OMG! Text Messages May Form Binding Real Estate Contract, Land Court Rules

by Rich Vetstein on May 8, 2016 · 4 comments

in Land Court, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Real Estate Litigation, Realtors, Technology

Text Messages Enforceable As Written Contract, Court Rules

With the proliferation of email and texts as the primary method of communications in real estate negotiations, it was just a matter of time before Massachusetts courts were faced with the question of whether and to what extent e-mails and texts can constitute a binding and enforceable agreement to purchase and sell real estate. In a ground-breaking case, Land Court Justice Robert Foster ruled in a case of first impression that text messages may form a binding contract in real estate negotiations–even where a formal offer has not been signed by the seller. This is huge wake up call for the remaining industry people who still believe that electronic communications are not legally binding.

St. John’s Holdings LLC v. Two Electronics, LLC

The case (embedded below) involves a commercial real estate deal between two businesses both represented by commercial real estate brokers for the purchase and sale of an industrial park property in Danvers. Two Electronics, as seller, and St. John’s Holdings, as buyer, negotiated for several weeks exchanging two “Binding Letters of Intent” spelling out all material terms of the proposed purchase of $3.2 Million. Towards the culmination of the negotiations, the real estate brokers exchanged several emails and texts, with the seller’s agent sending an email that his client was “ready to do this,” then a text that —

“[the seller] wants you to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or to the contrary, but that’s the way it normally works. Can Rick sign today and get it to me today? Tim”

The buyer signed four copies of the final Letter of Intent and tendered the deposit check with the buyer broker, after which the buyer’s broker sent the seller’s agent another text — “Tim I have the signed LOI and check. It’s 424 [PM]. Where can I meet you?” Shortly thereafter, the two agents met, and the buyer’s broker tendered the buyer signed Letter of Intent along with the deposit check.

Unbeknownst to the buyer, that same day, the seller had received another offer on the property, and proceeded to sign that offer. The seller then refused to sign the Letter of Intent with St. John’s. St. John’s sued, claiming that the series of letters of intent, emails and text messages constituted a binding and enforceable contract.

Intersection of 17th Century Statute of Frauds with 21st Century Text Messages

In Massachusetts, the Statute of Frauds requires that contracts for the sale of real state must be in writing signed by the party (or agent) to be charged. In the old days of pen and paper, application of the Statute was quite simple. If there wasn’t a written agreement signed in wet, ink signatures, there was no binding contract. With the proliferation of e-mail and text communication, application of the Statute of Frauds has become much more nuanced.

In the case discussed here, Judge Robert Foster noted several recent judicial decisions holding that emails may be binding as well as the Uniform Electronic Transactions Act, under which parties may impliedly consent through their actions to make email and text transmissions binding and enforceable. Emphasizing the fact that the seller’s agent signed his name “Tim” at the end of the critical text message, the judge found that the text message was sufficiently “signed” under the Statute of Frauds to constitute a binding agreement at the culmination of the previous communications and unsigned letters of intent. The judge also found persuasive that the seller’s agent told the buyer’s agent to have the buyer sign the letter of intent first, and that’s exactly what the buyer did. Finding in favor of the buyer, the judge denied the seller’s motion to dismiss and issued a restraining order against the seller’s conveyance of the subject property.

Take Away: IMO, Watch What You Say!

This area of the law is really becoming a dangerous minefield. After the e-mail ruling came out a few years ago, I advised my clients to use the following disclaimer: “Emails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor shall create a binding contract in the absence of a fully signed written agreement.”

The problem, however, with text messages is that they are so short and informal. It’s not practical to use a legal disclaimer on texts, and there’s no technology that I’m aware of that would insert one into every text. You could always start off a negotiation with the caveat that electronic communications will not create a binding contract until a formal offer is executed. Also, it’s always a good idea to end every email/text with “subject to seller/buyer review and approval” when negotiating an offer. But, such boilerplate language can always be waived by subsequent conduct or actions.

This case reminds me of Lomasney’s First Rule of Politics:  “Never write if you can speak; never speak if you can nod; never nod if you can wink.” — and by winking that does not mean an emoji. ?

And always take screenshots of important texts…just in case.

This post is sponsored by Brian Cavanaugh, Senior Mortgage Banker, Mortgage Network

Cav Zillow

St. John’s Holdings LLC v. Two Electronics, LLC by Richard Vetstein

  • Pavel Redko

    This was a great read and clearly answers a question that I’d had for some time!

  • Rebecca Kingston

    Invaluable ideas – Just to add my thoughts , you are wanting a VA 21-526EZ , my secretary found a sample version here http://goo.gl/sgc1Jn

  • Sunshine Cortes

    Lovely article – one of the best things I’ve recently read, and by far the most useful. I was searching for the same form some time ago and found a great service with a huge forms library. If you ever need to fill out a form, here is http://goo.gl/chzXbX a really useful tool. Very easy to navigate and use.

  • Pingback: Real Estate Mortgage Contract Form | Last Mortgage()

Previous post:

Next post:

Real Time Analytics