Posted on June 17, 2008 by Teri Rasmussen

Forming Contracts in the Age of George Jetson and Spacely Space Sprockets

Perhaps you remember the Saturday morning cartoon The Jetsons featuring poor George Jetson and his trials and tribulations in a future filled with all manner of technological conveniences.  (Click here if you've just been hit with a wave of nostalgia and want to relive episodes.)  George's job at Spacely Space Sprockets mostly consisted  of pushing a button at his computer, sorta like all of us do now. 

While George may have intended to make contracts with the push of the button, we don't always realize that's exactly what we've done.  Sometimes it's not "just" e-mail - you just made a binding contract.

Most of us think of e-mail as an informal casual form of communication.  As a result, we tend to be much less careful about what we say than when we put it in an old fashioned letter. And that could be trouble when sending e-mail about the terms of a business deal you think you're still "just" negotiating.  I've posted before about how a series of letters exchanged between two parties can sometimes result in a contract being formed.  The same thing can happen with e-mails, or even voicemail.

Uniform Electronic Transaction Act. Ever heard of the Uniform Electronic Transaction Act (UETA), codified in Ohio in 2000 as Ohio Revised Code Chapter 1306?  It takes contracts into the 21st century by expanding the meaning of what it means to be the time honored "written agreement" and "signature" needed to form a binding contract enforceable against the parties to it. 

The UETA defines an "electronic record" in such a way as to include both e-mail and voicemail.  In addition, an "electronic signature", defined as "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted  by a person with the intent to sign a record", can easily include something as simple as typing your name at the end of an e-mail or even just saying your name when leaving a voicemail. 

The provisions of UETA apply whenever the parties have agreed to conduct negotiations by electronic means.  Importantly, no formal agreement to use these channels is necessary - it can be implied from the surrounding situation and circumstances, including the conduct of the parties.  So... if you use e-mail to work out and close a business transaction, you are potentially at risk for creating a binding contract before you may have intended to do so. 

Real Life Example.  Is this really a potential problem or is it just another of any number of "parade of horribles" that never actually happens in "real life"?  Consider the following e-mail exchange in a recent case (Klebanoff et al. v. Haberle et al., 978 So.2d 598 (La. App, 2008)) regarding the purported settlement of a dispute involving a mineral lease:

  • Phillips: "If you want, you can just propose [the plaintiffs} pay me for what I have in the deal and I will convey my interest to them."
  • Scott: "We agree to this proposal of settlement."
  • Phillips: Demands payment in full, saying "I will not finance.... would expect to be paid for what we have invested at which point we would convey the interest over."
  • Scott: Offer accepted, but also says, "Now it seems as if the only issue that we do not have a complete meeting of the minds with respect to is how much your aunts will 'finance' this transaction/compromise and how much time you will allow them to do it."  Includes other comments, including gratuitous comment that plaintiffs had been "coerced" into signing over the interest at stake.
  • Phillips: "I wll no longer try to work with you, your clients can either pay $56,136,10 in two weeks or I will have my attorney contact you.... Please let me know how you would like to proceed."
  • Scott: Indicates "thrown for loop" by demand for immediate payment instead of payment plan, but says, "Nevertheless, subject to working out the financing aspect, we have a compromise.  I will do what I can do to scrounge up some financing for Carla and Melinda."
  • Phillips: "If I don't receive the money before the logging of the 30-3 the deal is off and you will have to resume litigation....  Expect a letter outlining our conversation and my proposal from my attorney.  I will have [the accountant] include the information you requested below."
  • Scott: "I am pleased we have a deal.... I look forward to hearing from your attorney so we can get this matter concluded." 
  • Phillips: "What deal do we have?  The 33% back in after payout or the payment of the un-recovered funds before logging the Frierson 30-3."
  • Scott: Inquires why hasn't gotten the documentation "to close our settlement of a return assignment of yours and Haberle's interest in the Yarber lease for the unrecovered amount of $56,000."
  • Phillips: "The 33 percent back-in is the current structure....  However, I would rather just get the money I have in it back and move on....  We can make the deal effective Feb 1 and any additional funds received will be forwarded to your clients."
  • Scott: Advises that $$ ready to be transferred and requests assignment documentation to be executed.
  • Some back and forth e-mails about the assignment and preparation of a general release.  Scott eventually files with the Court to enforce the settlement.

>>>>> Court determined that the parties had indeed reached a binding agreement, saying:

the parties'positions were clearly expressed in writings which are recognized under the [UETA].  The object of their communication was never anything other than a compromise,  We find no presumption of an intent not to be bound until the execution of a contract in a special form. 

So what should you do?  Stop using e-mail and voicemail?  Well maybe yes if you want to be super safe.  But for the rest of us who can't imagine how we ever did business without e-mail and voicemail, the best answer is to be just a little more careful in using e-mail and voicemail.

  • If you're frequently using e-mail to reach a deal with someone, it may be a good idea to add a standard disclaimer below your signature line indicating that the message is not intended to form a binding contract until ultimately reduced to a single document signed by both parties.  If you don't want to include this sort of disclaimer on all your e-mails, at least mention something early on, and perhaps later as well, about how of course everything needs to be reduced to a separate written agreement and reviewed by your attorney before it becomes binding. 
  • When leaving a voicemail, don't get so specific on all the terms unless you really are at the point that you're ready to have a deal.  Sometimes it might just be better  to leave a short "call me" message.
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