In Texas, when the law requires a contract to be in writing, electronic communications can satisfy that requirement, but only if each party agrees to conduct the transaction electronically. Even when neither party explicitly says that it has agreed to conduct transactions by electronic means, the context and surrounding circumstances can show that that the parties made such an agreement.
Communicating electronically can bind a party to a contract, even when no hard copy document was ever signed, and even when the law requires the contract to be in writing. A prior Alert, “So Easy to Make a Contract in the Digital Age” discussed some general aspects of this issue.
Disgruntled Potential Buyer Claimed It Had a Contract with the Seller
Electronic communications were addressed in a recent mid-level Texas Court of Appeals opinion, Le Norman v. Chalker. The case involved a sale of certain energy related assets, with a disgruntled potential buyer arguing that the seller had made a contract to sell those assets to it. The disgruntled entity sued for damages due to the seller’s alleged breach of the contract by selling the assets to a third party.
The seller obtained pre-trial dismissal of the case, arguing that the disgruntled entity had no evidence that it ever had a contract with the seller. Part of the seller’s argument was that the electronic communications identified by the disgruntled entity as proving the contract’s existence could not satisfy Texas law, because the seller never agreed to conduct transactions electronically.
Circumstantial Evidence of an Agreement to Conduct an Electronic Transaction
The appellate court reversed, finding that the disgruntled entity had presented enough facts to allow a jury to determine if the parties had actually made a contract. In making this ruling, the appellate court determined that the circumstances and conduct identified by the disgruntled entity would be enough to meet the legal requirements of making a contract, electronically, if the jury resolves disputed facts in favor of the disgruntled entity.
Texas Uniform Electronic Transactions Act
A key part of the Court’s analysis related to the Texas Uniform Electronic Transactions Act (“UETA”). This statute establishes how parties can use electronic communications to satisfy the requirement that a contract be in writing in order to be binding.
Not all contracts need to be in writing. However, for those contracts that Texas law requires to be in writing, the UETA states that electronic communications can satisfy this requirement, when each of the parties has agreed to conduct the transaction by electronic means.
Parties Must Agree, but Agreement Need Not Be Explicit
According to the UETA, each party must agree to conduct transactions by electronic means. However, the Court determined that no party had to explicitly say it was agreeing to conduct transactions by electronic means; rather, the context and surrounding circumstances, including the parties conduct, can show their agreement.
Jury Must Decide if the Parties Made a Contract
In this case, the appellate court reversed the trial court, and determined that the disgruntled entity had identified evidence of an agreement to conduct transactions electronically. The circumstantial evidence identified by the disgruntled entity did not conclusively establish that the parties agreed to make a contract, electronically, but was enough to allow a jury to determine if the parties did so.
The appellate court sent the case back to the trial court for a jury to determine if the parties made a contract, and if so, the disgruntled entity’s damages.
For a copy of the appellate court’s opinion click here.