Preventing the Simple Email or Text from Becoming a Formal Contract
Gone are the days when parties brokering a real estate transaction entered into a
formal, written contract by first reaching for paper and ink. Today, a cell phone and a
zealous broker is all that it may take to enter into a binding agreement. The ubiquity of technology has made communications via email and text message both convenient and now, with recent case law, potentially risky. In a mere click, tap or swipe a person who believes that she or he may be having a casual or conversation or negotiating a better deal, may end up with a lawsuit instead.
II. Examining the Offer and Acceptance
In the significant McCarthy v. Tobin case, the Supreme Judicial Court (SJC) of Massachusetts upheld an Appeals Court decision that a buyer’s offer to purchase was a firm offer that became a binding contract the moment it was accepted by the seller. The SJC ruled that the Purchase and Sale Agreement amounted to a mere memorandum of the already binding contract, since the parties had already agreed on the material terms within the offer to purchase.
In contrast to McCarthy, the Massachusetts Land Court in the Singer v. Adamson case held that an email communication between a potential buyer and the seller’s broker did not meet the requirements of the Statute of Frauds, due to the generic nature of the email, and the lack of such previous communications between the parties. As such, though a legally binding offer and acceptance can be made via email, it must include the material terms of the offer, and overall indicate that a valid offer and acceptance is the intention of the parties.
III. Texting and the Law: An Overview
The recent “text” case that has everyone talking is known as St. John’s Holdings, LLC. v. Two Electronics, LLC. There, text messages between two real estate brokers, amounted to a legally binding Purchase and Sale Agreement, and meeting the requirements of the Statute of Frauds.
In St. John’s Holdings, weeks of negotiating a commercial real estate deal culminated when the buyer’s broker sent an email to the seller’s broker, stating that his client was “ready to do this”. The email was followed by a series of texts including the quintessential one in which the seller’s broker requested that the buyer sign the final Letter of Intent first, saying in part “Can Rick sign today and get it to me today? Tim”.
The buyer proceeded to sign the final Letter of Intent and tendered the deposit check with the buyer’s broker. However, on that same day, the seller had received another offer on the property, and proceeded to sign that new offer. The buyer sued, claiming that the emails and texts amounted to a legally binding contract, and the Massachusetts Land Court agreed.
IV. The St. John’s Holdings Fallout
The decision in St. John’s Holdings was made by the Land Court, which does not
have the ultimate, binding authority as the Appellate Court. Still, St. John’s Holdings has still established an important legal precedent that has many real estate professionals concerned. Mere months before St. John’s Holdings, in a case known as Donius v. Milligan, the Massachusetts Land Court held that texts between brokers, negotiating the purchase of a Provincetown condominium, did not constitute a legally binding contract.
The brokers in both cases were lucky not to be added as parties. However, that does not mean that they couldn’t have been included as “necessary parties”, and therefore enmeshed in the complications of litigation.
V. The Five Commandments of Texting and Emailing
Since the case law surrounding this issue is rapidly evolving and sometimes seemingly contradictory, these “Five Commandments” below can help. They include:
1) Don’t Sign Your Name. The broker in St. John’s Holdings made the
mistake of including his name “Tim”, at the end of the text. The judge interpreted that as a “signature”, thereby satisfying one of the requirements of the Statute of Frauds.
2.) The Closer You Get, the More Careful You Should Be. In Donius v. Milligan and Singer v. Adamason, the parties had not yet agreed on all of the material terms necessary for the property sale. The judge therefore gave leeway to the text exchange between the brokers, recognizing them as communications rather than a binding contract.
3.) Add a Disclaimer. Since texts are conveniently brief, it would be impractical and impossible to add a disclaimer after each one. Begin negotiations with a disclaimer stating that any electronic communications meant simply as part of the negotiation process, and not as a contract, cannot be interpreted as such.
4.) Is There Consideration? One of the main differences between the St. John’s Holdings and Donius cases was the in-hand delivery of a check, versus emailing a scanned copy of a check, respectively. For the court, this boiled down to one thing—consideration. Without consideration there can be no binding agreement.
5.) What Are Your Intentions? Both courts in these cases looked at the facts as a whole, and drew conclusions regarding both parties’ intentions. The more actions and writings are used to interpret a contract, the more likely it is that emails and texts can be construed as the writings supporting that contract.
Before you casually send that next email or text message as part of your real
estate dealings, remember that these seemingly casual exchanges can amount to a binding contract. Think twice before you text or email, and be especially cautious when those messages contain material terms, can seem like an intentional agreement between the parties, exhibit some form of consideration, and are signed.
Though these recent, legal developments can be complicated, being aware of the legal dos and don’ts of texting and emailing can help protect you and your clients from entering into a binding, enforceable contract. That way, you can use the convenience of emails and texts to your advantage, worry-free.
About the Authors
Attorney Howard S. Goldman is the founding partner of the law firm of Goldman & Pease LLC, 160 Gould Street, Needham, Massachusetts 02494 (781) 292-1080. Mr. Goldman concentrates his practice in the areas of residential real estate and commercial closings, finance, and civil litigation, where he represents property managers, lending institutions, developers, and contractors for more than thirty-five years. He is an active member of the Massachusetts, Norfolk, and Rhode Island Bar Associations in his field and is also an active member of CAI and IREM, where he frequently lectures and writes columns affecting the real estate and finance industries. Mr. Goldman serves as a member of the Zoning Board of Appeals for the Town of Needham and as a court appointed mediator at the Boston Municipal Court and as a pro bono advocate at Federal District Court mediations.
Attorney Laura M. Moisin, practices real estate law at the law firm of Goldman & Pease LLC, provided much assistance in preparing this article.