Update on St. John’s Holdings, LLC. v. Two Electronics, LLC
On October 24th, 2016, the Massachusetts Land Court revised its ruling in St. John’s Holdings, LLC. v. Two Electronics, LLC (2016 WL 1460477 (2016). The underlying case (the subject of a prior blog article) involved electronic communication and the Statute of Frauds (G.L. c. 259 Section 1). In its updated ruling, the Court analyzed whether the seller gave his real estate broker decision-making authority.
The Court previously held that a text message from the broker, signed with his name and incorporating an unsigned letter of intent, satisfied the Statute of Frauds. As part of its analysis, the Court reviewed the Massachusetts Uniform Electronic Transactions Act (G.L. c. 110G), which 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.
In this instance, the Court asked whether the seller gave decision-making authority to its broker. To answer this question, the Court examined the following: the seller’s actions; the broker’s understanding of his decision-making authority; prior dealings between the seller and broker; and communication and agreements between the seller and broker. Based on this investigation, the Court ruled the broker had no actual authority to bind the seller.
The Court also rejected the buyer’s theory of implied authority. In doing so, the Court concluded that the seller made no express or implied manifestations of authority which the buyer could have relied upon; the buyer had no reasonable basis to assume the seller vested decision-making authority in the broker.
Despite the reversal in fortunes, this updated ruling does not alter the original takeaway: electronic communication may satisfy the requirements of the Statute of Frauds and create binding agreements. In this case the communication was just sent by the wrong person – a broker with no decision-making authority. As a result, continue to exercise caution when using electronic communication to negotiate real estate transactions.