California Statute of Frauds: What is a Signature?

We used to know what a signature is – a name scrawled in ink on the last page of a contract. Signatures are required by the California Statute of Frauds to enforce contracts to sell real estate. But now – with most real estate documents transmitted electronically – what is a signature?

The Statute of Frauds (Cal. Civil Code Sec. 1624) provides that a real estate contract, or a memorandum of the contract, has to be in writing and signed by the party against whom it is to be enforced. In recent years, though, the modern trend has favored enforcing contracts where the parties intended to make a contract even if the legal niceties were not observed. This has led to the adoption, both in the courts and the legislature, of a more inclusive and flexible approach to the application of the Statute of Frauds. (See, for instance, Okun v. Morton, 203 Cal. App. 3d 805 (1988)). As a result, the scope of what can constitute an adequate writing and an adequate signature on that writing to satisfy the Statute of Frauds has become quite broad. For example, in a breach of contract action, an email that purportedly recited all the terms of an agreement reached verbally between the parties during a face-to-face meeting was found by a federal Court of Appeals to satisfy the California Statute of Frauds. (Lamie v. Mattel, Inc., 394 F.3d 1355, 1362 (Fed. Cir. 2005).

The California legislature first responded with the California Uniform Electronic Transaction Act (Cal. Civil Code Sec. 1633.7), which confirms that an electronic record or signature is legally the equivalent of a written record or signature and satisfies the requirements of the Statute of Frauds.

But electronic communications have passed way beyond emails. A what point does an otherwise written communication become too short, abbreviated, ephemeral, or informal to satisfy the requirements of the Statute of Frauds? Now the legislature has amended the Statute of Frauds to impose limits on “ephemeral” electronic communications in the creation of contracts for the sale of real property. (See new sections added to the Statute of Frauds, Cal. Civil. Code Sec. 1624, effective January 1, 2015.) An electronic message of an “ephemeral” nature that is not intended to be retained or to create a permanent record is not sufficient, without separate written confirmation, to create a contract to convey real property. A communication delivered via text, tweet, instant message, Snapchat or other short-lived electronic communication does not create an enforceable contract for the conveyance of real estate unless (i) the party against whom enforcement is sought has provided the other party with a written confirmation of the purported contract within five business days after the date of the subject ephemeral communication, and (ii) the party receiving such written confirmation does not provide the sending party with a written objection within three business days after the date of its receipt of the confirmation.

But be careful – even if not enforceable as a written contract under the Statute of Frauds, these “ephemeral” messages can still become “oral” contracts enforceable under certain circumstances.

What to do? If you do not intend to create an enforceable contract, it is always best to say so. On real estate letters of intent this has become standard practice – that neither party intends to be bound until a separate purchase and sale agreement is signed by the parties. In many cases you may want to add such a disclaimer to emails and other electronic messages which might otherwise be construed as forming a contract.

November 2015