What Hath My Email Wrought?

February 21, 2012

On May 24, 1844, Samuel Morse transmitted, in the first telegraph message ever, from Washington, DC to Baltimore: “What hath God wrought.” His assistant, Alfred Vail, sent the same message back to him. Flash forward 150 years. Hundreds of millions of people are using the Internet daily to transmit email, photos, music files, and all other sorts of information on a truly global basis.

One common question attorneys hear today is, “Is my email sufficient to make a binding agreement?” By now, the fairly settled rule is, “Yes, if it appears you intended to enter into a binding agreement.”

More than 10 years ago, the Texas legislature adopted the Electronic Transactions Act (ETA) to govern electronic contracts, such as online purchases and signatures on card readers at retail shops. However, given the scope and breadth of the ETA, it also applies to seemingly casual e-mail exchanges between parties.

Prior to the ETA, many states prohibited the use of electronic records and transactions, recognizing and enforcing only written agreements in many circumstances. However, in June 2000, the federal government adopted the Electronic Signatures in Global and National Commerce Act, which set forth certain standards for implementing electronic commerce. However, this act also provided that if a state adopted the Uniform Electronic Transactions Act, promulgated by the National Conference of Commissions on Uniform State Laws, the state law would override the federal act. Since that time, almost all states, including Texas, have adopted the Uniform Electronics Transactions Act.

The ETA covers any and all “transactions.” It broadly defines a transaction as, “an action or set of actions” occurring “between two or more persons” relating to the conduct of “business, commercial, or governmental affairs”. Although the word “consumer” is not referenced in the ETA itself, one of the comments to the ETA provides that it is essential that the term “commerce and business” be broadly construed to include commercial and business transactions involving individuals who might qualify as consumers under other applicable law.

The lynchpin of the ETA is a section stipulating that a signature may not be denied legal effect or enforceability solely because it is in electronic form; and that a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation. The ETA further provides that if a law requires a record to be in writing, an electronic record satisfies the law; and that if a law requires a signature, an electronic signature satisfies the law.

Although the ETA does not require that parties use electronic records or signatures, it does apply to transactions where parties have agreed to use electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct. The ETA also allows a party the right to refuse electronic transactions even if the person has conducted transactions electronically in the past. The effectiveness of a party’s refusal to conduct a transaction electronically will be determined under other applicable law in light of all surrounding circumstances. Such circumstances must include an assessment of the transaction involved.

The comments to the ETA state that in order to facilitate electronic transactions, the circumstances cannot be limited to a full-fledged contract to use electronics. For example, if a party gives out his business card with his business e-mail address it may be reasonable, under the circumstances, for a recipient of the card to infer that such party has agreed to communicate electronically for business purposes. However, in the absence of additional facts, it would not necessarily be reasonable to infer such party’s agreement to communicate electronically for purposes outside the scope of the business indicated by use of the business card.

Given the broad scope of the ETA, a party must be vigilant in order to avoid unintentionally entering into any agreement through email, voice mail or any other electronic means of communications when engaging in business or commerce. Specifically, a party should clearly state that it is not intending to enter into any agreement. If a document is only a draft, it should be clearly identified as such, either through watermarks or a statement to such effect in the email. Often a party may attempt to use email footers disclaiming any intention to enter into a binding agreement. However, this is not a fool-proof system. If a party’s email message is inconsistent with such a disclaimer (e.g. “I agree to purchase 10 items at the price of $100 each”), then the party runs the risk of having entered into a binding agreement in spite of any disclaimer to the contrary.