Can Emails, Texts and Smoke Signals Constitute a Binding Contract for the Sale of a House?
In this day of social media and rapid fire exchange of texts, emails and instant messages, who has time to formally put things in writing and actually sign their name to it? Well, according to the Kansas Court of Appeals, if you want to ensure you have a binding contract for the sale or purchase of real estate, every buyer and seller needs to take the time to do so. Most consumers have at least heard of the Statute of Frauds – a statutory set of laws requiring certain agreements and contracts to be in writing and signed by the parties in order to be enforceable. Specifically, the statute of frauds applies to all contracts for the sale of lands. A writing, in order to be enforceable under the statute of frauds, can be any document or writing, formal or informal that is signed by the parties or their agents and which states with reasonable certainty: (a) each party to the contract by name or a description sufficient to identify them; (b) the land subject to the purported contract; and (c) the terms and conditions which constitute the contract.
Kansas and Missouri courts have held that their respective statute of frauds require only the material terms of the contract be stated with reasonable certainty and that separate writings may be construed together in order to determine whether an enforceable contract exists. In Sigg v. Coltrane, a Kansas Court of Appeals decision from 2010, the Court determined that an email was insufficient to constitute a binding and enforceable contract for the sale of real estate. The buyer had submitted a written offer for the purchase of the seller’s land and included an earnest deposit. The seller subsequently rejected the buyer’s offer, sold the property to a third party and returned the buyer’s earnest money. The buyer, in its lawsuit to enforce the contract, asserted an email from the seller, which included an unsigned counter-offer, satisfied the statute of frauds.
The Court of Appeals determined that even under Kansas’ Uniform Electronic Signatures Act (Missouri has a nearly identical law), the email still did not contain a legally sufficient electronic signature which is defined in the Act as “an electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” The Court held that electronically drafting and emailing a document alone does not constitute an electronic signature under the Act. Accordingly, there was not an enforceable contract between the parties because the sellers had not “signed” any of the separate writings allegedly forming the purported contract for the sale of land. Under our Kansas City Regional Association of Realtor’s form real estate contracts, buyers and sellers do consent to conducting and executing the transaction electronically.
The documents also contain provisions in which the parties agree those documents solely constitute the agreement for the sale of the property and that any modification must be signed by all parties. Since most offers originate on these base forms, it would pose a challenge to any party attempting to assert that a separate exchange of emails or texts constitutes a valid real estate contract under the statute of frauds – as those exchanges would have to exist independently of the base real estate documents. In addition, the enforcing party would need to establish that in fact an “electronic signature” was made by the other side to the relied upon email text or other electronic communication.
However, in a recent Massachusetts case, a Court at least permitted the argument to be advanced that an email exchange among the Realtors may have constituted an official acceptance of a real estate contract under their version of the Electronic Signatures Act. There, the Court stated an email signature block or even the “from” portion of email could be a valid electronic signature. The case settled out of court prior to any formal opinion or decision was made, but at least one judge has entertained this possibility. To protect yourself, ensure that you and your Realtor are deliberate and careful in the manner in which you communicate with other parties in the real estate transaction.
We are all anxious to hear or read “we have a deal” or “it’s done.” And to an awaiting party, hearing or seeing those kinds of statements solidifies a contract in their minds – the nuisance of getting the documents signed is a trivial detail to be completed after the fact. Properly manage expectations and always include language in any email, text, instant message or Morse code transmission which clearly conveys “that any agreement to certain terms remains subject to and contingent upon the parties completing and signing the real estate contract and forms.”
If this seems difficult to include in every text and email … it is – never a bad idea to practice the ancient art of verbal dialogue articulation via a communications service provider. Otherwise known as The Phone Call – as one can avoid most of the risks addressed in this article by simply speaking rather than typing.
Christian J. Kelly, Chief Administrative and Legal Officer