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MAR Notes from the Legal Hotline - June 2016

MAR Legal Staff, 6/1/2016

Use Caution When Negotiating Via Text and Email
In May 2016, a Massachusetts Land Court ruled that a series of text messages can satisfy the Statute of Frauds and bind parties to a real estate transaction. Massachusetts law requires all agreements to transfer real estate to be in writing and signed by the party against whom the agreement is to be enforced. It was only a matter of time before the courts reviewed whether or not a text message could satisfy that standard.

The case, St. John’s Holdings, LLC v. Two Electronics, LLC , involved a dispute between two businesses for the purchase of a commercial property. Over the course of several weeks the parties negotiated an unsigned “Binding Letter of Intent” through their respective brokers via email and text messages. Included in an email exchange, which included the brokers’ respective email signatures, was an email from the listing broker stating that the seller was “ready to do this.” The listing broker then followed up with a text message to the buyer’s broker, telling the buyer to sign the Letter of Intent, as prepared by the seller, and submit a deposit, which the buyer did. Some of the text messages included signatures on a first name basis, but not all of them did. During these negotiations, however, the seller received and accepted a higher offer from a different buyer and refused to sign the Letter of Intent with the buyer. Immediately, the buyer sought to enforce the Letter of Intent in a Massachusetts Land Court.

Before the Court was whether these text messages could satisfy the Statute of Frauds to bind parties to the agreement. The buyer argued that the Letter of Intent was binding based on the exchange of emails and text messages between the real estate brokers and included all material terms of the contract. The seller, on the other hand, argued that the text messages were merely negotiations and further, did not include the required signature from the seller.

The judge sided with the buyer, ruling that the text messages, in addition to the emails, satisfied the statute of frauds and amounted to a binding contract. In reaching his decision, the judge considered all of the email and text messages as whole. “Under the Statute of Frauds, multiple writings relating to the subject matter of the agreement may be read together as long as the writings, when considered as a single instrument, contain all the material terms of the contract.”  Additionally, he held that the signatures in the text messages were enough to authenticate the seller: “Typing their names at the end of certain messages containing material terms, but declining to do so for more informal discussions, is indicative that the parties chose to be bound by those signed communications.”  

The New Trend
As you may remember, there was a superior court case in 2012, Feldberg v. Coxall, which presented a similar set of facts and holding. In that case, the court applied the same standard and ruled that the parties could be bound if the material terms of the agreement were present and the parties had the requisite intent to enter into the agreement. Furthermore, it held that signature blocks in emails could meet the signature requirement.

What REALTORS® Can Do to the Protect Themselves
REALTORS® should be aware that negotiations through text and email may bind clients to an agreement. Therefore, great caution should be used when communicating through these means. 

Unless a client has expressly authorized you to make an agreement on behalf of your client, you should consider including a disclaimer at the bottom of emails that include proposed terms for an agreement such as: “Nothing in this email is intended to create a binding contract for the purchase or sale of real estate.  The sender of this email does not have authority to bind a client [buyer or seller] to an agreement via written or oral communications, including by email."  Adding this disclaimer, when it accurately describes the agent’s authority, will avoid unintended consequences of email communications.

When communicating through text message, it is wise to make similar statements in the beginning of the negotiations. An even wiser approach would be to discontinue negotiating terms through text messages all together.