E-mail Could Be Binding

Negotiating electronically could lock your client into a deal. Here's how to protect both of you.

January 10, 2013

Imagine you're negotiating a purchase transaction by e-mail with the real estate agent representing the buyer. The price has been agreed to, and you’re working out the buyer’s financing options. The buyer is able to be preapproved, and you e-mail, "We're almost there." A draft purchase offer is written up and e-mailed to the buyer's agent, but before anything is signed, a better offer comes in. The seller wants to go with that one, so you immediately inform the buyer’s agent of the situation. The buyer is upset and wants to enforce the deal. Much to your horror, the e-mails you exchanged may be enough for the buyer to sue to enforce the deal. This was the case under a ruling last year in Massachusetts.

In that case, Feldberg, et al. v. Coxall, attorneys representing the buyer and seller exchanged a series of e-mails about the deal, the last one attaching a revised, but unsigned, offer to purchase. When the seller pulled out of the deal, the buyer sued, claiming the deal had been sealed in the last e-mail.

The seller argued that nothing had been signed, as required under a law called the Statute of Frauds, which varies by state but generally requires certain agreements to be signed, and sought dismissal of the claim. The judge ruled against dismissal, though, saying that, under a state law called the Massachusetts Uniform Electronic Transactions Act (similar laws exist in other states), an e-mail signature block or even the "from" portion of the e-mail may constitute a valid electronic signature in cases where the parties are conducting the transaction electronically, as these parties by all appearances were doing. The judge denied the seller’s motion to dismiss, opening the door for the court to look at whether the e-mails in fact constituted a binding agreement.

As it turned out, the buyer and seller settled out of court a few months later, so the question was never brought before a judge. But by opening the door for the court to look at the issue, the judge was effectively saying an e-mail exchange could very well prove to be binding. Although the ruling was by a lower court judge—so it isn’t binding on other judges—it may provide a model for other judges as they consider similar cases.

There are steps you can take to protect yourself against inadvertently binding your client to a deal. Here are two suggestions:

  • Watch what you say in e-mails. If you're representing the seller, always say that the terms of the deal must be approved by the seller and that negotiations are preliminary until an offer or contract is signed. Conversely, if you are representing the buyer, it's prudent to push for confirmation that a deal has been reached, to avoid a situation, like the Massachusetts case, in which the seller jumps at a higher offer at the last minute.
  • Use a disclaimer. You can insert a disclaimer in your e-mail signature that looks something like this: "E-mails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor create a binding contract until and unless a written contract is signed by the parties."

This Massachusetts case is a good reminder that e-mails can come back to haunt you. Watch what you say, and remember that your e-mails could ultimately become an exhibit in court.