AN EXCHANGE OF EMAILS OR TEXT MESSAGES CAN CREATE A BINDING AGREEMENT FOR THE SALE/PURCHASE OF REAL PROPERTY
Michigan law has long required that an agreement for the conveyance of real property must be in a signed writing to be enforceable. This requirement is known as a “statute of frauds.” In light of the increasing use of electronic communications to negotiate real estate transactions, how do the traditional rules governing these transactions apply to changing technologies, such as emails and text messages?
In 1999, Michigan enacted the Michigan Uniform Electronic Transactions Act, MCL 450.831, et seq. (“MUETA” or the “Act”). MUETA, like the federal Electronic Signatures in Global and National Commerce Act 15 USC 7001 et seq, (“E-Sign Act”), validates electronic contracts and signatures and provides guidelines for use in everyday real estate transactions.
Generally speaking, the Act approves of the use of electronic forms of records or signatures. Although the Act itself does not require a record or signature to be created by electronic means, if a law requires a record or signature to be in writing, an electronic record or signature satisfies the law.
First and foremost, MUETA applies only where each of the parties has agreed to conduct the transaction electronically. Whether the parties agreed to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct. Little things, like giving out your business card with a business email address or agreeing to limit your communications to emails, can lead a court to conclude that you agreed to conduct the transaction electronically.
Assuming that the parties have agreed to conduct a real estate transaction electronically, the material terms of that transaction must be contained in those electronic records. This is a basic principle of contract law that is not altered by the fact that the record of the terms is in an electronic format. It should be noted that all of the terms of the transaction do not need to be contained in one email or text message: basic contract principles allow multiple writings, i.e., emails or text messages, to be viewed together in determining the terms of the parties’ agreement.
The key here is that if the electronic records establish all of the material terms of the contract, it is not unenforceable just because it is in an electronic form.
Because the statute of frauds requires a “signed writing”, how is that requirement satisfied when the transaction is completely electronic? Under MUETA, an electronic signature must still represent the act of the party authorized to sign a contract or other document. MUETA defines an “electronic signature” as “an electronic sound, 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 question is whether the party intended to authenticate the writing, not whether they subjectively intended to enter into a contract.
Does sending an email with the sender’s name at the end of the message satisfy the “signed writing” requirement? Although there are no reported Michigan cases that directly address this issue under the Act, there is one Court of Appeals’ decision which held that such an email met the “subscribed writing” requirement in a different context, which decision could well be viewed as how a court might decide this issue under the Act. Courts in other states are split on this issue. Some find that the signature block at the end of an email message necessarily satisfies the signature requirement; others don’t.
The lesson to be learned here is that if you are going to participate in electronic real estate transactions, do so carefully. Caselaw in this area is not well-developed. Make sure that your transaction doesn’t end up being one of those cases that helps clarify the law.
Seglund Gabe Pawlak & Groth, PLC
At Seglund Gabe Pawlak & Groth, PLC, our real estate attorneys are qualified to represent both the buyers and the sellers in residential and commercial real estate transactions. They have experience in real estate finance and have represented the interests of both borrowers and lenders. Our attorneys also represent landlords and tenants in negotiating and drafting lease documents. Our attorneys can prepare and review all of the documents that are necessary for a real estate transaction to ensure that everything has been drafted properly to protect your interests. In addition, our attorneys are experienced in litigation involving all aspects of the purchase, sale or lease of real property, both at the trial and appellate levels.
Seglund Gabe Pawlak & Groth, PLC
28345 Beck Road, Suite 301
Wixom, MI 48393
Phone: (248) 869-0030
Fax: (248) 869-0039
***The information provided in this article is for informational purposes only. If you have a real estate matter that involves electronic communications, consult an attorney who is well-versed in this topic.