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Emails May Create Deals – Unsuspectingly

by / Tuesday, 24 June 2014 / Published in Articles

Emails May Create Deals – Unsuspectingly 

By Bryan Mashian, Esq.  

 

In the “old” days, if there wasn’t a written agreement signed with wet, ink signatures, there was no binding deal. Now with email, it’s much more complicated.

Real estate transactions are routinely negotiated using email instead of personal meetings or telephone conversations. Who even remembers faxes! But negotiating through emails poses more risks for a seller or landlord, as a buyer or tenant is typically more likely to enforce preliminary negotiations as having risen to the level of binding agreements. During deal negotiations, a seller or landlord may desire to terminate the negotiations for many reasons, such as having received a better offer. But, the emails are a record of each and every step of the parties’ negotiations. To have a legally enforceable agreement, the parties do not need to have agreed on all the terms, but only the essential deal terms.

So, if a buyer or tenant can use these emails to show the parties had already reached agreement on such legally required essential terms, then the seller or landlord may not be able to back out. Also, sometimes after the parties meet in person, one of them sends an email confirming the substance of the meeting. If the buyer or tenant can use this email to show the parties had orally agreed upon the essential legally required terms, then they may be able to enforce the agreement reached, record a lis pendens (which is notice of pending action), and practically prevent an owner from selling, leasing or financing the property.

In a Massachusetts case, the seller learned the hard way that negotiations by email are not just preliminary but may bind, even when no contract is actually signed. Here, the parties’ attorneys, via email, negotiated the terms of purchase and sale of two undeveloped lots. At one point, the buyer’s attorney emailed the seller’s attorney and attached a “revised offer with changes to reflect the conversations we have had today.” The email reserved the buyer’s rights to comment on the revised offer, which contained an agreed upon purchase price of $475,000 and a firm closing date. The email ended with the suggestion that both attorneys work “to have the final offer form finalized in time for my client [the buyer] to sign it and get deposits checks to you before the end of the day tomorrow.”

The next day, seller’s attorney emailed back stating that “we must have a written approval letter from the bank today by 5pm and I think we are ready to go (I assume they will provide a closing date with the approval). We are almost there.” That same afternoon, the buyer’s attorney provided a commitment letter from a bank with standard conditions. Apparently, the seller then backed off and refused to proceed with the transaction. The buyer sued and sought to record a lis pendens.

The court noted that Uniform Electronic Transactions Act provides that if parties use electronic technology in their dealings, then the parties may consent to conduct the transaction electronically via email or electronic signature technology. The judge also ruled that an email signature block or even the “from” portion of the email may constitute a valid electronic signature for the purposes of the statute of frauds. The court held that the series of email exchanges between the buyer’s and seller’s attorney, the last one of which attached a revised, but unsigned, offer to purchase, created a sufficiently binding agreement. Accordingly, the judge found that the buyer had made a sufficient case that a binding deal had been reached, despite the seller refusing to sign the hard copy offer, entitling the buyer to record a lis pendens.

To prevent emails from unintentionally creating binding contracts, parties must be careful with the content of all emails, especially when communicating as or on behalf of a landlord or a seller, and particularly a seller dealing with multiple offers. Also, emails should clearly state from the outset that there is no binding deal until a contract is fully signed by all the required parties. When sending initial and subsequent revised versions of contracts, clearly state that the documents are drafts. For brokers and lawyers, it is a good idea to add that the revised document is still subject to final client review and approval. These types of disclaimers may help – but cannot for certain – sway a court from determining that a binding deal was formed.

This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions.

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