NSFW: Massachusetts Court Decides Text Sufficient to Close a Deal

August 1, 2016

Have you ever sent a text and immediately regretted it? Have you ever sent a text that ultimately became a binding contract to sell a $3 million dollar piece of real estate? Loose fingers beware, according to a recent Massachusetts court decision a text can be deemed to constitute consent to a binding real estate transaction.

In St. John’s Holdings, LLC v. Two Electronics, LLC [1], the court was presented with the case of a jilted buyer seeking to enforce a text against a seller to sell a commercial building for $3.2 million. The court agreed with the buyer, finding that the parties had negotiated the terms of a letter of intent (LOI) to a significant degree of detail by email correspondence between the parties’ brokers and the seller’s broker’s subsequent text fulfilled the statutory requirements for the formation of a binding agreement, committing the seller and the buyer to the terms of the deal.

Since the early seventeenth century, English (and subsequently American) law, has required that the sale of land must be set forth in a signed, written instrument. Known as the “Statute of Frauds”, its purpose was to govern admissibility of certain evidence before the courts. Over time, the presence of a “writing” has become increasingly diluted, not without criticism. The court in St. John’s noted that email and texts are increasingly common as a medium to conduct business, and noted that while the writing need not be a formal contract, the terms of the writing must be sufficiently complete and definite and the writing must reflect a present intent of the parties to be bound.

The seller’s counsel attempted to push the court away from finding that a writing existed in St. John’s, in keeping with a 2005 decision in which the Massachusetts Appeals Court found that emails “facilitate rapid, almost instantaneous communication, but in many cases they analogize more closely to telephone calls, or at least to voice mail messages… it is far from obvious that average parties launching emails to each other appreciate that their quickly composed electronic missives are contractual in nature….” Singer v. Adamson, 11 LCR 223 (2003). The court in St. John’s pushed back on this limited concept of electronic communications and found that the parties had made significant advances in their negotiations and the essential deal terms thus had come into existence.

The court noted that the parties negotiated the terms of an acceptable and expressly binding LOI over a number of days, following a two-month long process which initially began as a potential lease of the property. According to the court “[t]he communications … evidenced a meticulous attention to provisions that would govern the agreement to purchase …” and that “the terms discussed included the purchase price, seller financing, the due diligence period, the closing date, and the deposit amount.” Moreover, at the conclusion of the negotiations, the buyer’s broker delivered a final LOI by email to the seller’s broker, stating explicitly that it was binding. The seller’s broker then acknowledged the final LOI, and noted that the buyer should sign first with the following text to the buyer’s broker:  Steve. [the seller] wants [the 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 [the buyer] sign today and get it to me today? Tim

The court also analyzed whether the signature at the end of the text constituted the authentication requirement of the statute of frauds, but found that typing one’s name is unnecessary to authenticate an email or a text because the brokers’ use of email to conduct negotiations “arguabl[y] constitutes an agreement to conduct transactions by electronic means” and that the seller and buyer were bound by their broker’s actions, as agents for each of them. Ultimately then, whether or not a signature appeared at the end of the text would not have been dispositive in the court’s mind, as the parties’ conduct indicated that emailing and texting was an accepted form through which to conduct their business negotiations.

Is texting then NSFW? While texting is perhaps not the wisest choice to conduct real estate transaction negotiations, many of us text to one another, as we seek quick and efficient methods of remaining in contact. The court’s decision in St John’s is a wise reminder to pay strict attention to any correspondence in any medium before hitting “send”. Beware the fat fingered smartphone user!

[1] http://masscases.com/cases/land/2016/2016-16-000090-MEMO&ORDER.html