“To Contract (Via E-mail) or Not to Contract…That is the Question”

In Massachusetts and many other states, the “Statute of Frauds” has long operated as a well-known and rather easily understandable rule of law in the context of real estate:     contracts for the sale or use of land must be reduced to writing, and signed by all parties.   Typically, this requirement is satisfied through the signing of a purchase and sale agreement, residential/commercial lease, or some other type of formal document memorializing the sale or transfer of property.

Of course, given the prominence of e-mail in conducting business today, the notion that a “written, signed” document can only exist on paper is largely antiquated.   Online sales take place every day, which means that online contracts are formed and entered into every day.   State courts and legislatures have kept pace with this reality, most recently in Massachusetts, where the following question was recently posed:   can an ongoing e-mail exchange satisfy the Statute of Frauds for the sale of land?

The answer of Superior Court Judge Douglas Wilkins to the above question, in Feldberg v. Coxall — “yes,” in certain cases — is not a surprising one.   However, the facts of Feldberg indicate that such cases may be far more common than expected.

Ian Feldberg’s complaint stated that he and the defendant, Harold Coxall, entered into an agreement for Feldberg to purchase a plot of undeveloped land in Sudbury, through a series of e-mail exchanges.   Specifically, on April 19,2012, Feldberg’s attorney sent an e-mail to the defendant containing a “revised offer,” attached as a separate document, and reserving the defendant’s “right to comment.”   The revised offer described the property, contained a purchase price, and called for a closing on or before noon of June 1, 2012.  The next morning, Coxall replied with an e-mail that stated “we must have written approval letter from the bank by 5 pm and I think we are ready to go (I assume they will provide a closing date with the approval).”   In previous e-mails, both parties had contemplated the signing of a traditional, hard-copy offer to purchase at the end of their electronic negotiations.

That afternoon (April 20th), Feldberg’s attorney provided Coxall with a copy of the bank’s commitment letter.   The parties then again discussed alternatives for memorializing the terms in a single document, and for delivery of the executed offer and deposit funds.   Coxall and his attorney then began to question why a financing contingency would still be necessary, in lieu of the plaintiff’s commitment letter, and requested that this contingency be eliminated from the offer.  Feldberg’s attorney agreed to do so, but Coxall did not reply to subsequent e-mails, and he eventually sold the land to a third party with a May 7th closing date.

In evaluating Coxall’s Motion to Dismiss Feldberg’s complaint, Judge Wilkins stated that “the most difficult legal question” presented by defendant (Coxall’s) motion was whether an e-mail exchange could satisfy the Statute of Frauds.    In reality, the Court answered this question quite easily:   under the Uniform Electronic Transactions Act, adopted in Massachusetts, “if a law [such as the Statute of Frauds] requires a record to be in writing, an electronic record satisfies the law.”   And, “if a law requires a signature, an electronic signature satisfies the law.”   Thus, the e-mails and attachments sent between the parties were clearly “writings” satisfactory under the UETA and the Statute of Frauds, and the signature blocks found at the end of these e-mails were likewise acceptable as electronic signature symbols.

As the Court noted, however, the UETA applies only to “transactions between parties each of which has agreed to conduct transactions by electronic means.”   The true difficulty in Feldberg, therefore, was deciding whether the parties in this specific case had so agreed to conduct their transactions via e-mail.   The Court ruled that the evidence was not so convincing in favor of the defendant to grant his motion to dismiss.   The Court found this to be so despite the fact that Feldberg and Coxall had contemplated a traditional, hard-copy offer at the end of their electronic negotiations.   In so ruling, Judge Wilkins noted that the UETA allows a party engaging in electronic transactions to refuse the conduct of subsequent transactions with the same party electronically.

The true problem for the defendant in Feldberg appears to be that the hard-copy Offer to Purchase was only discussed in detail after the parties had agreed on a purchase price and closing date for the deal — at which point a contract had already been formed via e-mail exchange, and the Statute of Frauds already satisfied.

As noted above, the Court’s ruling was not a final decision:   the question before Judge Wilkins was simply whether or not the plaintiff’s claim that the parties’ e-mail exchange could satisfy the Statutes of Frauds rose to the level of frivolity and could therefore form the basis of dismissal.   It will therefore be interesting to see where Feldberg eventually lands on this point.   Either way, there seems little doubt that similar cases will arise in the future, requiring an analysis of the parties’ electronic communications, and their intent to contract pre-OTP/PSA.

In light of this recent decision, many attorneys have already stated they will now attach standardized disclaimers to all of their business e-mails, stating that such e-mails do not constitute acceptance of conducting transactions electronically.   Whether such boilerplate language will insulate real estate professionals from liability, regardless of the electronic content, is a question for the future. For now, buyers and sellers of real estate and their representatives should simply know that their e-mail negotiations could come under strict scrutiny upon the breakdown of relations, unless a hard-copy document is specified ahead of time.