You know clients can sign contracts using services like Digital Ink and DocuSign. But can your clients end up with a binding contract from a series of emails or text messages—even if they didn’t mean to?
Texas law, specifically the Texas Uniform Electronic Transactions Act (UETA), allows the use of electronic records and signatures in real estate transactions. Here are some answers to questions about this area of the law.
Doesn’t a real estate contract have to be one document that contains a written record of all the terms and conditions of a transaction? Can a series of emails or text messages satisfy that requirement?
The law has evolved to alter the common perception of what a contract can or should look like. For example, a combination of several documents or records can satisfy the “in writing” requirement.
Here’s how such an agreement could be made:
- The parties agree to conduct the transaction electronically
- The emails or texts identify the property to be sold
- The emails or texts identify the price to be paid
- The parties consent to exchange the property for the price
- The parties sign the electronic record.
A real estate contract, in addition to being in writing, requires the signatures of both parties. How would text within an email or text message qualify as a signature?
There is a split among Texas appellate courts as to what constitutes an electronic signature under UETA.
A Fort Worth appellate court determined that the message needs to contain some kind of graphical representation that signifies the intent of the sender to sign. For example, a scanned signature, a font different from the rest of a message that looks like handwriting, an “/s/” followed by a party’s typed name, or any other symbol or mark that unequivocally indicates an intent to sign the record could work. A mere signature block at the end of an email without any further indication that the signature block was supposed to constitute a real signature does not indicate intent.
However, a Houston appellate court has since disagreed with the Fort Worth court. The Houston appellate court determined that a signature block in an email does satisfy the requirement of a signature under UETA. In addition, the court stated that the “from” field in an email communication similarly functions to satisfy the signature requirement.
There have been no cases applying UETA to text messages. However, a text message should be treated in the same manner as an email. A graphical representation in a text message evidencing a party’s intent to sign the record could satisfy UETA and create a binding contract.
It’s a good idea, if you’re communicating through electronic means, to be clear about whether or not you intend to conduct transactions electronically, as discussed below.
I represent the buyer. The seller’s agent and I negotiated the terms of a contract via email, and the seller’s agent emailed me that her client accepted the terms. Before I was able to send over the contract, I was told that the seller signed and accepted a different offer. Didn’t the email messages create a binding contract?
To satisfy the statute of frauds and UETA, generally the email would have to be electronically signed by the buyer and seller, or a power of attorney for the buyer or seller. As such, in most instances, unless an agent has power of attorney for her client, she can’t electronically sign anything on behalf of her client. There is one case in which a court held the contrary to be true in an unusual set of circumstances, but in most transactions, even if her client has expressly agreed to conduct business electronically with the other party, it’s unlikely the agent will create a binding contract via email without her client’s electronic signature.
So, electronic communications between a buyer and seller—not through their agents—can create a binding real estate sales contract?
Sometimes. If the parties agree to conduct a transaction through electronic communications, and if all of the elements of a contract and the statute of frauds are met, there can be a binding transaction through electronic communications.
How would the parties make such an agreement?
There are two ways parties can agree to conduct transactions electronically. The first—the simple one—is where the parties expressly agree. For example, Jane Smith and John Doe agree orally or in writing that they will use electronic means to conduct the transaction. The second one is an implied agreement. This type of agreement would arise through context and surrounding circumstances, including the parties’ conduct.
I don’t want to end up in court. How can I indicate whether my clients and I want to conduct a transaction electronically?
A disclaimer, included in your email, could assist in establishing your intent. For instance, if you don’t want to conduct a transaction electronically, you could add language to your email making that clear. An attorney should assist you in drafting language for such a disclaimer.
What about my commission?
Texas law requires that in order for a person to maintain an action in this state to recover a commission for the sale or purchase of real estate, the agreement must be in writing and signed by the person to be charged with the commission.
To comply with this law, an agreement must:
- Promise that a definite commission will be paid
- State the name of the broker to whom the commission is to be paid
- Identify with reasonable certainty the property to be conveyed.
Therefore, electronic communications could bind the parties if, again, the intent exists to conduct the transaction electronically, there is a valid electronic signature, and the agreement contains all the material terms necessary to establish a binding contract. While it is possible to create an enforceable commission agreement via electronic communications, the best practice is to continue to use the TAR listing agreements or the TAR buyer/tenant representation agreements and obtain the proper signatures.
What should I do to ensure I’m only creating contracts that I want created?
Make other parties aware that you do or do not want to enter into contracts electronically, and be clear about the intent of any electronic communication.
Emails and other forms of electronic communications are commonly used in real estate transactions. Be clear in your dealings with your client and other parties to ensure these tools are used correctly.