Can an exchange of e-mails between parties to a real estate transaction, either directly between the parties or through their brokers, constitute a binding contract?

The question has been the subject of some debate as more cases involving the Uniform Electronic Transaction Act (UETA) are being litigated. To definitively answer the question, a review of the specific facts involved in a particular situation must be reviewed. Generally, there are 5 principles that courts will review and discuss.

UETA’s Purpose

The purpose of UETA is to provide that a record or signature cannot be denied legal effect or enforceability simply because it is in electronic form (322.007, B&CC). A contract is enforceable if it is in electronic form. If the law requires a signature on the contract to be enforceable, a contract that contains the signatures in electronic form is enforceable, absent any showings that a party has opted out under UETA.

UETA’s Effect on the Law of Contracts

UETA does not change the elements necessary to create a contract and does not change the elements necessary to establish a signature except to allow the electronic version to substitute for “paper and ink.” It does not change the Statute of Frauds, which requires certain contracts, such as the contract for the sale of real estate, to be in writing, and signed by the party against whom the contract is to be enforced.

Using an Electronic Signature

UETA defines an electronic signature to include “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.” (322.002(8), B&CC). UETA also provides that an electronic signature is attributable to a person if it was the act of the person (322.009, B&CC) of whom the signature is attributed.

Satisfaction of Contract Elements

The elements for the creation of an enforceable contract are:

• An offer,
• Acceptance that mirrors that terms of the offer, 
• Consideration,
• Meeting of the minds, 
• Communication that each party has consented to the terms of the agreement, and 
• Execution or delivery of the contract with the intent that it be mutually binding. 

A contract for the sale of real property must meet certain elements and must additionally satisfy the statute of funds (a writing and a signature).

The Authority of the Broker

A real estate broker is typically a special agent and not a general agent. A special agent does not have the authority to bind his principal to transactions. The special agent is engaged to conduct a specific act for the principal. The general agent is authorized to conduct all of the principals business in a particular area. The general agent usually has the authority to bind the principal. Listing agreements and buyer representation agreements commonly used in Texas are specific with respect to the fact that the broker and agent do not have authority to bind the principal.

Historically, electronic communications from one broker to another in real estate transaction have not generally been found to bind the brokers’ principle because:

• The evidence establishes that the broker did not have the authority to bind the principal; 
• The email communications are not found to be the contract between the parties; 
• The elements of the creation of a contract, as noted above, were not present;
• The statue of frauds is not satisfied; or
• The broker’s name in the email is not attributable to the principal as an act of the principal. 

Clarifying E-mail

A broker who wants to make it clear that his or her email may not bind the principle may wish to disavow such authority by written statement in the email. For example:

• “The broker’s statements in this email do not create an agreement for the broker’s clients.” 
• “My typed name in this email is not my electronic signature nor is it the electronic signature of any of my clients,” or 
• “I, the named broker, do not have the authority to bind my clients to a contract.”