As trips outside the home have decreased, people are more interested than ever in their surroundings. As a result, despite a slowdown in some sectors of the economy, the residential real estate market remains active. Combine the activity in that market with our seeming inability to set down our smartphones, and more and more negotiation for real property sales are done by email and text. Depending on the circumstances, parties exchanging electronic messages may unwittingly create a binding contract to buy or sell real estate.
Contracts for the sale of real estate are almost universally required by “statutes of frauds” to be in writing. Minnesota’s statute of frauds, Minn. Stat. § 513.05, requires that contracts for sale of land include:
- a statement of consideration (the purchase price),
- a description of the parties,
- an adequate description of the land,
- the general terms and conditions of the transaction, and
- a “subscription” (signature) of the seller.
Recognizing that transactions traditionally documented on paper are increasingly conducted by electronic means, Minnesota, and 46 other states, has adopted the Uniform Electronic Transactions Act (UETA). Provided the parties have consented to conduct their transaction by electronic means, the UETA allows an “electronic signature” on an “electronic record” to satisfy the subscription requirement of the statute of frauds. Minn. Stat. § 325L.06(1). Of course, the other elements of the statute of frauds must also be satisfied to create a binding agreement. Keeping this in mind, an email such as the following may lead to an enforceable agreement:
I would like to sell you my house at 123 Main Street in Anytown, MN for the price of $100,000. The sale will be “as-is” and will be closed on July 1, 2020 at the offices of Anytown State Bank, with the purchase price to be paid in cash.
If the buyer, in this case Ms. Smith, responds with an email indicating her acceptance of the terms and an electronic signature as simple as “Sue,” the parties could have a binding contract that meets the requirements of both the UETA and the statute of frauds.
Two key issues often arise when determining whether an email or text exchange can create a binding real estate purchase agreement:
- whether the parties agreed to conduct the transaction by electronic means; and
- whether the electronic signature indicates an intent to be bound by being “attached to or logically associated with” the electronic record at issue. See Minn, Stat. § 325L.02(h).
In SN4, LLC v. Anchor Bank, FSB, 848 N.W.2d 559 (Minn. Ct. App. 2014), the parties exchanged multiple email communications regarding sale of an apartment complex and ultimately attached a “purchase agreement” to corresponding emails. The buyer’s lawyer delivered a copy of that document signed (in ink) by the buyer. The seller, however, never signed the agreement, and later sold the property to a third party. The buyer claimed that inclusion of the names of the parties’ lawyers on the emails exchanging the purchase agreement draft constituted electronic signatures sufficient to create a binding contract. The court of appeals affirmed the trial court’s ruling that no contract was created, finding that although the parties consented to negotiating by email, they did not agree that electronic signatures would bind them. This was evidenced by the fact the buyer returned an ink-signed copy of the purchase agreement to seller.
Although this area of the law is still evolving, buyers and sellers wishing to avoid creating an agreement by email or text should make very clear in their electronic communications that nothing therein should be considered an electronic signature or create a binding agreement.