What constitutes a legally binding real estate agreement?
Provided they meet the necessary contractual requirements, real estate agreements that are electronically signed may be considered legally binding.
Gone are the days when all real estate transactions are individually signed by each party and completed contracts are exchanged on paper. Rather, in today’s digital age, many dealings are handled through electronic signatures, or what are deemed to be electronic signatures, with no exchange of actual signed paper documents. While this has sped up the pace of forming and finalizing real estate contracts, and created great convenience for buyers, sellers, real estate agents and attorneys, it also raises important questions about when and if a contract has been formed, the terms of that contract and, of course, has created fertile ground for disputes. There are two primary types of disputes that have emerged. One concerns whether negotiations conducted via email or even text message can form a valid and binding agreement. The second involves whether a written contract, the terms to which have been agreed to, can be made effective without an ink to paper signature. In either instance, it behooves participants in transactions involving the sale or lease of real property to understand what constitutes a legally binding agreement in the state of Massachusetts.
Formation of Real Estate contracts
Whether they are between buyers and sellers, landlords and tenants, or others, nearly every type of real estate relationship or dealing requires a contract with terms that are sufficiently complete and definite, evidences a present intent of the parties to be bound, and is in writing within the meaning of the Statute of Frauds. Common real estate contracts include:
- Offers to Purchase
- Purchase and Sale Agreements
- Residential or Commercial Leases
- Rights of First Refusal and other Option Contracts
“An enforceable agreement requires (1) terms sufficiently complete and definite, and (2) a present intent of the parties at the time of formation to be bound by those terms.” Targus Group Intern., Inc. v. Sherman (“Targus“), 76 Mass. App. Ct. 421, 428 (2010). While not all terms of the agreement must be specified, the parties must have at least progressed beyond “imperfect negotiation” and a “meeting of the minds” must be reached. Lafayette Place Assocs. v. Boston Redev. Auth., 427 Mass. 509, 517 (1998). Thus, completeness and a present intent to be bound require that “the material terms [be] set and agreed upon.” Fecteau Benefits Group, Inc. v. Knox (“Fecteau Benefits“), 72 Mass. App. Ct. 204, 212 (2008). The fact that, as part of the agreement, the parties have expressly contemplated that further documents would be prepared, completed or finalized neither vitiates the completeness of an agreement, nor the parties’ present intent to be bound. See McCarthy v. Tobin, 429 Mass. 84, 87 (1999).
It may be surprising to many, however, that the scope of the material terms needed for contract formation is not necessarily extensive. Typically it is sufficient if the property and purpose of the agreement, i.e., its general subject matter, and price are identified. See McCarthy, 429 Mass. at 86 (“property to be sold and the price to be paid” are essential terms and “the remaining terms covered by” a formal agreement are “subsidiary matters which did not preclude the formation of a binding contract”); A.B.C. Auto Parts, Inc. v. Moran, 359 Mass. 327, 329 (1971) (finding that an endorsement on a check which indicated the nature of the transaction, parties, property, and purchase price satisfied the Statute of Frauds).
Statute of Frauds, Mass Gen. L. c. 259, § 1, Fourth Paragraph
Contracts for the sale of land, whether by oral promise or written agreement, are enforceable only if they are supported by a writing that includes the agreement’s essential terms and is signed by the party against whom enforcement is sought. See G.L. c. 259, § 1, Fourth Par. (“[n]o action shall be brought … [u]pon a contract for the sale of lands, tenements, hereditaments or of any interest in or concerning them … [u]nless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized.”). Whether a writing satisfies the Statute of Frauds is a question of law. Schwanbeck v. Federal-Mogul Corp., 412 Mass. 703, 709-710 (1992).
Over the past decades, emails, and now text message exchanges, have become common between parties to real estate transactions. Participants in such exchanges must be aware that a series of emails or text messages, discussing and agreeing to terms of a possible transaction, have been held to satisfy the Statute of Frauds, and doctrines of completeness and present intent to be bound, sufficient to create binding contracts. Fecteau Benefits, 72 Mass. App. Ct. at 212-213 (parties intended to be bound by emails settling a fee dispute where they formed a clear and complete agreement including material terms such as the amount of legal fees, a deadline for acceptance, and acceptance without equivocation); Slover v. Carpenter, 24 LCR 1, 4 (2016) (“Emails between the parties may create a binding contract that satisfies the Statute of Frauds, provided the emails contain all essential terms”); Shattuck v. Klotzbach, 2016 WL 1460477, at *8 (Land Court, April 14, 2016) (“text message is a writing and that, read in the context of exchanges between the parties, it contains sufficient terms to state a binding contract”); Feldberg v. Coxall, No. MICV201201649A, 2012 WL 3854947, at * 6 (Mass.Super. May 22, 2012) (series of emails between their attorneys regarding the sale of property was sufficient to satisfy the Statute of Frauds ); Shattuck v. Klotzbach, No. 011109A, 2001 WL 1839720, at *3-4 (Mass.Super.Dec.11, 2001) (emails exchanged between buyer and seller addressing specific contractual provisions, including the closing date, purchase price, deposit amount, and waivers of contingencies held to satisfy the Statute of Frauds). And under the Statute of Frauds, multiple writings relating to the same subject matter of the agreement may be read together to form a contract, so as long as the writings, when considered as a single instrument, contain all the material terms of the contract and are authenticated by the signature of the party to be charged. Flynn v. Wallace, 359 Mass. 711, 717 (1971) (finding that an unsigned deed together with corporate meeting minutes authorizing the sale of property were sufficient to satisfy the Statute of Frauds); Waltham Truck Equip. Corp. v. Massachusetts Equip. Co., 7 Mass.App.Ct. 580, 583 (1979) (reading three papers together as satisfying the Statute of Frauds). The writings may, but need not, incorporate each other by reference. Tzitzon Realty Co., Inc. v. Mustonen, 352 Mass. 648, 653 (1967).
The Uniform Electronic Transactions Act
If the terms of an agreement are reached, what kind of act or signature is sufficient to acknowledge assent to the arrangements? While the answer to that question used to be a signature in writing on a paper contract, the advent of electronic communications has changed the nature of what constitutes a valid acceptance. Under the Uniform Electronic Transactions Act, set forth in M. G. L. c. 110G, § 7(d), “[i]f a law requires a signature, an electronic signature satisfies the law.” An electronic signature is “an electronic … symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” Thus, today, a signature does not have to be created, generated, sent or communicated under the UETA. See M.G.L. c. 110G, § 5(a). That is, a copy of an actual signature captured and sent electronically is not required. Instead, “[a]n electronic record or signature is attributable to a person if it was the act of the person. The act of a person may be shown in any manner….”, M. G. L. c. 110G, § 9(a); and is determined from the context, and surrounding circumstances at the time of creation or execution. M. G. L. c. 110G, § 9(b). Thus, the name of a party appearing at the end of an email can be a sufficient “electronic signature” because “the typed name at the end of an email is indicative of a party’s intent to authenticate because the sender of an email types and sends the message on his own accord and types his own name as he so chooses.” Shattuck, 2001 WL 1839720, at *4 (email negotiations may satisfy the Statute of Frauds even when the emails lacked a formal script signature); Feldberg, 2012 WL 3854947, at *6 (allowing certain parts of an email to satisfy the signature requirement of the Statute of Frauds).
For landowners and prospective land owners in Massachusetts, navigating real estate contracts can be challenging. This may be complicated further in situations involving email and text communications, and electronic signatures. To help assure that parties understand their legal obligations and risks, it may benefit those who are involved in real estate dealings to seek legal guidance. An attorney can help ensure that landowners and prospective landowners do not unknowingly enter into a contract, or end up with an agreement that is invalid or unenforceable.
Written by Jeffrey T. Angley, Esq.
Copyright (c) 20162 by Jeffrey T. Angley, P.C. All rights reserved.
Disclaimer: The information contained in this post is general in nature and for educational purposes only. No personal legal advice is being provided. If you have an actual legal issue that needs to be addressed, you should seek the advice of competent legal counsel. This post does not create an attorney-client relationship between the reader and Jeffrey T. Angley, P.C., Phillips & Angley or their attorneys.