Electronic Transactions: When E-Mail Becomes a Real Estate Contract

All real estate professionals should know about the Uniform Electronic Transactions Act (UETA). See Chapter 322 of the Texas Business and Commerce Code.

This law can significantly impact (positively or negatively) the way real estate contracts are negotiated and carried out. Simply put, the UETA places electronic contracts and signatures on the same legal status as paper contracts with handwritten signatures as long as certain conditions are met. The main question is whether the UETA satisfies the statute of frauds. The answer lies among the various definitions of UETA.

Based on the broad definitions of an electronic record and electronic signature, real estate contracts entered via email may be enforceable, assuming one other condition is met. The act applies only to transactions between parties who have agreed to conduct transactions by electronic means. Clearly, in this situation, the buyer and sellers did not agree formally to conduct an electronic transaction. However, the act goes on to say, “Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct” (Texas Business and Commerce Code section 322.005). Thus, the act requires no formal agreement. The agreement may be implied from the parties’ conduct, among other things.

The court makes this determination long after the communications cease. Unsuspecting buyers and sellers (or their brokers and agents) may be surprised to learn they have entered a binding contract before they know it.

Resorting to traditional contract principles as a defense may be futile. Of course, these rules become a problem only when one of the parties wants out of the contract.

Talk to a lawyer if you need help figuring out whether you have entered into a binding electronic contract.

According to the Uniform Electronic Transactions Act (UETA), a contract means the total legal obligation resulting from the parties’ agreement. An agreement is the bargain of the parties as found in their language or inferred from other circumstances. The term electronic contract is not defined, but electronic is. "Electronic" relates to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities.

The UETA 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 typing of a name at the bottom of an email could be recognized as an electronic signature according to this definition.

See Electronic Transactions: When Email Becomes a Contract, by Judon Fambrough for the Texas A&M Real Estate Center.