Can A Text Message Can Create a Binding Contract?
Before we get started, let’s bring out the standard disclaimer: Never, ever take anything you read here at The Source as legal advice, and always seek qualified counsel with respect to any issue or problem that arises in your business.
Law blog JDSupra writes this week about a fascinating case in Massachusetts where two commercial brokers, one representing a buyer and the other a seller, were negotiating the sale of a commercial building in a MA industrial park. After a round of negotiations, the buyer’s broker emailed the seller’s broker a letter of intent that was unsigned.
The seller’s broker then texted the buyer’s broker with a request for a signature and for a check, indicating the seller would then countersign upon receipt of these. The buyer’s broker complied, dropping these off with seller’s broker, but that day, the seller accepted an offer from a third party and declined to countersign the first buyer’s LOI. The jilted buyer then sued.
From the JDSupra post:
The essential issue the court focused on was whether the emailed LOI and the text message, together, constituted a writing sufficient to satisfy Massachusetts’ Statute of Frauds and therefore create a binding contract enforceable against the seller for the sale of land. The court held that, between the LOI, which set out the terms of the deal in sufficient detail, and the text message “signed” by Tim, the seller’s broker, there could be an enforceable contract.
Take note. This court was deciding only a motion to dismiss. So it didn’t hold that there was an enforceable contract, only that, viewed in the light most favorable to the non-moving party (i.e., the buyer) there could be an enforceable contract and therefore the motion to dismiss was denied. (It will be interesting to see whether this case settles, goes to trial, or comes to some disposition in between.) Some might also be wondering how signing the LOI created an enforceable contract, since letters of intent usually disclaim any binding effect. In this case, the parties pretty clearly intended to make the LOI binding: the document was titled “Binding Letter of Intent.” Your Basic Oxymoron. Also, the LOI did not contain any of the disclaimers you might typically see in a term sheet for a large commercial real estate deal. Finally, because the buyer and the seller stipulated that their brokers were duly authorized agents acting on their respective behalves, the court found that the broker’s signature was sufficient to bind the seller.
The entire post gets into the reasoning behind the court’s interpretation of broker’s behavior and customs when using texts — including the interesting notion that there can be a difference in legal weight of a text message that is appended with a “signature” — an entry closing a message with the name of the sender — as opposed to one that is not.
(Photo credit: Wikipedia)
And once again, remember: never, ever take anything you read here at The Source as legal advice!