A Text Can Bind You: Enforceability of Agreements in Today’s Digital Business Climate
Text as Contracts
In today’s evolving electronic world, more and more business is conducted via text messages. This raises the question: can text messages form a binding contract?
The answer is YES assuming certain elements are met. Courts that have been faced with this question have found that agreements entered into via text messages are enforceable borrowing from basic contract formation principles and the reasoning applied to email messages.
Contract Law Requirements
The foundation of basic contract law controls the analysis which requires:
- a valid offer (the terms of which must be clear and definite);
- acceptance of the offer;
- mutual assent (or a meeting of the minds on the essential terms); and
- adequate consideration (also known as mutuality of obligation).
These principles regarding enforceability of contracts have been applied to both written and oral agreements for decades and now are being used to determine the enforceability of agreements reached through less traditional means, such as emails and text messages.
Courts throughout the country have found text messages exchanged between parties to be enforceable agreements.
- In New York, a court found that a text message exchanged between a landlord and tenant relating to a refund for money spent repairing the leased premises to be an enforceable contract.
- In Massachusetts, a court held that text messages exchanged between brokers was sufficiently definite to express an intent to be bound on the essential terms of the agreement; thus, forming an enforceable contract.
- And in California, a court enforced an agreement to arbitrate where the defendant sent the plaintiff the proposed agreement via text and the plaintiff replied “Agree.”
What lawyers and their clients should know is that these rulings indicate that the language used in text messages can satisfy the basic requirements to form an enforceable contract. With enforceability of agreements in mind, one should be careful about how they respond to a text message or at least qualify the response such to avoid indicating an intent to be bound by the terms in the text message.
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