Can Online Chats Revise Existing Contracts?

Can Online Chats Revise Existing Contracts?

As technology continues to modify the way that we communicate, contract managers have greater pressure to watch their language across a wider variety of mediums. If you think that an online chat is just too “informal” to be admitted as evidence in a courtroom, think again. Let’s review the rise of online chat services in corporate America and its ability to even modify existing contractual obligations.

Review of Corporate Online Chat Services

Since the advent of online chat services, business people have used it to avoid expensive phone calls and leverage asynchronous communication. And some of these online chat services don’t need to have lots of bells and whistles. Take, for example, executive traders of crude oil and petroleum products, who had for almost 18 years used Yahoo! Inc.’s Messenger tool as their default communication tool.

According to Bloomberg Businessweek, the popularity of the app in the oil industry was so high that traders, refinery managers, pipeline operators and harbor masters included their Yahoo IDs on their business cards.

Why was Yahoo! Messenger so popular in this industry? It was simple to use and it provided a key feature for all users: chats could be recorded and logged internally. At this point, you could almost answer the question posed at the beginning of this article.

Online Chats Have Been Used As Evidence in Court

Perhaps the most well-known case of using group chat logs as evidence in a trial is the case of Terry Gene Bollea (better known as the wrestler Hulk Hogan) against the site Gawker. Throughout the trial, prosecutors used at least 32 pages of Campfire chats (warning: contains adult language and graphic material) as evidence. In hindsight, it’s clear that the Gawker employees should have refrained from exchanging such language in a shared media. The problem is that they did and kept a log of it. The cost: Gawker settled with Bollea for $31 million.

But you don’t need to be a multi-million dollar news corporation to become a victim of group chat blunders. Smoking Everywhere, an e-cigarette seller, entered a referral agreement with affiliate marketing network CX Digital for up to 200 sales per day. The parties signed an insertion order but CX Digital quickly became interested in bumping up the 200 per day limit. So, the following chat exchange took place:

[CX] (2:50:08 PM): We can do 2000 orders/day by Friday if I have your blessing

[CX] (2:52:13 PM): those 2000 leads are going to be generated by our best affiliate and he’s legit

[Smoking Everywhere]: is available (3:42:42): I am away from my computer right now

[CX] (4:07:57 PM): And I want the AOR when we make your offer #1 on the network

[Smoking Everywhere] (4:43:09 PM): NO LIMIT

[CX] (4:43:21 PM): awesome!

That’s all it took. After this exchange, CX Digital referred an average of 1,244 sales per day. Smoking Everywhere eventually tried to get out of the contract with CX Digital but a court in Delaware sided with CX Digital and awarded the marketing agency an award of $1,235,655, including fees, costs, and interest payments.

These two cases demonstrate that online and group chats are actively being used in courtrooms and that these mediums can modify existing contracts.

Lessons for Contracts Managers

Despite these two cases, businesses of all sizes aren’t staying away from group and online chat services. Campfire, which is now merged into Basecamp, has over 100,000 paying customers using its productivity suite of tools. In 2016, team communication app Slack had over 4 million daily users (up from 2 million in 2012) and 1.5 million paying users. As early as 2012, group chat app Hipchat has claimed that billions of messages have been sent through its service and the company includes NASA, Netflix, Tesla, John Deere, Sotheby’s, and the U.S. Department of Defense in its roster of clients.

There seems to be no industry that isn’t going to use group chats.  Even a few players in the finance industry have started to use Slack. This means that contract managers and all employees need to be aware of how they conduct themselves on internal communications and work with HR to develop clear policies. The nature of group chat tends to make conversations more informal and loose, so it’s critical to provide guidelines of what’s acceptable and what’s not.

Large enterprises might be interested in leveraging the compliance tools and reports that some of these group chat apps provide in order to meet applicable industry regulations. While these compliance tools have a cost, ranging from $12.50 to $15 per user of Slack, they could be considered as insurance against a multimillion-dollar court battle. Just ask Gawker and Smoking Everywhere.

Takeaway

Online chats are just as good as paper or email when it comes to binding or revising agreements. By paying close attention to your internal and external chat communications and doing your due diligence when discussing contracts in any digital form of communication, you are ensuring that your contracts remain within pre-approved terms and conditions.

If you’re ready to take your contract management processes to the next level, schedule a demo of Contract Logix and learn why hundreds of enterprises and tens of thousands of users trust Contract Logix to securely manage more than 5 million contracts.

Image Credit: U.S. Department of Agriculture