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Are You Texting a Contract?

August 23, 2016

Posted in Contract

photo - texting a contractTexting has become a common form of communication. Smart phones are used less and less as phones and more and more as devices to text and email from. You may see texting as an informal, short hand way to communicate but a Massachusetts case shows you need to be careful with texting because the messages you send may be interpreted by a court as creating a binding contract.

The Massachusetts Land Court ruled in April that a series of text messages between two real estate brokers concerning the purchase and sale of a commercial building may be enough to constitute a “writing” meeting the requirements of the Massachusetts Statute of Frauds. In the St. John’s Holdings, LLC v. Two Electronics, LLC, case the court denied defendant’s motion to dismiss arguing the communications at issue were insufficient to be a contract for sale of real estate. The judge found the communications between the parties,

  • Identified the subject of the alleged agreement,
  • Showed they made a contract,
  • Stated the essential terms of the alleged contract with reasonable certainty,
  • Included a form of a signature, and
  • May be the legal equivalent of a written document signed by the parties.

The lawsuit concerns the attempted purchase of a commercial building. The brokers for each side discussed the proposed deal in person and put the terms of the agreement in a letter of intent (LOI), which was further discussed and later changed. The brokers continued to negotiate the $3.232 million deal through emails and text messages. They included,

  • The purchase price, due diligence period, earnest money deposit and closing date.
  • One of the last texts stated that the seller wanted the buyer to sign the final LOI first.
  • The broker for the buyer got the signature and sent a text to the seller’s broker stating the LOI was signed and he had the earnest money check as required by its terms.
  • Each text ended with the sender’s name.

The sale didn’t actually happen. Instead of following through with the LOI the seller’s principle took another offer to buy the property. The jilted buyer/plaintiff filed a lawsuit to enforce its rights because of an allegedly binding letter of intent to purchase.

The court found,

  • The parties frequently communicated electronically.
  • The conduct during negotiations clearly showed an appreciation that the last exchange of texts would memorialize the final LOI as an offer and acceptance.
  • The typed signature at the end of the texts sufficiently portrayed the sender’s intent to authenticate the message.
  • The brokers’ included their names in texts with material terms, but omitted them from informal discussions, showing an intent to authenticate their “signed” statements by electronic means.
  • “The communications between SJH and Two Electronics before the text message evidenced a meticulous attention to provisions that would govern the agreement to purchase the [building].”
  • By reading the context of the mess ages the texts created a binding offer and acceptance.

If you are negotiating through writing (texts or emails) you may want to include qualifying language to the effect that,

  • Acceptance is subject to final review,
  • No agreement can be reached with the use of electronic communication without a statement like “I so contract.”

Parties to a potential real estate sale need to be cautious with letters of intent. If there are negotiations leading to the writing of an LOI containing the essential terms of a contract to purchase, it should expressly state it is not intended to be legally binding. Otherwise it may be enforceable if a court finds both sides agreed to its terms.

If you are involved in a contractual dispute or a disputed sale of commercial property contact our office so we can discuss your situation, how the law may apply and the best ways to protect your legal rights and interests.