Can a Text Message Create a Binding Contract?

ContractA previous post discussed how an exchange of emails can result in a binding contract. But can you really create a contractual obligation by sending a text?  A recent case in Massachusetts hints that this too, is a possibility.

The case, titled St. John’s Holdings, LLC v. Two Electronics, LLC (available here), involved negotiations for the purchase of a commercial building, in which the buyer’s broker emailed the seller’s broker an unsigned Letter of Intent (LOI) as an attachment.  The LOI (which the parties intended to be binding) needed to be signed by both parties.  The seller’s broker followed up by texting the buyer’s broker to ask that the LOI be signed and a deposit made.  Specifically, the text said,

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

The buyer then signed the LOI and provided a check to the seller.   However on that very same day, the seller accepted a third party’s offer for the property, and refused to countersign the LOI.  This being the United States of America, rather than look for another property, the buyer decided to sue.

The court focused on whether the emailed LOI, together with the text message, was sufficient to satisfy the Statute of Frauds, which requires all land sale contracts to be writing.  The court held that, because the LOI set forth the terms of the deal in detail, and the text message was “signed” by “Tim” (the seller’s broker), there could be an enforceable contract.

The facts of the case revealed that sometimes the brokers signed their names at the end of text messages and emails, but at other times they did not.  When unsigned, the text messages tended to be briefer and more informal. The court reasoned that adding their names to the end of certain messages and not to other, more informal messages evidenced an intent to be legally bound by the signed text message.  In other words, it’s possible that Tim intended his signature to form a legally binding contract.  This may have not been Tim’s intent at all- he may have just been trying to be polite, which supports the old adage that no good deed goes unpunished.

This decision (which by the way, was not the final decision in the case, which is still going on), opens the way for including additional types of communications that can serve as signatures, but it doesn’t necessarily mean that this will inevitably become the law of the land.  California law expressly excludes electronic messages “of an ephemeral nature,” such as text messages and instant messages, from forms of writing that can satisfy the statute of frauds, and many states may follow suit to avoid someone accidentally agreeing to something as the result of a polite tweet.

Whatever the future may hold, the one thing to keep in mind when texting, emailing, or tweeting, is to think before you send.   If you’re discussing a deal, simple statements like “looks good to me,” while harmless in intent, may cause serious problems.

Seth Heyman

Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.