Legal Spotlight

  

Be Careful with Your Text Messages—They Can Form a Binding Contract

Not long after I started practicing law, there was great confusion and indecision concerning whether a faxed signature could create a binding contract. Courts eventually worked through that issue, and we all know that a faxed signature can be binding, absent a restriction otherwise. Time flew by, and we wrestled with electronic communications and whether emails could create a binding contract. The initial informality and the instantaneousness of email communications lulled many emailers into a false sense of emails as informal, non-binding chatting, with no legally enforceability. And a number of those so-called informal, non-binding email series turned out to create binding contracts! The dangers of social media are not just confined to an accidental—and potentially inappropriate—“Reply All.” Clearly the trend in the past few years had been to accord electronic communications the same status as documents signed in ink.  

While text messaging has the hallmark of informality that emails sported a few years ago, text messages, too, can form a binding contract. In a recent decision, St. John’s Holdings, LLC v. Two Electronics, LLC, No. 16 Misc. 000090 (April 14, 2016), the Massachusetts Land Court determined that a text message was sufficient to satisfy the signature requirement under the statute of frauds, thus creating a binding contract to sell certain property. Click here to read the entire decision.

The dispute in this case was “whether the parties merely engaged in negotiations regarding the purchase of the Subject Property, or whether their dealings, carried out through electronic communications, gave rise to a binding and enforceable contract for the purchase and sale of the real estate.” The Buyer approached the Seller about a purchase and sale of a piece of property owned by the Seller. The Buyer sent the Seller several drafts of an unsigned document called “Binding Letter of Intent” (LOI). By text message, the Seller’s broker asked the Buyer’s broker to sign the final LOI: “[Seller] wants [Buyer] to sign first, with a check and then [Seller] will sign. . . . Can [Buyer] sign today and get it to me today? Tim.” The two brokers met that same day to deliver and obtain the LOI and deposit. When the Buyer’s broker sent a text message to the Seller’s broker, seeking an executed LOI, the Seller’s broker sent the following text: “[Seller] was out of town today. He will get back to us tomorrow.” However, the Seller had accepted a third party’s offer to buy the property and already countersigned a written offer, refusing to execute and deliver to the Buyer the executed final LOI.

The Buyer sued to enforce its rights as a buyer of the property pursuant to a binding LOI to purchase it allegedly entered into with the Seller. The Buyer asserted that the LOI was binding based on an exchange of emails and text messages between the parties’ brokers that constituted an agreement all the terms that satisfied the statute of frauds. The Seller argued that the final text message did not satisfy the statute of frauds. 

The court agreed with the Buyer, finding that the final text message and the conduct of the parties throughout the course of negotiations satisfied the writing requirement:

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Takeaway

It is a fact that most of us at times send emails and, in particular, texts without considered reflection. I recommend that each of you keep this in mind when you are engaging, as you do each day, in electronic communications and remind your contractors to keep this in mind as well. They do not want to inadvertently create a binding contract that was never intended.

And while we are on the subject of electronic communications, please also remind your contractors that their emails and text messages—whether or not overly candid or unguarded--can be used as evidence in a court of law or an arbitration tribunal. When my children and electronic communications were young, I told my three youngsters not to put anything in an email that they would not want published on the front page of The Washington Post. That admonition now applies to all electronic communications and all forms of social media.