The statute of frauds is a legal principal that requires certain contracts to be in writing in order to enforce them. It is traditionally reserved for contracts involving important or expensive subject matter, such as the sale of land, contracts for marriage, or the sale of goods totaling more than $500. In these instances, the contract is only enforceable if the terms of the agreement are in writing and it is signed by the party against whom the agreement is being enforced. It is used as a defense in cases where one party is suing another for breach of contract regarding one of the situations the statute covers. For example, if one person wants to buy a piece of land from another and they merely shake on it, the seller can use the statute of frauds as a defense when the buyer sues him for the land by saying, “our deal wasn’t in writing. The land still belongs to me.”
What exactly constitutes a “writing” for the purpose of satisfying the statute of frauds has long been an issue discussed by courts, but modern communication methods complicate the question. Do emails qualify? What about text messages? In April 2016, a Massachusetts court took up the question in the context of a sale of land. In the case, a buyer, St. John’s Holdings (SJH), and a seller, Two Electronics, were negotiating the terms of sale via email. Included in this exchange, were four drafts of an unsigned letter of intent (LOI) from SJH to Two Electronics. After the final LOI, on February 3, 2016, Two Electronics’ agent sent SJH’s agent a text that said Two Electronics wanted SJH to sign first with a check and then Two Electronics would sign. The last word of the text message was Two Electronics’ agent’s first name, Tim. Later that day, SJH executed the LOI by signing and gave a check to its agent to deliver to Two Electronics’ agent. After the execution, SJH’s agent sent a text to Two Electronics’ agent saying, “I have the signed LOI and check it is 424 [PM] where can I meet you?” When the two agents spoke on the phone later that day, they agreed that SJH’s agent would bring the signed LOI with the check to Two Electronics’ agent’s office.
While the text messages and phone call was exchanged on February 3, 2016, Two Electronics accepted a third party’s offer to buy the property at issue. The next day, SJH’s agent sent a text message with an inquiry as to the status with Two Electronics’ agent. Two Electronics’ agent replied via text message that the owner of Two Electronics was out of town and he would follow up the next day. Subsequently, Two Electronics’ owner never signed the LOI or delivered it to SJH saying that he’d sold the land to the third party.
SJH sued seeking the enforcement of the LOI claiming it was binding based on the emails and text messages between the two agents and that those communications constituted an agreement on all essential terms satisfying the statute of frauds. The Massachusetts court explained that a contract for the sale of land is only enforceable if it is supported by a writing that includes the agreement’s central terms and is signed by the party against whom enforcement is sought. In doing so, the court looked at four (4) questions: (1) whether text messages qualified as a writing under the statute of frauds; (2) if so, whether it contained sufficiently complete terms and intent to be bound by those terms; (3) whether the text messages were signed; and (4) whether there was an offer and acceptance.[1]
The issue of whether text messages qualify as writing had not been specifically addressed by the court, but it had previously ruled that writings of relative informality and brevity can be enough to satisfy the statute as long as the writing is sufficiently complete and reflects an intent of the parties to be bound.[2] The determination ultimately turns on the specificity of the contents of the communications themselves with some email exchanges containing the specificity regarding the key terms of the agreement while others lack it. According to the statute of frauds, multiple writings relating to the same subject matter may be read together as long as, when considered as one instrument, they contain all the material terms of the contract and are authenticated by a signature. In the case at hand, the February 3rd text message was a writing containing sufficient terms to state a binding contract when read in the context of the emails between the two parties as well as their LOI attachments.
Several courts have found that the requirements for satisfying the signature requirement are relatively minimal and that it can be done in a variety of ways: including, but not limited to one’s own name, initials only, or a stamped or typewritten signature so long as the method was intended to authenticate the writing.[3] Even emails without formal signatures have been held to be binding under the statute of frauds.[4] In this case, the seller’s agent signed his name “Tim” at the end of the February 3rd text message even though in previous and subsequent texts messages, he had not signed his name. The court decided that the fact he had done so on a text that contained material terms of acceptance and declining to do on more informal exchange was evidence that he intended the alteration of acceptance to be authenticated by his own signature and, thus, was evidence of his intent to have the text message be legally binding.
Two Electronics’ final argument was that there was no offer and acceptance, but the court found that when Two Electronics’ agent sent the text message altering the method of acceptance, that is, requiring SJH to sign first, it was a material change to the contract that was sufficient to constitute a counteroffer. Once SJH had signed and provided the deposit check, it was an acceptance of the counteroffer and Two Electronics was bound to the agreement.
Courts are notorious for being sluggish when it comes to adapting to new technology, but they won’t stay stuck in the twentieth century forever. The Massachusetts court’s ruling, while not addressing text messages entirely on their own, is a reminder that new technology will be incorporated into case law eventually and as long as these new methods conform to the requirements of the old, they are likely to be accepted, however slowly.
[1] St. John’s Holdings, LLC v. Two Electronics, LLC, MISC 16-000090, April 14, 2016.
[2] A.B.C. Auto Parts, Inc. v. Moran, 359 Mass. 327, 329 (1971).
[3] Irving v. Goodimate Co., 320 Mass. 454, 458 (1946).
[4] Slover v. Carpenter, 24 LCR 1, 5 (2016).
