Published by The Central Penn Business Journal
September 27, 2013
Text message: “Awesome.”
Is that any way to form a contract? In 2011, a Florida state court said it was.
It was as early as 1677 that the British Parliament passed the Statute of Frauds, which generally provided that certain types of contracts are valid only if memorialized in a signed writing. During the ensuing 336 years, that principle has become hard-wired into our everyday thinking.
How often have we heard, "We might have talked about that, but we never signed a contract."
Well, here's the thing: Electronic communication is in writing, and any evidence of the sender can be considered a signature. So the exchange of emails, texts or perhaps even tweets can constitute a signed written contract. This does not mean that three-plus centuries of jurisprudence has been overthrown. The Statute of Frauds still lives. We just are not yet fully sensitized to the significance of electronic communication.
As an aside, in the last few years, I have been awed by the effect off-the-cuff emails can have in a litigation context. A witness might think a deposition is going swimmingly until confronted by a two-sentence email tossed off while finishing a latte three years ago and that now represents a devastating admission. In fact, I am willing to wager that you pushed "send" on three smoking guns this morning before your muffin wrapper hit the recycle bin. And. They. Live. Forever.
But back to contracting ...
There is no longer any dispute that an email is a writing and adding your name to the bottom is a signature. That still comes as a surprise to, well, almost everyone. In 2000, President Bill Clinton signed the Electronic Signatures in Global and National Commerce Act, which provided that contracts cannot be rejected merely because they were made electronically. About the same time, the Uniform Electronic Transactions Act was adopted in Pennsylvania.
The UETA provides, among other things, that an electronic record has legal effect and, in fact, any electronic "sound, symbol or process" can be considered a signature. Yikes.
The difficult question is whether email or text exchanges constitute binding contracts. Here we venture into the shark-infested waters of "intention."
There is no longer any dispute that an exchange of emails intended to constitute an agreement is a contract. The question is whether the exchange was intended to constitute an agreement. Of course, that is a wonderful concept, subject to expensive hind-sighting that allows 436 Harrisburg lawyers to drive really nice cars.
The thing is, it is not really the lawyers' fault. It is your — strike that — the guy two desks over's fault. Because whether he NOW says he did or did not intend to enter that agreement is probably driven by whether the effect of that exchange is still beneficial. If it is not — well, obviously he had NO intention to enter into any silly agreement, and anyone who says otherwise is a no-good liar.
If, however, that fixed price looks really good right now, well, it was clear that this was a contract and no reasonable person could think otherwise.
How do we resolve this conundrum? A jury gets to see your emails and decide what you intended. Shudder.
So, where do we go from here? How do we avoid unnecessary legal expenses? Here are some new concepts to hard-wire into our everyday thinking.
Be aware that emails live forever and can be accessed by the "other side" in litigation, many years down the road.
Understand that online conversations have the same legal effect as pen and parchment letters.
Understand that putting your name or even your v-card at the end of an email is a legal signature.
Realize that an exchange of emails can constitute a binding offer and acceptance.
Make your intentions clear in each exchange — if you intend the exchange to constitute a legal agreement, say so; if you do not so intend, say that instead.
Consider adding a disclaimer automatically into the body of your emails to the effect of "This communication is not intended to be legally binding" — but be sure that is really what you mean. It may be that there are some electronic communications that you WANT to be legally binding and such a disclaimer would undermine your intention.
Educate your employees about these concepts.
And if you have any scintilla of doubt about whether you would like to read your email in the morning newspaper — don't send it.
The pace of change is overwhelming. We are all a bit behind on the topic of electronic contracting. We need to catch up, and we will. In the meantime, you'll be careful, right?