By Seth Heyman
Courts in recent years have decided that in some cases an email exchange can constitute a binding contract. Since communicating via smartphones became ubiquitous, another question has arisen: whether you could enter into a contractual obligation – even inadvertently – by sending a text. A recent case in Massachusetts suggests that, too, is a possibility. The court held that because the text message was “signed,” there could be an enforceable contract.
The court held that because the text message was “signed,” there could be an enforceable contract.
The Text That Launched a Lawsuit
The case in question, St. John’s Holdings v. Two Electronics, involved negotiations for the purchase of a commercial building. The buyer’s broker had emailed the seller’s broker an unsigned Letter of Intent (LOI) as an attachment. The LOI, which the parties intended to be binding, had to be signed by both parties. The seller’s broker followed up by texting the buyer’s broker to ask that the LOI be signed and that a deposit be made.
Specifically, the text said:
“Steve. [Seller] wants [buyer] to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or contrary, but that is the way it normally works. Can [buyer] sign today and get it to me today? Tim.”
The buyer then signed the LOI and provided a check to the seller. But on the same day, the seller accepted a third party’s offer for the property and refused to countersign the LOI. Rather than look for another property, the buyer decided to sue.
Was the Text Legally “Signed”?
The Massachusetts court focused on whether the emailed LOI, together with the text message, was sufficient to satisfy the Statute of Frauds, which requires all land sale contracts to be writing. The court’s decision opens the way for additional types of communications, including texts, to be considered as signatures.
The court’s decision opens the way for additional types of communications, including texts, to be considered as signatures.
In its decision, the court held that because the LOI set forth the terms of the deal in detail and the text message was “signed” by “Tim” (the seller’s broker), there could be an enforceable contract.
In the course of the litigation, it was revealed that the brokers sometimes signed their names at the end of their text messages and emails, but at other times, they didn’t. When unsigned, their text messages tended to be briefer and more informal.
The court reasoned that adding their names to the end of certain messages and not to more informal messages was evidence of an intent to be legally bound by the signed text message in question. But while it’s possible that the broker intended his signature to form a legally binding contract, that might not have been his intent at all. He might just have been trying to be polite.
In any case, the court’s decision – which keeps the litigation going, since it denied the seller’s petition to dismiss the lawsuit – opens the way for additional types of communications, including texts, to be considered as signatures. Consider including language indicating clearly that a contract cannot be created through your text, email or tweet.
Consider including language indicating clearly that a contract cannot be created through your text, email or tweet.
That said, the Massachusetts case doesn’t necessarily mean that texts will become legally binding contracts nationwide. For example, California law expressly excludes electronic messages “of an ephemeral nature” – such as text and instant messages – from forms of writing that can satisfy the statute of frauds. Many states could follow suit, to avoid someone accidentally agreeing to something as the result of sending a polite text.
Better Safe Than Sorry
Whatever the future holds, there’s one thing that you should keep in mind as a business owner when texting, emailing or tweeting: think before you send. If you’re discussing a deal in an electronic message, for example, simple statements like “looks good to me” – while harmless in intent – could cause serious problems.
Unless you are in fact looking to establish a binding contract, consider including language indicating clearly that a contract cannot be created through your text, email or tweet. A knowledgeable attorney can help you draft boilerplate language to that effect.