The age-old requirements of contract law continue to stand the test of time: offer, acceptance, and consideration are the necessary elements to create a contract.
Contracts can be created in writing and sometimes orally; nevertheless, as technology evolves and the world continues to keep up with it, contracts are created in different ways. In the world of text messaging, Twitter, Facebook and LinkedIn, it is no secret that individuals are communicating regularly on their smartphones about their business affairs. Comments are made every day about what a business is doing or what a business wants to do.
Recently, a court addressed the question about whether a text message can constitute writing sufficient under the Statute of Frauds to create an enforceable contract.
In the case of St. John’s Holdings, LLC v. Two Electronics, LLC, a Massachusetts Land Court concluded (in what appears to be a case of first impression) that a string of text messages can constitute a writing under the Statute of Frauds sufficient to bind the parties to sell certain property.
In this case, the transaction involved numerous discussions and emails, including four drafts of a letter of intent from Buyer to Seller for purchase of a piece of property. All documents and writings of script were not executed with a signature by Buyer at that point.
Ultimately, the Seller’s agent texted the Buyer’s agent, asking him to sign the letter and provide a deposit. About two hours later, after Buyer signed the letter and provided a deposit, Buyer’s agent sent the following text to Seller’s agent:
“I have the signed LOI and check it is 424[pm] where can I meet you?
The two agents met later that day to deliver and accept the letter and deposit. When the Buyer’s agent asked for a copy of the Seller’s executed documents, Seller’s agent sent the following text:
“Here’s the problem: the Seller accepted a third party’s offer to purchase the property at the same time, and refused to execute and deliver the letter of intent from the original Buyer.”
The general rule in most states is that contracts for the sale of land are enforceable only if they are supported by writing that includes the essential terms and is signed by the party to be charged (i.e. against whom enforcement is sought). This is called the Statute of Frauds. There are exceptions to the Statute of Frauds to take a contract out of it and/or an assortment of defenses; nevertheless, there is no guarantee of success to set aside an agreement in this manner.
Ultimately, the Court in St. John’s Holdings faced a series of tough questions. Whether a text message can be a writing under the Statute of Frauds? Or whether a text message can clearly present an intent to be bound, or whether the text message is truly signed by the party to be charged? Lets also not forget that we need to prove offer and acceptance this way as well.
The Court concluded that the text message from the Seller’s agent was a writing that, read in the context of the email exchanges between the parties, contained sufficient terms to state a binding contract between Seller and Buyer. In addition, the court found that the final text message contained a valid electronic signature to be “signed” within the meaning of the law.
Although this case deals with the purchase of real property, which is subject to the Statute of Frauds, there are many lessons for contract construction to be aware of. We cannot forget that we live in a mobile, technology-driven world where communication is instant and rapid responses can generally reflect one’s true sense of meaning and understanding to messages and terms. Technology has been around in some capacity the past few decades, whether it has been a fax machine, email, or voicemail messages; thoughts, ideas, and instantaneous prompt responses quickly transferred back and forth revelations between people.
Don’t forget, although this case may not be generally applicable to all jurisdictions, it may be time to realize that no one is safe in the art of the deal and negotiation over mediums of technology. It may be safer to condition your responses on a mutually agreeable paper-drawn contract that is to be finalized in the future – at least this can show you didn’t mean to have assent the moment you pressed send. It may be time we start thinking that the digital age controls more than our social lives, it can potentially dictate our business lives as well.