Sometime ago Ernest “Big Daddy” Bux conveyed a pipeline easement to Nodding Donkey Pipelines for the construction, operation and maintenance of a 24-inch pipeline across his Big Bux Ranch. In an email sent before Christmas, Lannie Landman with Nodding Donkey requested an easement for a second pipeline on the North side of the existing line. Landman’s January email stated “Pursuant to our conversation earlier, Nodding Donkey agrees to pay you $70.00 per foot for the second 24 inch line it proposes to build.” Big Daddy responded “We accept.” Subsequent Nodding Donkey exhibits attached to an email depicted the new easement both on the North and South sides of the existing pipeline and offered $15 to $25 per foot. Yet another email from Big Daddy attached a proposed amendment to the R.O.W. agreement between the parties. Does Big Daddy have an enforceable agreement at $70 per foot? Can an email exchange create an enforceable contract? What about the Statute of Frauds?
Yes, since passage of the 2001 Uniform Electronic Transactions Act electronic records and signatures may create an enforceable contract for the sale of real estate – if the email(s) satisfies the Statute of Frauds. To satisfy the Statute of Frauds, there must be a “written memorandum which is complete within itself in every material detail.” In a more complicated recitation of these very facts, the Texas Supreme Court recently found that there was no enforceable contract. The conflicting email exchanges, including the introduction of a new investor in Nodding Donkey who offered substantially less, made it clear that oral testimony would be required to sort out the details – the very thing that the Statute of Frauds is intended to stop. The Texas Supreme Court held that the material contract terms offered by Big Daddy were incomplete and did not satisfy the Statute of Frauds.
As first blogged by my partner Jamie Ribman in 2009, great care must be exercised when using email. If you are negotiating a deal, be aware that unless you have disclaimers in your text saying that email communications are not binding upon the parties, and that the deal is subject to the preparation of a written and signed contract, the email exchange may become an enforceable contract. If you are determined only to have “ink” signatures, 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.
Tilting the Scales in Your Favor
A worthy substitute, perhaps, is an on-line electronic signature solution. The Texas Realtors, for example, make Digital Ink available for free and DocuSign at a discount. Products such as these make electronic documents and signatures legally binding for nearly every business or personal transaction around the world – exceeding the requirements of the ESIGN Act and the Uniform Electronic Transactions Act.