An Unsigned Email May Create a Contract

For many years the legal risks associated with the spontaneous and enduring nature of email have been well known. For example, email may prove discriminatory intent in employment cases. Legislation such as the Uniform Electronic Transactions Act (UETA) (1999) provides for electronic signatures on documents. A late 2016 unpublished Texas appellate court decision determined that that an email header "From" containing a name constitute a signature under UETA. Always consult an experienced attorney in specific situations.

In a brief and incomplete summary, the Texas decision involved an email summarizing the terms of a verbal personal promise to repay some $400,000 owed a company (Khoury v. Tomlinson). A promise to pay a debt owed by another person [in this case, the individual's promise to personally repay a corporate debt] must be written and signed. The individual receiving the email responded from his iPhone with the following first sentence: "We are in agreement and I am working on producing the financial documents you requested." The email was unsigned but did have a header "From" with the name and email address of the sender. Was the header sufficient to act as a signature?

The Texas Court applied UETA's rules concerning electronic signatures according to a section in the legislation that states that the standards be applied in a manner "to be consistent with reasonable practices concerning electronic transactions and with the continued expansion of these practices." The Court noted that while UETA defines "electronic signature," it does not define "sign." Traditional law considers a document signed if it contains "any mark sufficient to show legal intent to be bound by the document." While not specifically mentioned by the Court, traditional law does not require that a signature must be located at the end of a document. Additionally, noted the Court, there are legal scholars and court decisions in other states, notably Missouri. Montana, and Arizona, that conclude that an email header may serve to authenticate the document and constitute a signature.

However, this Court took care to distinguish its decision from that in 2011 of a different Texas Court of Appeals that reached a contrary result concerning an email signature block (Cunningham v. Zurich American Insurance Co.). That Court noted that the signature block was automatically generated without specific and intentional action. However, the Cunningham decision's logic was criticized in a federal District Court decision that observed that typing the block once and having a computer program duplicate the block in future emails was the equivalent of re-typing it (Williamson v. Bank of New York Mellon).

Obviously, this decision is one more example why one must exercise care with email.

Several brief observations may be helpful:

1. Not all contracts need to be signed to be legally enforceable. This decision focused on one situation that did require a signature. The parties might specify under the ground rules for a negotiation that no agreement is binding unless and until also signed by her or his individual attorney.

2. While a single email may create a contract, also a series of emails containing various parts such as price in one and a property description in another might be put together by a court to create a contract.

3. In some situations, a preliminary email may alone be a binding contract even though it references a later to-be-created formal agreement.

4. An "implied-in-fact" contract may be created by conduct and industry custom, even though specific words of agreement are not used. The entire situation including possible emails is reviewed.

5. In some situations, such as creating a mechanic's lien [required payment for repairs] or mortgage lien assumptions, a state stature may mandate a certain sequence and timing of events, as well as specified formal documents, that the email will not provide.

6. Note that one may sue under "quantum meruit" (as much as is deserved according to the value received) even in the absence of a contract. For example, suppose an email stated "paint the building and we'll take care of you." A suit to recover for the reasonable value of the painting might reference the email as encouraging the painting.

7. The terms used and their context are critical. Be careful when using words such as "accept," "agree," and "agreement." Rather say "preliminary negotiations," "proposal for discussion purposes only," and "non-binding proposal."

8. If a proposal must meet certain conditions or contingencies, clearly state them. If a future written formal agreement is required, clearly say so. Avoid creating the impression that there is a "meeting of the minds" if that has not occurred.

This comment provides a brief and incomplete educational overview of a complex topic and is not intended to provide legal advice. Always consult an experienced attorney in specific situations.