Nowadays, it is not uncommon for real estate brokers to communicate with their clients and negotiate deals through text messages. The use of text messages in that context has given rise to a new legal issue: whether an exchange of text messages between brokers can create an enforceable contract for the sale of land.
In order to be enforceable, a contract for the sale of land must satisfy the Statute of Frauds, meaning that it must be in writing and signed by the seller and buyer or by their authorized agents. M.G.L.c. 259, §1. Can text messages satisfy the Statute of Frauds.
A line of cases from the Land court has addressed this specific issue. In each of these cases, a prospective buyer sued the seller to enforce a contract allegedly formed by a series of text messages between brokers. The seller then moved to dismiss the complaint on a “special motion to dismiss” pursuant to G.L.c. 184, §15(c). A special dismiss will be granted if the claims are found frivolous or are devoid of any factual support or basis in law.
The first case to address this novel issue is St. John’s Holdings, LLC v. Two Electronic, LLC, 2016 WL 1460477 (Mass. Land Ct., April 14, 2016). In that case, the brokers had typed their names at the end of text messages (and emails), which contained material terms of the sale of land. The Court held that the signed text messages incorporating a detailed letter of intent were sufficient to withstand a special motion to dismiss.
A few months later, the Court decided otherwise. In Donius v. Milligan, 2016 WL 39256577 (Mass. Land Ct, July 19, 2016), the brokers had exchanged text messages agreeing on the price and the closing date. Citing St. John’s Holdings, the Court conceded that, “text message and emails can potentially satisfy the Statute of Frauds.” Nevertheless, such writings must “contain the essential terms of the transaction and [must be] signed by the parties to be bound or their authorized agents.” The Court observed that unlike St. John’s Holdings, the “text messages here were not signed by either the proposed buyer or seller, nor are they signed by the agent.” Even assuming that the text messages were signed, there was no showing that the seller’s broker was authorized to sign on behalf of his client. Mere assumption that the broker has authority to bind the seller is insufficient. Moreover, while the text messages contained, at best, an agreement on the sales price and the date of closing, they did not contain all material terms necessary for a sale of land, such as the deposit, the inspection contingency, the mortgage contingency, and the requirement for execution of a “broker standard purchase and sale agreement.
The most recent case is Cabral v. Drouin, 2017 WL 5179119 (Mass. Land Ct, November 8, 2017). Cabral, a real estate broker himself and an attorney, claimed that “text messages he exchanged with the defendant’s real estate broker concerning the price of the property constituted a valid and binding agreement.” The Court held that the threshold issue is whether “an agreement was reached by parties authorized to bind the parties.” As in Donius, the Court found that the plaintiff had not demonstrated that the broker had authority to accept offers on behalf of the defendant. Even assuming the broker was authorized to accept offers, there was no binding agreement for two important reasons: (1) the text messages contained an agreement as to price but they did not contain all other material matters necessary to form a binding contract for the sale of land, and (2) the broker did not signed her text message.
The Appeals Court has not yet weighed in on this issue but it will do so soon (the oral argument on the Rudnick v. QBJKL, LLC appeal from a decision granting a special motion to dismiss, No. 2017-P-0490, took place last month). While we wait for a ruling, these Land Court decisions provide a cautionary tale for real estate brokers: in negotiating deals and where you have no authority to accept offers on behalf of your clients, be careful about what you say in your text messages as they could expose your clients to frivolous lawsuits by an interested buyer for the enforcement of an alleged contract.
Fitch Law Partners will continue to monitor future litigation this developing area of the law.
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