In a recent Land Court decision, a Massachusetts court determined for the first time that a text message exchange satisfies the Statute of Frauds and can create a binding contract for the sale of real estate. This is a landmark decision and a potential game changer in the world of both commercial and residential real estate. Real estate brokers in particular must take notice.
The salient facts of St. John’s Holdings, LLC v. Two Electronics, LLC, 16 MISC. 00090 (RFB) are as follows. The buyer’s broker sent a final written offer as an email attachment to the seller’s broker with instructions for the seller to accept the offer by signing and returning it to the buyer. The next day the seller’s broker sent a text message to the buyer’s broker stating that the buyer should have signed the offer first. The text message further requested that the buyer sign the offer and then send it back to the broker for the seller’s signature. The buyer’s broker complied with this request and later that same day delivered in person the signed offer to the seller’s broker. The seller, however, never signed the offer and instead accepted and signed a third party’s counteroffer later that same day.
Based on these facts, the court found that the text message sent by seller’s broker in response to the email of the final offer constituted a writing containing the essential elements of the agreement sufficient to bind the parties under the Statute of Frauds. The court based its decision on several factors, including the history and context of the communications between the brokers prior to the text message and the increased prevalence of electronic communications in the legal field. The court explained that the text message “implicitly incorporated” the final offer and that the text message, taken together with the buyer’s email of the final offer and “the conduct of the parties throughout the course of negotiations, satisfies the writing requirement.” The court further reasoned that “[t]he way in which the parties handled the transaction was sufficient for them to appreciate that the text message would memorialize the contractual offer and acceptance.”
The court also addressed the requirement that a writing must include a signature to satisfy the Statute of Frauds. In focusing on how the parties previously signed emails and text messages, and the fact that some previous text messages did not include a signature, the court determined that by signing his name “Tim” at the end of his text message requesting the buyer to sign the offer first, the seller’s broker evidenced his intent to have the writing be legally binding.
This decision is an important reminder that electronic communications and signatures are quickly substituting paper documents in business and real estate transactions and that all forms of electronic communications can create binding contracts. As a result, lawyers and brokers must be careful when undertaking negotiations via text message or email and should consider using disclaimers at the end of communications. The decision equally impacts communications engaged in directly by clients in all types of transactions and business contexts and therefore clients must be advised on the risks and need for caution when communicating electronically. While many people still view electronic communications as informal and casual, this decision makes clear that the law and the courts do not.
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