Courts are willing to recognize agreements made via strings of emails and texts instead of a formal contract.
The statute of frauds, which requires that real estate contracts be in writing, was enacted in England in 1677 under the title “An Act for the Prevention of Frauds and Perjuries.” It traveled to North America during colonial times, where it remains in force today.
This ancient statute did not foresee today’s electronic communications, leaving questions about whether binding contracts to sell real estate could be formed using electronic “writings.” But in 2003 the Massachusetts legislature adopted the Uniform Electronic Transactions Act (UETA), ensuring that electronic contracts are as effective as traditional paper and ink contracts.
The statute of frauds and the UETA, one from 17th century and the other from the 21st century, account for some interesting Massachusetts trial court decisions. For example, in 2012, a superior court noted in Feldberg v. Coxall that emails between attorneys can establish a contract to sell real estate. The land court’s 2016 decision in St. John’s Holdings, LLC v. Two Electronics, LLC went a step further, ruling that a combination of emails and text messages between real estate brokers can form a binding real estate contract. Both decisions cite the statute of frauds and the UETA.
Tough Problem for Jerky-Maker
The United States District Court in Massachusetts weighed in on this topic last December in Beauregard v. Meldon. The plaintiff Philip Beauregard was a former attorney and friend of the defendant John Meldon, a Puerto Rico resident. Meldon leased a New Bedford building to Beauregard’s son, an “artisanal beef jerky” manufacturer. The relationship soured when Meldon refused to allow beer and wine sales at the jerky emporium.
The parties discussed various solutions to this impasse, including Beauregard’s possible purchase of Meldon’s building. A series of emails followed in September and October of 2018. Meldon suggested a $1.3 million sales price. Beauregard’s son proposed a $1 millionprice, with seller financing. Meldon’s attorney responded that Meldon would sell for $1 million, but without seller financing. Beauregard acknowledged the $1 million price and advised that he was seeking financing. He asked Meldon to prepare a purchase and sale agreement.
Meldon’s attorney sent Beauregard a draft agreement, which Beauregard rejected because it lacked financing and inspection contingencies, and it reserved a right of first refusal for Meldon. Beauregard’s attorney emailed Meldon’s attorney a redraft with financing and inspection contingencies, and no right of first refusal. Meldon’s attorney followed with an email advising that Meldon would not accept an agreement with buyer contingencies. Negotiations stalled.
Nevertheless, Beauregard prepared for a closing without a signed agreement. He and his son supposedly improved the property, applied for mortgage financing, and ordered an appraisal and title exam. Beauregard’s lawyer announced that Beauregard would close in January of 2019, and asked Meldon’s lawyer for a draft deed and authorization to request a mortgage loan payoff. In early January of 2019, Meldon decided not to sell. Beauregard promptly sued Meldon for breach of contract.
Major Issues Must Be Agreed
Beauregard filed suit in Bristol County superior court, but Meldon removed the case to federal court because he is a resident of Puerto Rico. Federal law allows removal of lawsuits from state courts to federal courts if the amount in controversy exceeds $75,000 and the parties are residents of different states. Puerto Rico is considered a “state” for this purpose.
Christopher R. Vaccaro
The federal court was unimpressed with Beauregard’s case. Citing the statute of frauds, the court acknowledged that contracts can be formed by multiple writings read together. While noting that the parties never signed a final purchase and sale agreement, the court accepted Beauregard’s argument that back–and–forth emails can form binding contracts. However, the court found no contract between Beauregard and Meldon.
Analyzing the parties’ emails, the court identified seven material contract terms: the purchase price, the financing contingency, the inspection contingency, the execution of a final agreement, the status of title, the seller’s right of first refusal and the closing date. The court noted that out of these seven material terms, the emails only reflected agreement on the $1 million purchase. Otherwise, the emails evinced no meeting of the minds between Beauregard and Meldon. The court rejected Beauregard’s breach of contract claim against Meldon on this basis.
Courts are willing to enforce contracts formed by email, but only if the email chain shows agreement on all major issues. Nevertheless, the Beauregard court’s well-reasoned decision is a disappointment to Beauregard, his son, and New Bedford consumers seeking one-stop shopping for beer, wine, and artisanal beef jerky.
Christopher R. Vaccaro, Esq. is a partner at Dalton & Finegold, L.L.P. in Andover. His email address is cvaccaro@dfllp.com.
