Thursday, July 12, 2012

Beware! You may be bound by an Unsigned Purchase and Sale Agreement

A recent decision in Massachusetts Superior Court has held that a series of emails between and buyer and seller containing all of the material terms of an offer to purchase, and indicating acceptance of those terms, was sufficient to create a binding contract between the parties, even though the actual purchase and sale agreement was not executed by the parties.  In reaching this finding, the court applied principles of the Uniform Electronic Transaction Act to the ancient statute of frauds law (which requires a contract for the transfer of real estate to be in writing), and concluded that the conduct of the parties in using email to negotiate the terms of the transaction constituted an agreement to conduct the transaction by electronic means.  Since the exchange of emails contained all of the material terms of the deal and the parties expressed an intention to be bound, the Court found that an enforceable contract existed despite the lack of an actual executed purchase and sale agreement.

This case follows a series of prior decisions in which Offers to Purchase have been held binding in cases where the terms are sufficiently complete and definite and the parties intended to be bound at the time.  Many parties erroneously believe that an Offer to Purchase, and now written email negotiations, are just a formality, or an expression of intent, and that a binding contract is created only upon the execution of a final written purchase and sale agreement.  This recent case adds yet another twist to the proposition that the parties may be bound even in the absence of a signed P&S if their email negotiations are comprehensive enough. 

So buyers and sellers beware:  if your Offer, and now your email negotiations, contain all of the material terms and evidence an intention to be bound, you may indeed be bound to such agreement even if you never reach the point of executing a purchase and sale agreement. The law appears to be catching up to the 21st  century, and some very ancient principles are now being interpreted in the context of modern technology.