Can a Text Message Form a Binding Contract? OMG. The Answer May Surprise You
In today’s world of texting and emails, individuals regularly communicate via these written forms of communication using their mobile devices for both business and personal matters. On construction projects, it is no secret that emails largely have replaced other forms of written correspondence such as letters and faxes. More recently, text messaging (texting) has become one of the primary methods of communication on a jobsite.
Part of the appeal of texting is its speed and efficiency. Nearly everyone has a cell phone, and it is estimated that short message services, like texting, have a 98% read rate compared to the estimated 22% read rate for emails. Texting is a direct and quick way to communicate, allowing for speedy answers to urgent questions and an easy way to disseminate information quickly. On a jobsite, texting can be a useful tool for efficiently coordinating work, deliveries, and schedules, notifying workers of changes or safety issues, and facilitating prompt resolution of encountered issues that could otherwise delay work. Many construction companies are taking advantage of these benefits by permitting and even encouraging employees to communicate via text in carrying out daily work on a project.
As more business is conducted via texting, new questions regarding the legal implications of such exchanges continue to arise. While the law has been developing for some time concerning email communications, courts are just beginning to address particular disputes and questions surrounding texting. With the increasing prevalence of this form of communication in facilitating daily job operations, companies need to understand the potential legal impact and considerations that come into play with this quick, and often casual, form of communication.
Recently, a court in Massachusetts held that a text message can constitute a writing sufficient to create an enforceable contract for the sale of land. In St. John’s Holdings, LLC v. Two Electronics, LLC, a buyer’s agent and a seller’s agent exchanged a number of drafts of a letter of intent, along with emails and text messages, concerning the sale of a piece of property. When they agreed upon a final letter of intent, the seller’s agent texted the buyer’s agent, asking that the buyer sign the final letter of intent and provide a deposit. That same day, the buyer’s agent arranged to meet with the seller’s agent and delivered the signed, final letter of intent and deposit check to be passed along to the seller. The seller then refused to execute the letter of intent and tried to enter into a sale agreement with a different buyer. The original buyer filed a lawsuit seeking to enforce its rights to buy the property.
The case came down to whether the parties had merely engaged in negotiations regarding the purchase of the property or whether their dealings, carried out through electronic communications over text messages and emails, gave rise to a binding contract for the purchase and sale of that property. The formation of a legally-enforceable contract requires a clear offer, a clear acceptance of that offer, and agreement by both parties as to the terms of that offer. For contracts regarding the sale of land to be enforceable, the Statute of Frauds requires that they are supported by a writing that includes the essential terms and is signed by the party against whom enforcement is sought.
The court concluded that the text message from the seller’s agent, asking the buyer to sign the letter of intent and provide a deposit, was a writing that, when read in the context of the other exchanges between the parties, contained sufficient terms to create a binding and enforceable contract between the seller and original buyer. In reaching this conclusion, the court recognized that electronic writings of relative informality and brevity can satisfy writing requirements, that essential terms of a contract can be spelled out over multiple writings that can be read together, and that signature requirements can be met in the absence of a formal signature.
Although this case was decided under Massachusetts law and involved the signature and writing requirements applicable to real estate contracts under the Statute of Frauds, there are important lessons and warnings to take away from this court’s decision. This decision reflects that courts, as a general matter, are beginning to evolve and adapt the law to current technology and communication methods utilized by individuals and businesses. Significantly, it is reasonable to assume that courts will find that the elements evidencing a legally-enforceable contract can be based on a series of brief and informal electronic communications between agents of the parties in the context of construction contracts, which are subject to customary contract law principles and not the heightened standards imposed by the Statute of Frauds.
There are additional cases from various jurisdictions in recent years, including New York, Iowa, and Pennsylvania, which reflect this trend of considering text messages as evidence of parties’ agreements. In light of this, companies should be aware that, despite the apparent or perceived informality, text messages can and will have legal ramifications. It is clear that a text message, or a series of them, can create an enforceable contract and may constitute a writing, which could give rise to certain rights or claims. On the one hand, text messages could help support or bolster your position concerning a particular dispute or issue in the absence of other contemporaneous project records. On the other hand, text messages sent by you or your employees could come back to haunt you and could evidence work authorization or directives. By way of example, a criminal complaint was recently filed in New Jersey federal court against the owner of a construction company. This complaint alleged that the owner had denied directing workers to perform repair work on a roof during a sworn deposition taken by OSHA in investigating two jobsite injuries. However, OSHA subsequently discovered text messages sent by the owner to the workers on both occasions did direct the performance of repairs on the roof.
The bottom line is that companies and employees need to know and understand that text messages should not be carelessly sent, as they could be interpreted to be binding upon the company. Companies should be aware of team members discussing change orders, extra work, or potential claims via texting and whether team members are providing notice of claims, conditions, or other issues via texting. This information is critical to protecting the company’s rights and liability, as well as ensuring the preservation of all relevant documentation.
As more and more communications are exchanged via texting, discovery in litigation and arbitration matters increasingly involves text messages. Companies need to realize that preservation obligations extend to electronically stored information, including text messages. Steps must be taken to preserve project-related text messages to avoid potential evidentiary problems and possible discovery sanctions in the event of litigation. Companies should have policies in place to address the use of cell phones and the types of project communications that are being discussed and exchanged via texting. In addition, companies should establish a retention policy for the preservation of project-related text messages on both private as well as company-owned cell phones—B4 it is 2 late!