As time goes on, the use of text messages and emails as communications between business partners or owners has become the normal. It may come as a shock that the exchange of emails or texts can create a binding contract, in certain circumstances.
The Statute of Frauds
The Statute of Frauds, codified in Section 5-701 of the New York General Obligations Law mandates that certain types of contracts be in writing to be enforceable, including agreements that cannot be fully performed within one year from the date of formation. This provision applies even if the actual performance of the contract is completed within a year; if the terms of the agreement anticipate a duration exceeding one year, a written contract is required.
In New York, an email or text exchange can potentially satisfy the requirements of the Statute of Frauds, provided that certain conditions are met. See Naldi v. Grunberg , 80 AD3d 1, 908 NYS2d 639 (1st Dept. 2010). Although Section 5-701 of the New York General Obligations Law mandates that certain types of contracts be in writing, Section 5-703 of the same law specifically addresses electronic communications and provides that "a contract or other record required to be in writing may be created, generated, sent, communicated, received, stored, or otherwise processed by electronic means."
New York courts only recognize electronic exchanges if they meet all of the essential elements of a contract as required by the law. Sullivan v. Ruvoldt, 16 Civ. 583, 2017 WL 1157150 at *6 (S.D.N.Y. Mar. 27, 2017). These elements do not need to be contained in the same emails or text, but can be pieced together through multiples exchanges. To ensure enforceability, the following factors are generally considered:
- Identification of Essential Terms: The electronic correspondence must provide enough detail to ascertain the basic elements of the contract. The essential terms of the agreement, such as the parties involved, subject matter, price, and any other material terms, must be sufficiently articulated in the text or email exchange.
- Consistency and Mutual Assent: The exchange must demonstrate a mutual understanding and assent to the terms of the contract. This requires a back-and-forth communication where both parties agree and confirm the terms in a clear and unambiguous manner.
- Intent to Create a Binding Agreement: The correspondence must reflect a clear intention by the parties to create a legally binding contract. Language demonstrating the parties' agreement and their intention to be bound is crucial.
Signature and Authentications
Signature and authentication are also essential elements required to ensure enforceability. However, this element is a bit more nuanced when it comes to electronic correspondence. Under Section 5-703 of the New York General Obligations Law, a signature can include electronic signatures or symbols adopted by the parties to authenticate the writing. Therefore, an email containing the sender's name, or any other form of electronic signature, may satisfy the requirement of a signature as long as the intent to authenticate the contents is present. As most recently noted in Garcia v. Dezba Asset Recovery, Inc., No. 22-CV-01736 (KMK), 2023 WL 2691756, at *7 (S.D.N.Y. Mar. 29, 2023), courts have held that electronic correspondence which contained a pre-printed signature may not be sufficient writing under the statute of frauds. Therefore, if the parties intend to be bound, it would be prudent to add an additional signature line above any automatic signature block.
While email and text exchanges can potentially satisfy the Statute of Frauds, it's important to note that each case is unique, and the courts evaluate the enforceability on a case-by-case basis. Factors such as the complexity of the agreement, the parties' conduct, and other surrounding circumstances may influence the court's determination. To ensure the enforceability of a contract formed through email exchanges, it is advisable to consult with an attorney who can provide guidance specific to your situation and help you meet the requirements of the Statute of Frauds in New York.
If you are facing similar concerns or if you have questions about your Business Litigation situation, please feel free to contact us here. We have many years of experience handling such matters and will be able to assist you in resolving the dispute.