Massachusetts court: a text message can create binding real estate contractJanuary 28, 2017
On behalf of Greg Aceto at Aceto, Bonner & Cole PC
The ability of electronic communication to create binding legal agreements is a fast-evolving area of law.
An April 2016 Massachusetts Land Court decision found that, under some circumstances, a simple text message may be a sufficient writing to bind parties to a contract to sell real estate. At issue in St. John's Holdings, LLC v. Two Electronics, LLC was whether text communication can satisfy the various requirements of the Statute of Frauds.
The statute of frauds theory is rooted in ancient English law mandating that certain kinds of contracts need to be in writing, contain the essential terms of the agreement and be signed to be enforceable. One type of contract that falls within the statute of frauds is contracts for the sale of land.
The St. John's Holdings case concerned the sale of an office building owned by Two Electronics that St. John's Holdings, called SJH, wanted to buy. After a series of negotiations that were in person, via email, via text and by phone, SJH through its realtor delivered signed "final" Letters of Intent and a deposit check so that Two Electronics could sign as the seller. In the meantime, the seller had accepted another party's offer to buy the building.
SJH sued to enforce the sale, arguing that the Letter of Intent it had executed and delivered was binding because the previous content of emails and texts between the parties' real estate agents, combined with one final text, established circumstances and facts that were sufficient to satisfy the Statute of Frauds. The seller's broker texted the buyer's broker stating, "Can [the Buyer] sign today and get it to me today. Tim" The court agreed, citing cases that had held that a series of email exchanges containing the essential terms of a contract could satisfy the Statute of Frauds and extending this logic to a simple text message under certain circumstances.
The court found that this particular text message, following emails from Two Electronics' broker indicating an agreement to sell, had "sufficient terms to state a binding contract" between the parties, particularly in the context of extensive previous communications between them in which they discussed details regarding terms.
The judge also noted that the real estate brokers each typed his name at the end of text messages that contained material terms, implying that they meant those texts to be binding. In finding the typed names in those texts to be valid signatures, the judge also cited the acceptance of electronic signatures as binding in business generally.
This case illustrates the evolving hazardous nature of transacting business electronically. It is important that when an individual or business begins to discuss a potential transaction or contract with another party, the party consult legal counsel in order to understand whether and when emails or texts are simple communicative methods of negotiation and when they have migrated into the area of a binding agreement.
The Boston lawyers of Aceto, Bonner & Cole PC, represent individuals and businesses in a wide variety of legal matters, including real estate, litigation, business agreements and more and can assist clients in understanding the traps for the unwary.