In 2016 we had shared a case called St. John’s Holdings, LLC. v. Two Electronics, LLC, which held that a REALTOR bound their client to perform through a series of emails and text messages that occurred between two agents. REcap In the original case, the buyer argued that a Letter of Intent was binding based on the exchange of emails and text messages between two real estate brokers and included all material terms of the contract. The seller, on the other hand, argued that the text messages were merely negotiations and further, did not include the required signature from the seller.

The judge originally sided with the buyer, ruling that the text messages, in addition to the emails, satisfied the statute of frauds and amounted to a binding contract. (BE CAREFUL OF WHAT YOU PUT IN WRITING!) In reaching his decision, the judge considered all of the email and text messages as whole. “Under the Statute of Frauds, multiple writings relating to the subject matter of the agreement may be read together as long as the writings, when considered as a single instrument, contain all the material terms of the contract.”  Additionally, he held that the signatures in the text messages were enough to authenticate the seller: “Typing their names at the end of certain messages containing material terms, but declining to do so for more informal discussions, is indicative that the parties chose to be bound by those signed communications.”

This case was appealed, but the basis did not focus on whether electronic communication taken together as a whole, can meet the requirements to bind the parties because under the Statue of Fraud Act, if a law requires a signature, an electronic one will suffice.  The appellant rather asked the courts to reconsider whether or not the seller truly gave his real estate broker decision-making authority.

To answer this question, the Court examined the following: the seller’s actions; the broker’s understanding of his decision-making authority; prior dealings between the seller and broker; and communication and agreements between the seller and broker.  Based on this investigation, the Court ruled the broker had no actual authority to bind the seller.

The Court concluded that the seller never explicitly gave his real estate broker permission to accept or reject or even negotiate an offer, so no actual authority existed. Nor did the broker believe that he was authorized to make decisions regarding the pending transaction.

The Court also considered “apparent authority” which focuses on only the words and actions of the principal and whether those actions would cause a third party to reasonably believe that the principal intended to be bound by actions of its agent. In this case, the Court found that the buyer was aware that the seller – not the broker -was the ultimate decision-maker based on the communications and meeting between the parties.  Given this, the Court also rejected the buyer’s theory of implied authority.

This updated ruling does not alter the original lesson – electronic communication may satisfy the requirements of the Statute of Frauds and create binding agreements.  As a result, continue to exercise caution when using electronic communication to negotiate real estate transactions.

As MAR Legal Counsel advises, “It is crucial that Realtors® make the exact nature of their relationship with their client(s) clear to the other parties in the transaction. Once that relationship develops beyond that of a typical broker-client relationship, something as simple as an email or text message could bind their client to a legally enforceable contract.”