Contracts can be accepted in a wide spectrum of ways, from a formal signing on the dotted line witnessed by a notary public at one end to an informal handshake at the other. Even a wink or a nod can be enough to enter into a binding contract. In June, a court in Saskatchewan, Canada ruled that a texted “thumbs-up” emoji was enough to signal acceptance of a contract (despite the texter’s apparent intent).
In a June 8, 2023 opinion, Canadian Judge Timothy Keene ruled that a farmer’s “👍” response to a contract sent by a grain cooperative qualified as an agreement on the contract terms. During the covid-19 pandemic in 2020, the grain cooperative stopped sending its salespeople to deal with farmers in-person and instead handled contracts by phone or email. According to court records, a cooperative employee drafted a contract that listed “Nov.” as the delivery period, signed it, and took a photo of it on his cellphone. He then sent it to farmer Chris Achter, along with the phrase “Please confirm flax contract.” In response, Mr. Achter texted back “👍”. The grain never arrived, prompting the cooperative to sue for breach of contract and insist that the emoji constituted an agreement to the proposed terms. Mr. Achter contended that he intended his emoji to “indicate that I did receive his text message” but “I did not have time to review [it].” However, Judge Keene looked to the parties’ prior course of conduct and found that, since 2015, Mr. Achter demonstrated “an uncontested pattern” of entering into contracts with “curt words” such as “looks good,” “OK”, and “yup” meant to confirm terms that he subsequently fulfilled. The court ordered Mr. Achter to pay CAN $82,200 ($61,000 USD) in damages.
The fact that more and more businesspeople are using emojis in contractual settings does not render it a prudent practice. The inherent ambiguity due to how emojis can and are used can lead to many situations where one party may believe they have an agreement for a contract and the other does not. In short, the legal landscape of contracting by emoji is littered with traps for the unwary. Notwithstanding a relatively common misperception that an “official” contract requires a hand-written signature, texts, emails, and even tweets and X-posts can create binding, enforceable contracts (leaving aside the specific writing requirements in the “Statute of Frauds” for the lawyers in the crowd).
To prevent hasty modifications of existing contracts, consider adding a provision to any contract that states that only certain specified individuals or classes of employees have the power to modify the contract or to waive the performance of conditions. Such a clause helps inoculate the party against the “loose cannon” employee who doesn’t have authority to bind the company.
Emojis may also carry legal import beyond creating a binding contract. Their use may give rise to potential liability or possibly even criminal liability. In July 2023, a U.S. judge ruled that stockholders of Bed Bath & Beyond (“BBB”) could sue investor Ryan Cohen over a tweet he posted featuring an emoji that seemed to indicate an endorsement of the home goods retailer shortly before BBB declared bankruptcy earlier this year. In denying defendants’ motion to dismiss, District Judge Trevor McFadden of the United States District Court for the District of Columbia concluded that Cohen and his company must face plaintiffs’ fraud claims, including their allegation that Cohen’s smiley moon emoji was a fraudulent misrepresentation.
On August 12, 2022, Cohen posted a tweet responding to a CNBC story predicting that BBB’s share price would drop to $1. The CNBC story was accompanied by a photo of a woman shopping at a BBB store. Cohen reposted the CNBC story with a quip — “At least her cart is full ”.
In posts and tweets responding to Cohen’s message, many investors said they interpreted his use of the smiley moon emoji as a signal that he still believed BBB shares were “headed to the moon.” That phrase has become a common idiom among so-called “meme stock investors” indicating that the referenced stock is poised to soar. Meme stock investors (not surprisingly) understood Cohen’s tweet to mean that Cohen was confident in BBB and that he was encouraging them to act by buying more shares. Shares subsequently rose from $10.63 and peaked at nearly $30.
Shortly thereafter, when Cohen revealed he had sold all his shares in BBB, the stock price plummeted. Investors filed a securities fraud class action alleging that they had been duped by Cohen and his company, RC Ventures. The suing investors claimed Cohen posted the smiley moon emoji to trigger a pump-and-dump scheme (where a holder of stock makes false or misleading public statements to raise the price so the holder can sell his own shares at a profit). Cohen knew his followers would read the emoji as a sign of his confidence in the company even though his true intention, according to the shareholders’ complaint, was to drive up the share price before he ditched his stake. Cohen argued that emojis are inherently ambiguous, so that “a tiny lunar cartoon” has “no defined meaning.”
In upholding the stockholders’ right to sue, Judge McFadden held that: “emojis may be actionable if they communicate an idea that would otherwise be actionable. A fraudster may not escape liability simply because he used an emoji.”
Judge McFadden appears to be the second judge to hold that emojis have particular meaning to investors. U.S. District Judge Victor Marrero in Manhattan ruled last February, in Friel v. Dapper Labs, Inc., that when a seller of non-fungible tokens (NFTs) posted a tweet with emojis of a rocket ship and money bags, the emojis signified the poster’s promise of profitability.
Emojis have recently posed other complicated legal questions. In a 2014 case, Ghanam v. Does, a Michigan appeals court analyzed the facts and circumstances surrounding a “sticking out tongue” emoticon in a defamation case. The court concluded that it was a joke, ruling in favor of the defendant.
Emojis have even been used as evidence showing a person’s criminal intent. In a Pennsylvania drug conviction, Commonwealth v. Foster, the defendant’s use of an image of a rat was held to indicate the defendant thought someone had been disloyal.
As with any new technological development, it often takes years for regulations and case law to catch up with society. As the use of social media and emojis shows no sign of slowing down, its significance in the legal and business worlds is something to keep 👀 on.
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