E-SIGN

Are Electronic Contracts And E-Signatures On The Way?

Catching my eye this week was a recent New York Times article discussing a New York state court opinion regarding the legal effect of e-mail in real estate contracts.  The ruling reaffirmed that e-mail may carry the same weight as traditional ink on paper contracts.

It made me think about the future of real estate contracts and how they will look. Will the common practice of executing four original purchase and sale agreements be replaced by some type of electronic PDF document with electronic signatures? (I hope so. They are in the West Coast now). Same for the standard Offer to Purchase? What about the stack of disclosures and loan documents signed at closings? (There must be a better way). And mortgages are already being electronically recorded in several Massachusetts counties.

I wonder how closings will be conducted in 2021?

Congress and state legislatures have already laid the groundwork for electronic real estate contracts and e-signatures. In 2000, Congress enacted the E-SIGN law which validated certain contracts in electronic form and electronic signatures. In 2004, Massachusetts adopted the Uniform Electronic Transactions Act (UETA), which is essentially updates the E-SIGN law. Lawmakers designed UETA and E-Sign to recognize that “a signature, contract, or other record relating to a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” The Massachusetts UETA exempts several types of contracts and disclosures (e.g., wills), but not real estate contracts.

Old Traditions & The Statute of Frauds

But old traditions are hard to change, especially when it involves real estate.  As every first year law student learns, Massachusetts real estate contracts are governed by the Statute of Frauds.  This doctrine, originated in old English common law, says that any contract for the sale of real estate must be in writing and “signed by the party to be charged therewith.”  One can make a compelling argument that secured electronic contracts and signatures serve the purpose of the Statute of Frauds by providing some objective evidence, other than word of mouth, that there really has been a binding deal.

I haven’t found any cases dealing with the interplay between the UETA and the Statute of Frauds.  And there’s something about that “wet” ink signature on real paper that gives people security and comfort.  The same is true for our beloved Greater Boston Real Estate Board standard form Offer and P&S.  We’ll have to see how the issue plays out in the courts.

But if you can purchase a Ferrari online through E-Bay, why can’t you buy a home using a secure electronic contract?  How do you think technology will affect real estate in the future? What would you like to see change in the industry?

{ 1 comment }