Agents Email Exchange May Create A Binding Contract

by MAR Staff | Dec 29, 2013

By: Robert S. Kutner, Esq. Partner, Casner & Edwards

During the past 15 years, technology has radically changed the way real estate agents conduct business. No longer is hand delivery of a signed offer the primary method to start the process. It is common for the terms of a transaction to be negotiated via email, text message, or other digital communication. An offer, a counteroffer, or an acceptance may be sent by fax or email. If signing a formal agreement is anticipated, the parties may be uncertain whether an agreement has been made.

Complicating the analysis is the fact that the exchange of emails is often between the buyer’s agent and seller’s agent, rather than directly between the buyer and seller. Will emails from agents for the buyer and seller bind their clients? Will the Statute of Frauds requirement of a writing signed by the parties be satisfied by an agent’s email? Answers to these questions are critical to real estate brokerage. REALTORS® must educate themselves regarding the proper use of emails as well as how and when to take steps to avoid unintended consequences of their communications.

Determining the Effect

A superior court judge was asked to determine the effect of an exchange of emails in the 2012 case, Feldberg v. Coxall. In that case, the buyer, Feldberg, claimed that the exchange of emails by his agent (an attorney) and the seller’s agent (also an attorney), formed a binding contract for the purchase of  twolots of land in Sudbury. The seller, Coxall, denied that the emails were sufficient to constitute an offer and acceptance. Coxall also denied that the emails were sufficient to satisfy the Statute of Frauds that requires a signed writing to create an enforceable agreement to convey real property. The decision of the superior court judge provides preliminary answers, but leaves many questions for future determination.

The judge was presented the case on Feldberg’s Motion For Endorsement of a lis pendens. If the court endorses a lis pendens, a notice is filed at the Registry of Deeds, placing prospective buyers, lenders, and lienholders on notice that there is a pending lawsuit that affects the “title to the real property or the use and occupation thereof or the buildings thereon.” By recording the lis pendens, the rights of the plaintiff in the pending lawsuit are preserved and will come ahead of a later-filed deed, mortgage or lien.

In Feldberg v. Coxall, the court found that the attorneys for the parties communicated via email. A revised, but unsigned, offer was emailed that included the property description, purchase price, and closing date. The seller’s attorney responded by requesting written approval by the buyer’s bank that day, stating: “and I think we are ready to go.” Several hours later the buyer’s attorney responded with a copy of the bank’s commitment letter.

Feldberg filed suit and asked the judge to endorse a lis pendens. Coxall responded by filing a special motion to dismiss. Because the issue was presented in the context of a lis pendens, the Court sidestepped a full evaluation of the merits, limiting his rulings to the requirements of the lis pendens statute.

The issue that a judge faces when deciding whether to endorse a lis pendens is limited to the question: Does the “subject matter” of the plaintiff’s lawsuit affect “title to the real property or the use and occupation thereof or the buildings thereon.” The judge is not asked to evaluate fully the merits of the lawsuit. If a claim affecting title, use, or occupancy has been made, the statute states that the lis pendens “shall” be endorsed by the judge.

The remedy available to the seller is to file a “special motion to dismiss” that requires dismissal only if the judge finds that the lawsuit is “frivolous.” To be “frivolous,” the statute requires proof that: “(1) it [the lawsuit] is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the statute of frauds.”

Judge’s Ruling

Coxall’s Special Motion To Dismiss was denied. The judge ruled that the lawsuit was not frivolous, stating: “Coxall falls short of proving that the plaintiffs’ claims lack any arguable support and basis in fact or law or are subject to dismissal because of a valid defense such as statute of frauds.” The judge noted that the parties did not dispute the legal standard concerning whether an enforceable agreement had been made. That standard is whether the parties had reached agreement on “all material terms” for the transaction and “intended to be bound,” regardless whether a more formal agreement was contemplated. In McCarthy v. Tobin, 429 Mass. 84,87 (1999), the Supreme Judicial Court ruled that an accepted offer was enforceable, even though the offer expressly required that a purchase and sale agreement be agreed and signed.

In Feldberg, the judge dismissed the argument that absence of signatures of the buyer and seller rendered the email exchange unenforceable under the Statute of Frauds. The judge ruled that the electronic signature blocks of the attorneys provided a reasonable basis for Feldberg to claim to have satisfied that requirement. According to Massachusetts electronic signatures act, 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.” The judge left rulings on all other issues for later determination. Before trial, Feldberg and Coxall settled the matter, agreeing to a purchase and sale agreement and dismissing the lawsuit.

Caution for REALTORS®

The lesson to be learned from Feldberg is that email negotiations between a buyer’s agent and a seller’s agent may provide a basis for a disappointed buyer or seller to file suit, seeking to enforce the terms negotiated and could well provide a judge with a basis to endorse a lis pendens, tying up the property. Because a special motion to dismiss will not be granted unless the lawsuit is “frivolous,” the lis pendens will create a roadblock that will be likely to scuttle sale of the property to any other buyer until suit is resolved.

REALTORS® are cautioned that the Feldberg decision was the ruling of a superior court judge, not an appellate court. Therefore, Feldberg is not a precedent that is binding on any other court.  Nevertheless, REALTORS® should exercise care when communicating terms for a transaction on behalf of their clients.

Unless a client has expressly authorized the agent to make an agreement on behalf of the client, the agent would be wise to include a disclaimer at the bottom of emails that include proposed terms for an agreement. A disclaimer may state that: “Nothing in this email is intended to create a binding contract for the purchase or sale of real estate. The sender of this email does not have authority to bind a client [buyer or seller] to an agreement via written or oral communications, including by email.” Adding this disclaimer, when it accurately describes the agent’s authority, will avoid unintended consequences of email communications.