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OMG! Text Message Forms Binding Real Estate Contract

You may be familiar with the fact that, when it comes to real estate, if it isn’t in writing, it isn’t enforceable.  This was pretty simple not so long ago: if you didn’t have a paper that was signed in ink, you had no real estate contract.  But how does the law account for all the new ways that we ‘write’ to one another?  In this electronic world of ours, emails and texts have become all but the exclusive method of communications in real estate negotiations.  So it was only a matter of time before our courts were faced with the question of whether and to what extent e-mails and texts can constitute a binding and enforceable agreement to purchase and sell real estate.  The Massachusetts Land Court last year gave us our first answer: a text messages may form a binding contract in real estate negotiations–even where a formal offer has not been signed by the seller.

The Case: St. John’s Holdings LLC v. Two Electronics, LLC

Both sides to a commercial real estate deal in Danvers were represented by commercial real estate brokers.  The Seller and Buyer negotiated for weeks, exchanging draft “Letters of Intent” to lay out the terms of the multi-million dollar deal.  As the negotiations were nearly completed, the brokers exchanged several emails and texts, and the seller’s agent emailed that his client was “ready to do this,” followed by a text message reading —

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

The buyer signed the final Letter of Intent and gave the deposit check to his broker.  The buyer’s broker then texted the seller’s agent that “I have the signed LOI and check. It’s 424 [PM]. Where can I meet you?” Shortly thereafter, the two agents met, and the buyer’s broker tendered the buyer signed Letter of Intent along with the deposit check.

Unbeknownst to the buyer, the seller received another offer on the property that very same day, and had signed an acceptance of the competing offer. Naturally, the seller then refused to sign the Letter of Intent with the buyer, so the buyer sued, claiming that the series of letters of intent, emails and text messages constituted an enforceable contract.

You may know that the law in Massachusetts already allows parties to “e-sign” electronic documents, but what about in this case, where there was no actual signature and the ‘document’ being signed was not the actual contract?  The Judge held that parties here had impliedly consented through their actions to make email and text transmissions binding and enforceable, and further that the addition of “Tim” to the end of the text made it a “signed” writing. As a result, the seller was made to sell the property to the first buyer.

So how do you protect yourself? IMO, CYA!

So what can you do if part of your business involves negotiating over email or text message?  First and foremost, adhere to the old adage that you don’t write it if you can speak it!  Secondly, for email, you can add a disclaimer to your signature indicating that the message is not intended to create a binding contract and stating that any terms are subject to review and approval.  But of course that doesn’t work so well for text messages.  In those cases, a general written disclaimer at the start of the negotiation process might be the best you can do, even though this Land Court case seems to suggest that your later conduct over text message could negate such a disclaimer.

It’s a great time to buy or sell real estate in Massachusetts.  But remember that bringing a good attorney into the fold early in the buying and selling process can help you to avoid pitfalls when dealing with real estate contracts, and will become absolutely essential if you have found yourself in a dispute.

Martin Winstead