The Perils of Mobile Communication and Real Estate Negotiation

The Perils of Mobile Communication and Real Estate Negotiation

The rapid expansion in mobile communication has stretched the limits of many longstanding legal frameworks, including the Statute of Frauds (“SOF”) (G.L. c. 259 § 1).  This is certainly the case with respect to real estate transactions.  In fact, 97% of respondents to a recent Pew Research Center survey indicated they use a smartphone for text messaging.  This same survey indicated that 44% of respondents utilize their phone to look up real estate listings and property information.  As a recent land court case reminds us, however, the use of text messaging and email when negotiating real estate transactions can bring unintended legal consequences.

In St. John’s Holdings, LLC v. Two Electronics, LLC (2016 WL 1460477 (2016)), the Land Court addressed a novel concept: whether a text message can satisfy the requirements of the SOF.  The SOF is a legal doctrine requiring contracts for the sale of land to include all essential terms and be in writing signed by the party against whom enforcement is sought.

The controversy in St. John’s centered on communications between two real estate brokers negotiating the sale of a commercial office building.  After negotiating the terms for the sale and receiving a final letter of intent (“LOI”), the seller’s broker sent the buyer’s broker the following text message:

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

The buyer’s broker responded with the following:

“Tim, I have the signed LOI and check it is 424 [PM] where can I meet you?”

Subsequently, the seller refused to execute the LOI and sell the building to the buyer.  In response, the buyer filed suit for specific performance claiming the exchange of emails and text messages, in conjunction with the final LOI, resulted in an agreement of all essential terms. The seller countered that the exchange did not satisfy the SOF.

Analyzing the buyer’s claims, the Court revisited the decision in Feldberg v. Coxall (2012 WL 3854947) that emails between a buyer’s attorney and seller’s attorney (one of which included an unsigned offer to purchase) created a binding agreement.  Additionally, the Court reviewed the Massachusetts Uniform Electronic Transactions Act (“Act”) (G.L. c. 110G).  The Act applies when parties have agreed to conduct transactions by electronic means.   Under the Act, if a law requires a signature, an electronic one will suffice. Parties may also switch between electronic means and hard copy when conducting transactions.

The Court ultimately concluded that the text message, in concert with the buyer broker’s email of the final LOI and the conduct of the parties, satisfied the SOF.  The Court further held that the final text messages made no changes to the essential terms of the agreement and “implicitly incorporated” the final LOI.  This final LOI, the Court explained, contained all of the specific terms of a purchase and sale agreement.  Interestingly, the Court also noted that the use of the seller broker’s signature at the end of the last text message was evidence of his intent to have the writing be legally binding.  The Court differentiated it from previous texts of a “more informal nature.”

The decision in St. John’s Holdings, LLC is thus a good reminder to exercise caution when using electronic communications to negotiate real estate transactions.  One of the primary takeaways from this case is that the informality of email and text messaging is no elixir to a bad deal.  Additionally, this case illustrates the importance during negotiations of careful consideration and review of structure and content before sending email and text messages.  As that well-known idiom states, “measure twice, cut once.”


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