With the prevalence of cell phones, work is increasingly being conducted by and through text messages; for many people, this may even be their preferred form of communication! Texts can be used when setting up coffee or lunch meetings, hashing out details of a plan, checking in with your independent contractors to see if they’re available to help with a project quickly, arranging for a digital influencer on social media to promote your business and products, and to confirm the details of a potential sale! This all begs the question of whether a text message can create a legally binding contract, especially for a California business owner.

California Law: Statute of Frauds and Electronic Signatures 
The modern Statute of Frauds is generally a statutory provision which requires certain types contracts be memorialized in writing and that they meet other requirements that go above and beyond those provided by basic contract law. In California, the statute of frauds includes contracts such as those for the purchase or transfer of property, lease agreements longer than one-year, larger business loans, and any contract which explicitly requires more than one year to complete. It’s a good idea to ensure that you have these clearly articulated in a written document and that you keep them on hand and filed as required as text messages won’t work as evidence of your agreement.

California’s Statute of Frauds expressly excludes text messages and similar forms of electronic messages from those writings which may serve as evidence of an agreement. Further, because this provision was drafted specifically in reference to the statute of frauds courts will find that a discussion or negotiation conducted through text messages is insufficient evidence of valid agreement for a long-term contract or real estate transaction. As a result, it’s important that important agreements have formal contracts to back up their terms.

Other Types of Contracts in California
Except for those contracts mentioned above, a text message can create a binding agreement in certain instances, which is true both in California and those states which have not excluded text messages as evidence of an agreement. In those instances, a text message can be provided as evidence of an oral contract. To create an enforceable contract, the basic elements of a contract must to be present including: an offer, acceptance of that offer, and some form of consideration, generally this takes looks like the promise to pay money in exchange for the services or a good provided by the other party.

Text messages are not the only way for you to enter into contracts utilizing an electronic platform. Indeed, both federal and state laws provide for certain electronic transactions and in what instances an electronic or digital signatures are an acceptable alternative to traditional signatures. In California, contracts which require a signature before they become effective may be executed with an electronic signature.

Unlike a digital signature, which uses encryption to prohibits edits to the document, an electronic signature is merely a mark on the document which indicates the intent of a party to execute the agreement. Which means that, in most contracts created under California law, if there was a meeting of the minds regarding the contract and one party wrote their name to the arrangement intending it as a signature, then they will likely be bound by the contract. 

As this may apply to emails, text messages, chat windows, social media exchanges, and any other types of digital messaging, it’s important to clearly indicate your intentions within your electronic messages. The possibility of inadvertently creating a contract by sending simply sending an email is a rather terrifying prospect for any business owner. Courts across the country regularly determine that an electronic communication has created a valid contract or that it has amended the terms of a preexisting contract.

Business owners utilize electronic messaging systems for any number of reasons including their desire to improve responsiveness to customers, a need to improve their employees’ ability to provide increased customer service, and the need to keep their business on the cutting edge of technology. However, there are drawbacks to these programs, including the possibility that a customer’s live chat with an employee inadvertently bind a company resulting in unintended consequences. While limiting access to electronic communications with customers may provide you with peace of mind, limiting your employee’s autonomy creates additional work for you as the business owner, which is impractical for most small businesses. Alternatively, providing training to your employees about these issues helps ensure that they understand that their emails, texts, and electronic messages sent on behalf of the company carry the potential of creating binding contracts, and educating them about your policies on what should and should not be included in their communications.

If you’re unsure whether a text message or other electronic communication may result in a binding contract with you or your business, reach out to DeAnn Chase and her team at Chase Law Group, P.C. They can help you by looking at the specifics of your situation and advise you on potential steps you can to take moving forward. Having a business attorney to help you draft and finalize agreements is helpful for those business owners wanting to turn their informal communications into clear, detailed contracts that are drafted carefully and executed by everyone involved. Reach us by calling (310) 545-7700 today.