CREATING A BINDING CONTRACT VIA TEXT? Not so simple says NY court

A legally binding agreement is a meeting of the minds with sufficient detail to allow for enforcement of its terms. For instance, for a sale, you need price and quantity terms agreed.

The law views certain agreements as more significant and has added a requirement that these agreements must be evidenced by a signed writing. This requirement is known as the Statute of Frauds. Examples of these more significant agreements are transfers of land, prenuptial agreements, agreements where performance will extend more than one year, and agreements over a specified value ($500 for a sale of goods under UCC Sec. 2-201).

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It’s well settled that digital communications are considered a “writing” under the law. It’s also well established under state (Uniform Electronic Transaction Act (UETA)) and federal (Electronic Signatures in Global and National Commerce (ESIGN) Act) law that digital representations of signatures such 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” qualify as a signature. See more on that topic in my post here. So, what’s the issue with text messages?

The U.S District Court, S.D. New York decided Tayyib Bosque v. Emily Realty on June 17, 2019. I’ll keep the facts brief and just get to the point.

In New Jersey, business brokers agreements must be in a signed writing (Statute of Frauds). In this case, the business broker and the seller were communicating about a business sale and the broker’s commission via text messages. They reached an agreement and then the seller reneged. The broker sued.

Text messages, as mentioned, are writings. However, there is a significant difference between a text message and an email regarding the “signature” requirement. Email messages often close with a person’s name or an automatically inserted signature footer (containing name, company, email address, phone number, etc.). These email closings all qualify as “signatures” under the law. However, text messages are almost never closed with a person’s name. It would be so nerdy signing a text message! So, unfortunately for the broker, in this case, there was no signature. Hence, no signed written agreement satisfying the Statute of Frauds.

You might say, “Isn’t a signature just evidence of who made the agreement? Here it’s clear who sent the text message and it’s therefore agreed!” That’s all very logical, but the Statute of Frauds is a statute and must be strictly construed. End of story.

Bottom Line: Text messaging is great for quick back-and-forth communications. However, if you want to make a text binding, clarify the agreement in a text and ask the other person to respond confirming the agreement and inserting their name. It would be even better to conclude the agreement via email, making sure the necessary terms and signatures are clear. Of course, creating a document that is digitally signed is best.

The moral is clear: If you want to make sure you have an enforceable agreement, make sure you get it in a clear signed writing qualifying under the law.

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William Galkin manages GalkinLaw. Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions.

  
                                                                                                         
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