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Tilting the Scales Business Issues with a Legal Slant

Email Can Create a Binding Contract

Posted in Legal Risk Management, Social Media & The Internet

SOLD!

You and a home buyer are “discussing” price via e-mail. It’s been a barrage of online discussion and exchanges. Now, about that final price … Could it be you’ve just “sold” your house without knowing it?

Consider this e-mail exchange in Massachusetts:

  • Home buyer and home seller are exchanging e-mails.
  • Sales terms for a multi-million dollar home are “discussed” during the e-mails.
  • The e-mails detail aspects such as the home’s location, purchase price, down payment (10 percent) and waiver of “usual contingencies,” including financing.
  • At the bottom of the e-mails are the typewritten names of the respective senders.
  • The last e-mail says the parties will sign a purchase and sale agreement.
  • Then, a day later, the seller receives another offer at a higher price.

Can the seller accept the higher offer, yes or no? If not, why not?

“No document was ever signed, right? … Right?!”

Wrong.

A 2001 Massachusetts trial court permitted the buyer to enforce “the deal.” E-mail correspondence was sufficient to satisfy all “legal requirements.” In today’s “paperless” world, a signed agreement with all parties, side by side, is scarce.

  • The electronic contract is growing in strength and number. Here’s what you need to know.
  • The United States Congress and the State of Texas have enacted laws acknowledging electronic contracts.
  • E-mail communications may stand stronger as a contract, compared to an “oral contract” since e-mail has a greater probability of certainty, as governed by traditional contract principles. Any contract—electronic, oral or signed on paper—must include
  1. A valid offer
  2. An acceptance
  3. Consideration

Meeting these three contract criteria is easier to demonstrate with e-mail communications vs. the “he said/she said” aspects of an oral contract.

  • In Texas, there is The Uniform Electronic Transactions Act (UETA), which focuses on electronic communications and contracts.
  • Adopted in 2001, UETA states: “… a record or signature may not be denied legal effect or enforceability solely because it is in electronic form. Yet, there are some kinds of documents that may not be held binding without ‘pen and ink,’ such as wills, trusts, marriage, divorce, adoption and similar family agreements and court documents.
  • In Texas, there is no prohibition to e-mail sales of real estate.

Tilt the Scales Your Way

Great care must be exercised when using e-mail. If you are negotiating a deal, add disclaimers saying that e-mail communication is not binding upon the sender and that the deal is subject to the preparation of a written and signed contract. Finally, make sure that typewritten names within your e-mail state that they are for contact purposes only and are not the “signature” of the sender.

Additional Resources:

The Uniform Electronic Transactions Act (Chapter 43 of the Texas Business and Commerce Code).

Added UETA insights.

See Shattuck v. Klotzbach, Civ. Act. No. 01-1109A (Superior Ct, Mass., December 11, 2001).

  • Jack Kearney

    I often see confidentiality boilerplate language at the bottom of e-mails. I have never seen any boilerplate that accomplishes the purposes you recommend. Do you have such boilerplate to add to the footer of e-mails? Or should the disclaimers you note be in the body of the e-mail before the name of the sender appear?