Exercise caution when communicating via email in real estate transactions
On July 28, 2014
In today’s busy market it is more important than ever to communicate offers and counteroffers quickly. As a result, many agents commonly communicate their client’s counter offers and acceptances verbally. However, as every licensed agent should know, such verbal negotiations don’t meet the requirement under Ohio law for an enforceable real estate purchase contract.
But what about negotiations that take place via emails? Could an email from a listing agent to the buyer’s agent indicating that the seller has accepted the buyer’s offer be considered sufficient to create a legally binding purchase contract? What if the listing agent forwards an email from the seller indicating his acceptance of the offer to the buyer’s agent? In this article (originally written in 2011, but still timely today), Cleveland-based real estate attorney Cindy Lammert discusses this issue...
By Cindy Lammert, Coakley & Lammert Co., LPA
Real estate professionals who themselves indicate a client’s offer or acceptance via email, or who forward a communication from their client evidencing terms of an offer or acceptance may unwittingly bind their client to a real estate purchase or lease agreement. While it is still the conventional practice to have an original document executed by the parties, courts nationwide are now considering electronic agreements to have the same legal effect.
Recently, a New York appellate division court unanimously held that electronically transmitted emails satisfy New York’s statutes of frauds requirement for real estate contracts to be reduced to writing. In Naldi v. Grunberg, 2010 NY Slip Opp. 07079, the court concluded that the term “writing” as used in the state’s statute of frauds encompasses electronic communications and electronic signatures. “As much as communication original written or typed on paper, an e-mail retrievable from computer storage” is evidence of agreement, the court held.
In Naldi, the purchaser agreed via e-mail to pay $50M for two Manhattan apartment buildings, exercising a first right of refusal for the property that had been conveyed to him in an e-mail by the owner’s agent. When the seller refused to honor the terms set forth by his agent in the e-mail, the purchaser sued the owner for breach of contract. The owner moved to dismiss the lawsuit, arguing that the right of refusal was memorialized only in an email, and hence was not compliant with the statute of frauds. The Appellate Court rejected this argument. Naldi v. Grunberg was appealed in February 2011 to New York’s highest court.
Other courts likewise seem to be inclined to honor e-mail communications as binding. In Shattuck v. Klotzbach (Mass. Super. 2001), 14 Mass.L.Rptr. 360, a Massachusetts court held that “the typed name at the end of an e-mail is more indicative of a party’s intent to authenticate than that of a telegram as the sender of an e-mail types and sends the message on his own accord and types his own name as he so chooses.”
While there are few Ohio court cases relating to whether an email suffices as a signature for purposes of statute of frauds in real estate transaction, at least one Ohio court has suggested that typewritten signatures, including those in a telegram, are adequate. See Hart v. Oak Park Associates (Sept. 14, 1984), 6th Dist. No. L-84-031. Recently, in Bergey v. HSBC Bank USA, 9th Dist. No. 24986, 2010-Ohio-2736, the court also noted that a seller of real property accepted offer of buyer via email correspondence from seller’s agent. Thus, it is becoming more likely that an email from a party or its agent will be deemed sufficient to satisfy the signature requirement in Ohio.
Ohio’s statute of frauds, R.C. 1335.05, states:
No action shall be brought whereby to charge the defendant (…) upon a contract or sale of lands, tenements, or hereditaments, or interest in or concerning them, or upon an agreement that is not to be performed within one year from the making thereof; unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or some other person thereunto by him or her lawfully authorized. (Emphasis added.)
While the statute does not specify the type or form of writing necessary to constitute a valid agreement, the substantive requirements are defined by common law. “A signed memorandum is sufficient to satisfy the Statute of Frauds so long as it (1) identifies the subject matter of the agreement; (2) establishes that a contract has been made; and (3) states the essential terms with reasonable certainty.” Landskroner v. Landskroner (2003), 154 Ohio App.3d 471, 483.
However, “where there is clear evidence demonstrating that the parties did not intend to be bound by the terms of an agreement until formalized in a written document and signed by both,” then a prior acceptance will not suffice to bind a party until memorialized in an actual document. See Artisan Mech., Inc. v. Beiser, 2010 Ohio 5427, 33, citing Richard A. Berjian, D.O., Inc. v. Ohio Bell Tel. Co. (1978), 54 Ohio St.2d 147, 151-152.
Accordingly, real estate brokers and agents should include a standard disclaimer in all e-mail communications clearly stating that the content may not be deemed an offer, counteroffer or acceptance until paper documents are mutually executed between the parties. This is the case for any email communications relaying an offer, counter-offer, terms of a purchase or lease, or any other communications where it is arguable that the communication forms the basis of the terms of an offer or counteroffer or acceptance of the same.
Real estate brokers and agents likewise should refrain from forwarding their client’s communications to the other party or the other party’s agent, as these likewise may be deemed binding and valid if the client expresses willingness to accept certain terms.
Adhering to the foregoing practices will help a brokerage and its clients to avoid leverage by the opposing party in negotiations, and potential litigation over whether or not a binding agreement was made via an email exchange.
Cindy Lammert will be part of a panel of attorneys discussing “Best Practices for Avoiding Legal Bear Traps” at the OAR Annual Convention & Expo, Sept. 9-10, in Cleveland. The session, scheduled for Sept. 10 from 10 to 11:30 a.m., includes 1.5 hours of continuing education credit. Click here for more information or to register for the event.