Contracting by Email and the Statute of Frauds

Email can actually save many agreements that would otherwise fall prey to the "statute of frauds".   Let me explain.

I know that many of you neglect to get their agreements and understandings in writing.  And, on an emotional level, I understand why.  It can seem off putting, too demanding and even insulting to new business partners to immediately have every understanding in writing.  Even if you all plan to put your business deal into writing, it often gets postponed indefinitely for fear of not doing it exactly right, bickering over minute details, the time and money it takes to get legal help and so forth.  Meanwhile, everybody starts doing things, working hard, creating stuff…..

Statute of Frauds – Some Agreements must be in Writing

Now, an oral agreement can still be a good and enforceable contract.  But very often it is not, because a little law commonly called the "statute of frauds" requires certain agreements to be in writing.

For example, all agreements that by their terms are not to be performed within one year from the making thereof require to be in writing to be enforceable.  

Email to the Rescue

Still, there may be a way out of this dilemma, if you have an email or several emails combined which set forth all the essential terms of your agreement and which are sent and "authenticated" by the party you want to bind to that agreement.  

The statute of frauds states that if there is a note, memo or other writing sufficient to indicate that a contract has been made and signed by the party against whom enforcement is sought, the statute of frauds is satisfied.

A writing can be a text produced by "computer retrieval or other process by which electronic signals are transmitted by telephone or otherwise," if it was created by a party with the present intention to authenticate that writing.  Email fits squarely into that definition.

As court cases have shown, "authenticating" can be the fact that the party simply has typed his or her name at the end of the email.

Still, for a full fledged enforceable agreement, the email must lay out the essential terms of the agreement.

A court has held that an email, signed by the sender, naming the seller and buyer and the agreed upon price for a particular house  did not contain the essential terms of the agreement, since it failed to set forth any understanding about a contract deposit for the house and treatment of a lease that encumbered the house.

Lessons to be Learned

  • Be aware of email's power to constitute binding contracts
  • Save or properly archive all your email with past and present business partners
  • If using email as a contracting device, make sure all essential terms of your agreement are contained in the email

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 **This post is for informational purposes only.  For actual legal advice contact a business lawyer, business attorney or business law firm**

 

About Imke Ratschko


Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027.

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