- In March 2016, one company sued another for breaking an agreement that was made via text message.
- The buyer and listing broker discussed the buyer signing a final letter of intent and sending a deposit check to the seller to sign.
- In Massachusetts, where both companies are based, text messages can form a legal, binding contract.
When you send a text message, are you aware that a court might consider it a valid purchase contract?
That’s what a Massachusetts court ruled in a commercial real estate case involving a medical marijuana company attempting to purchase a property and a buyer texting back and forth with a listing broker.
In Dec. 2015, St. John’s Holdings sought to lease a property for its medical marijuana operations, and reached out to Timothy Barry of Barry Realty Group about a property owned by Two Electronics.
The next month, St. John’s Holdings decided to buy the property instead and began negotiations with the sellers.
From there, Frederick McDonald, the manager of St. John’s Holdings, and his agent, Stephen Cefalo of Stephen Cefalo Real Estate, met with Barry and the manager of Two Electronics, Matthew Piccione.
Just text me!
Throughout January 2016, buyer and seller, along with their respective agents, met several times to hammer out the basic terms of the offer.
After those meetings, Piccione asked McDonald to submit a written offer following the terms discussed. Furthermore, he asked that McDonald and Cefalo communicate with him through Barry only.
Over the following weeks, McDonald, Cefalo, and Barry further negotiated the terms of the offer via email and went through three different letters of intent (LOIs).
On Feb. 3, McDonald, Cefalo and Barry agreed upon the third and final version and texted about how the letter and the deposit check would be delivered.
This is the text message thread, according to court documents:
Barry to Cefalo: Steve. It [Two Electronics] wants you [St. John’s Holdings] to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or contrary, but that is the way it normally works. Can Rick [McDonald] sign today and get it to me today? Tim
Cefalo to Barry: Tim, I have the signed LOI and check it is 424 [PM] where can I meet you?
Later that day, both brokers spoke over the phone and Cefalo subsequently delivered four original copies of the final LOI, along with the deposit check for Piccione to sign.
Meanwhile, on the same day, Two Electronics accepted a third party’s offer to buy the property and agreed on a closing date of April 27, 2016.
The next day, Cefalo texted Barry about the status of sale and was told: “Matt [Piccione] was out of town today. He will get back to us tomorrow.”
Shortly thereafter, Two Electronics refused to execute the deal with St. John’s Holdings.
Breach of contract?
St. John’s Holdings quickly filed a lawsuit claiming Barry’s texts created “created an offer that they accepted by delivering a signed offer and the deposit check to the listing broker.”
According to Massachusetts’ law, text messages, alongside a signed written agreement that contains all material terms, can form contracts under the state’s Statute of Frauds.
The Massachusetts Land Court, Essex County, ruled that the texts between Barry and Cefalo did meet the Statute of Frauds — which states that text messages alongside a signed written agreement that contains the “material terms” of a deal can be considered a legally binding contract — but that Barry’s specific texts as the listing broker did not constitute an offer to St. John’s Holdings.
This is because Barry, as a middleman, could not force Two Electronics to follow through with the offer. If the seller had been the one sending the text messages, then the court’s decision would likely have been different.
In July, The Massachusetts Land Court, Barnstable County, ruled on a similar situation involving a residential real estate sale where a buyer‘s representative and listing broker chatted about signed listing agreement and copy of an earnest money check.
According to court records, the check wasn’t sent to the listing broker and the listing agreement was never signed. So the sellers sold the home to another buyer.
In this case, the court ruled in favor of the sellers because there wasn’t a signed written agreement that contained all material terms.
“Our business is increasingly happening on mobile devices, and it’s not uncommon for agents to interact with colleagues and clients via text message,” said National Association of Realtors President William E. Brown.
“It’s unlikely that these interactions will result in a binding contract, but agents should nonetheless keep in mind that they’re representing their client’s interests in the same way, regardless of whether they’re doing business via text, in an email or in person.”