It’s Not Casual, It’s Business: Tips to Avoid Texting Your Way Into a Contract

Insights July 20, 2012

Message sent…wait, was that a contract?

With a daily average of 105 emails, 45 text messages, innumerable tweets, posts, and pics flying in and out at the click, the average professional participating in the global market economy has reached the era of informal instant communication. (The Radicati Group Email Statistics Report 2009-2013)

But despite the demands of integrating wide networks through multiple mediums, some things remain the same—like how we create a contract.

Here are some quick tips to avoid creating an unanticipated obligation:

1. Minds can meet where we tweet

You might think you’re having a casual conversation, but your quick text exchange could become your formal agreement.

A Florida federal court interpreting Delaware law awarded $1.2m when it concluded that the word “Awesome!” at the end of a instant message stream indicated acceptance of a counter-offer.(CX Digital Media, Inc. vs. Smoking Everywhere, Inc., No. 09-CV-62020, Order (S.D. Fla. Mar. 23, 2011))

In this case Smoking Everywhere, Inc. refused to pay the advertising and marketing bill from CX Digital Media, Inc. (CX). Smoking Everywhere said that CX had breached the contract, but Smoking Everywhere failed to take into account a string of instant messages between its director of marketing, Nick Taurus, and CX account manager Pedram Soltani.

pedracx (2:50:08 PM): We can do 2000 orders/day by Friday if I have your blessing

pedramcx (2:50:39 PM): You also have to find some way to get the Sub IDs working

pedramcx (2:52:13 PM): those 2000 leads are going to be generated by our best affiliate and he’s legit

nicktouris (3:42:42 PM): I am away from my computer right now.

pedramcx (4:07:57 PM): And I want the AOR [agent of record] when we make your offer #1 on the network

nicktouris (4:43:09 PM): NO LIMIT

pedramcx (4:43:21 PM): awesome!

The lesson: your pre-meeting text or check-in chat might be as much a part of your agreement as the more formal recitation of terms contained in the contract. 

2. That email could be your signed writing

Even where no formal written contract exists, the exchange of emails can create a binding contact. In Waddle v. Elrod, M2009-02142-SC-R11-CV (4/24/12), two family members were in dispute over ownership of a parcel of land. The attorneys for both parties exchanged emails regarding a proposed settlement.

Ms. Elrod’s counsel set forth the proposed settlement terms including the transfer of the land. Ms. Waddle’s counsel replied “that is the agreement” and typed his name at the bottom of the message. Three weeks later, Ms. Elrod advised her attorney that she had changed her mind and no longer wanted to settle the case.  Ms. Elrod refused to sign the settlement documents.

Ms. Waddle subsequently filed a motion asking the trial court to enforce the settlement agreement. Ms. Elrod responded that the email exchange merely resulted in an agreement to agree, with many important material terms left unaddressed.

Unfortunately for Ms. Waddle, the court disagreed and found that the email exchange constituted a binding agreement with the attorney’s “signature” at the bottom of the email making it a “signed memorandum” sufficient to satisfy Tennessee’s requirements for a binding contract. The Tennessee Supreme Court affirmed the trial court’s ruling. (Waddle v. Elrod, M2009-02142-SC-R11-CV (4/24/12))

The lesson: an email can be just as much a signed writing as a traditional signed document, meaning that while we are another step closer to being paperless, we need to pay careful attention to what we put in our electronic communications!

3. Protect Yourself

How can you protect yourself?  Here are three concrete steps you can take:

1. Educate your team.  Educate your principals, officers and employees regarding the potential legal implications of electronic communication.  Make sure they understand that electronic communication is retrievable and discoverable.  Preserve text messages and other instant communication to avoid unpleasant surprises.  Many texting programs will allow for instant message streams to be emailed for easy archival.

2. Clarify Methods of Contract Amendment.  Contracts should contain provisions setting forth how they can be amended or modified.  Amendment by electronic communication should be restricted to communications from specified officers of the company and should require a subsequent delivery of a written formal communication via fax, U.S. mail or messenger.  In addition, any communication should specifically reference the fact that it is intended to amend or modify the original contract.  Also, contracts should preclude amendment or modification via verbal communication or text message.

3. Legend Electronic Communications.As a catch all, don’t just excuse your typos due to the fact they come from your iPhone but add a legend in all corporate emails and instant messages that the writing does not constitute “an offer, acceptance, amendment, modification or agreement.”