The Perils of Text Message Contract Negotiations

With the explosion of smart phones, contract negotiation is no longer confined to business letters, telephone conversations, or even emails. However, are text message contract negotiations the way to go?

For busy business professionals, text message contract negotiations between partners is becoming increasingly common. Unfortunately, it is not the most legally sound way to negotiate a deal.

Many states, including New Jersey, have adopted the Uniform Electronic Transactions Act (“UETA”), which states that a “contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation” and that “[i]f a law requires a record to be in writing, an electronic record satisfies the law.” Courts have also relaxed the rules regarding when an email signature is sufficient to create a contract. However, courts are still determining how best to apply traditional contract law to emails, text messages, and other types of electronic communication.

In any case, the basic principles of contract law still apply. In order for a business contract to be enforceable, there must be a valid offer and acceptance, supported by consideration. If one party sends a text message or email proposing different terms, the offer is considered rejected, and the contract formation process starts fresh. In addition, the parties must also intend to be contractually bound. While intent need not be expressly conveyed in the electronic communication, it must be clear that the parties intended that the agreement be legally binding.

Tips for text message contract negotiations

To avoid a costly breach of contract lawsuit, below are five tips for text message contract negotiations, email or other form of electronic communication:

• Expressly convey your intentions. The court will analyze what you said during text message contract negotiations, not your subjective intentions, when evaluating whether a valid contract has been formed. Therefore, it is imperative to memorialize everything in writing.  In New York, recent decisions indicate that the court is likely to view whether or not you put your name at the end of your message as an indicator of intent to form an agreement.
• Put the other party on notice. If you do not want to be bound by the terms discussed via text or email, make it clear to the other party that your electronic correspondence should be considered non-binding, and that any agreement is contingent upon the execution of a physically executed, formal written contract.
• Clear up any confusion. If you suspect that the other party may be interpreting your email exchange as the basis for a binding contract, it is imperative to take swift action, in writing, to correct any misconceptions.
• Be mindful of accidental contract amendment. Texts and emails can also amend the terms of an existing agreement. Therefore, it is important to be equally mindful that you do not unknowingly waive or modify an important contract term via electronic correspondence.
• Train your employees. Make sure your employees understand the risks of negotiating via electronic correspondence, including the unintentional formation of a binding agreement.

As a business owner do you find yourself making text message contract negotiations? If you feel you need to speak to an attorney regarding this issue contact attorney and editor of Business Law News Dan Brecher.