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By Matthew T. Crook, Esq.
James, Potts & Wulfers, Inc.
Tulsa, Oklahoma

We live in a world of electronic commerce. So much communication between commercial parties is now accomplished by means  of electronic mail  or even  text messages in lieu  of  letters delivered by snail mail which was the standard for so much of the 20th Century.  In such an environment, parties often reach agreement regarding business transactions via one of the electronic methods previously mentioned.  However, given the legacy of the previous 150 years of business practice and history, most business people do not consider a contract finalized between their company and a counterparty until signatures have been scrawled on a piece of paper by representatives of each party. However, this is no longer strictly true. In Oklahoma and the 46 other states which have passed the Uniform Electronic Transactions Act (“UETA”), the presence of one’s standard electronic signature at end of an email can be deemed to be a signature sufficient to the bind that individual or their organization to the terms of the transaction that has been discussed in the email to which that signature is attached. Similarly, sending a text to another person or business counterparty and typing your name at the end of the text may be sufficient to form a contract. Given the frequency with which we exchange texts and emails, individuals and business people today must be careful of the significance of our actions.

The UETA was promulgated by the National Conference of Commissioners on Uniform States Laws in 19991.  Oklahoma passed its version of the UETA in 20002 (“OKUETA”).  The UETA provides that if a law requires a record to be in writing and signed, an electronic record satisfies the law. Although under Oklahoma and most other states’ laws, contracts do not have to be in writing to be valid, a substantial percentage of commercial contracts are in fact written and some types of contracts must be written to be valid. Subsections (c) and (d) of § 15-107 of the OKUETA provide that electronic records and signatures satisfy legal requirements for writings and signatures. Under the OKUETA, a "record" is defined as “information that is inscribed on tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form."3 An "electronic record" is defined as "a record created, generated, sent, communicated, received, or stored by electronic means."4 An "electronic signature" is "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 the record.”5 Finally, the OKUETA also provides that "if a law requires a record to be presented ... in its original form ... that law is satisfied by an electronic record".6 Sometimes even an email or text is not required to constitute an electronic signature. U.C.C. Comment 7 to Okla. Stat. tit. 12A, § 15-107, states in part "[n]o specific technology need be used in order to create a valid signature. One's voice on an answering machine may suffice if the requisite intention is present."

In a 2016 federal case from the Western District of Oklahoma, the court found that a series of emails sent from an individual debtor to a bank in an effort to negotiate an amount the individual owed the bank reaffirmed the debt and allowed the bank to proceed to collect the debt even though the statutory period during which the bank could sue the debtor for the money it was owed had already expired.7    The court reached this conclusion by finding that, under the OKUETA, the emails from the debtor to the bank acknowledging the debt constituted a sufficient affirmation of his debt as required by Oklahoma law to restart the running of the statute of limitations period in which the bank could sue him.   Thus, by merely sending emails to the bank acknowledging the debt in a good faith effort to renegotiate it and without signing a single piece of paper, the debtor re-obligated himself to pay the money he had borrowed although he likely had no idea of the significance of his actions when he did so.

Let’s apply the OKUETA to a hypothetical set of facts. Suppose for example that you are negotiating to sell a piece of surplus real estate owned by your company. Under Oklahoma law and the laws of most other states, contracts for the sale of real estate must be in writing to be enforceable. You are contacted by a party interested in purchasing the property. The parties engage in negotiations regarding the purchase and sale of the agreement via email and reach an understanding regarding the material terms of the proposed sale, including an agreed purchase price. Subsequently, in preparation for having a contract drawn up to sell the property, you discover that it is worth substantially more than you had previously been lead to believe. You contact the purchaser to inform them of this fact and to renegotiate the purchase price based on the new information. The other party refuses and tells you that the parties “had a deal.”  Can your company be held liable for damages if you refuse to sell the property to the purchaser? Assuming that enough specifics are included in the emails between the parties to identify the property (for instance, you send the counterparty a copy of your company’s deed to the property) and that the parties’ intent to consummate the sale under those terms is clear from the emails, it is likely that a court could find that the emails constitute a binding contract between the parties and that your company could be sued for any damages the other party suffers as a result of your company’s failure to go through with the sale.

The moral of the story is that everyone (not just commercial parties) should be careful when they send emails and texts to anyone else regarding business or personal transactions. By no means does the author believe that every email or text message one sends in the normal course of their business day is sufficient to form a contract with the recipient. However, when you are negotiating the terms of a potential sale, a new service agreement or the sale of particular assets or of the entirety of one’s business, it is wise to be cautious and careful regarding the language used. The easiest way to avoid a contract being formed by accident is to clearly state in your electronic communications that the preliminary agreement you reach via electronic methods is just that, preliminary and that your company does not intend to be bound until a final, definitive, paper agreement between the parties is subsequently signed. As always, if you have any concerns about the course of your negotiations and what they might lead to, contact an attorney.

http://uniformlaws.org/LegislativeFactSheet.aspx?title=Electronic%20Transactions%20Act.

2 Okla. Stat. tit. 12A, §§ 15-101 to 15-121.

3 Okla. Stat. tit. 12A, § 15-102(16).

4 Okla. Stat. tit. 12A, § 102(9).

5 Okla. Stat. tit. 12A, § 102(10).

6 Okla. Stat. tit. 12A, § 15-112(d).

7 Bank SNB v. Flemming, No. CIV-14-1354-R, 2016 WL 347709 at *2 (W.D. Okla. Jan. 28, 2016).