s therefore possible that an exchange on Twitter (or over email, by telephone or by other means of communication, including in writing) could give rise to a binding agreement enforceable through the courts, irrespective of whether it’s reduced to a nicely bound up piece of paper with a lawyer’s logo on the front and a signature at the back.

In most cases a contract can be formed if there is an agreement (often referred to as an offer and acceptance), the terms of the arrangement are certain, the parties have capacity to contract, there is consideration (or payment) for the arrangement and the parties have an intention to be bound by the arrangement.

Whether each of these elements are satisfied will turn on the facts in each case.  But each of these elements can arise without the need for someone to put pen to paper, so the lesson for the unsuspecting entrepreneur is to be explicit as to whether their dealings are intended to be binding.

In the case of Musk and Cannon-Brookes’ discussions over Twitter, Musk’s offer that “Tesla will get the [100 MW] system installed and working 100 days from contract signature or it is free” (and his follow up confirming the price) would suffice as an offer with certainty as to the terms put forward.  It’s not clear whether Musk and Cannon-Brookes have capacity to represent and bind their respective organisations and in the context of the exchange it would be difficult to show that they had an intention to be contractually bound through this exchange.  In fact, Cannon-Brookes response to “give me 7 days to sort out politics and funding” probably meant that he hadn’t accepted Musk’s offer in any event.

The ambiguity that these types of exchanges create (whether or not over Twitter) has been exploited many times in the past by parties wanting to enforce contractual terms.  If you want to avoid the risk of being bound to contractual terms, make it clear that your discussions are subject to a formal written contract and then get that contract right.

If you want advice on creating certainty in your contracts please contact us.

For Musk and Cannon-Brookes, although they didn’t explicitly state that their discussion wasn’t binding there is clearly a long way to go to see their project actually get off the ground.  If you want to know a bit more about what is likely to be involved, have a look at our analysis here.