Can A Text Form A Contract?

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Past issues of “Legal News” (Feb. 2014, Feb. 2016) discussed how an exchange of emails can be sufficient to form a binding contract and can satisfy the Massachusetts’ Statute of Frauds requiring a signed writing in contracts for real estate. Although informal, email has become an accepted means of communication in business and social interaction. But, what about text messaging? Can you create a contract in a Facebook or Twitter exchange? Is society ready for that, or is it even wise? Where does the law draw the line?

In one recent Massachusetts Land Court case a prospective Buyer of a condominium in Provincetown, MA, sued the Sellers of the real estate alleging that text messages between his real estate agent and the agent for the defendant Sellers constituted a valid and binding contract to sell the property. In the text message exchange, the agent for the Sellers conveyed that “the Sellers accept the price” and proposed a closing date which the Buyer adopted. The Buyer’s agent emailed a Contract to Purchase with an image of a deposit check, both signed by the Buyer. The proposed Contract to Purchase contained additional terms, including a subsequent deposit to be paid, an inspection contingency, and a mortgage financing contingency. The Sellers didn’t sign or return the Contract to Purchase, and subsequently entered into a purchase and sale agreement with another buyer.

In finding that no binding contract was formed, the Land Court judge noted that “text messages and emails can potentially satisfy the Statute of Frauds, provided that they, like other writings, contain the essential terms of the transaction and are signed by the parties to be bound or their authorized agents.” The judge found that under the facts of the case, the text messages between the agents were insufficient because there was no evidence that the Sellers’ real estate agent was authorized to bind her principals to an agreement. The substance of the text messages, at best and even combined with the later emails, demonstrated circumstances where the parties had merely reached the stage of “imperfect negotiation.” Specifically, the judge found that the proposed Contract to Purchase added new material terms that had not been agreed to or discussed. Although real estate agents in general have the authority to negotiate terms of a proposed sale, such authority does not include the authority to bind the represented party to such terms unless the agent is expressly authorized to do so.

In dismissing the Complaint against the Sellers, the judge also concluded that the digital image of the deposit check was insufficient delivery of the proposed deposit such as to constitute a failure of consideration for the Offer to Purchase which would have rendered the agreement unenforceable even if signed by the Sellers. This particular case suggests that although any writing, including the brief and casual messages regularly exchanged electronically, can form the basis for a contract, the law will continue to insist on the required elements of contract formation on which society relies.

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