Imagine a contract – a legally binding agreement between at least two parties. You’re probably picturing a paper document (or maybe a PDF) of several pages long with lots of numbered clauses and sub-clauses, and signatures and dates at the end.
But what if parties discuss and agree terms in another format, like through SMS? Can a text message create a legally binding contract? Let’s find out.
Can a text message be a legally binding contract?
Contracts come in all shapes and sizes, so a text message can be a legally binding contract if it meets the specific requirements of a contract.
In fact, the form of communication used to make a contract isn’t actually relevant – so an SMS (or a WhatsApp message, or a Twitter DM, or an email), can constitute a contract. And it doesn’t need to have a pen-and-ink signature at the end to make it official.
Don’t panic though – this doesn’t mean that every casual conversation you’ve had over text message could get you taken to court for breach of contract. Let’s take a closer look at how an instant message can become a legally binding document.
How can a text message become a legally binding contract?
For any contract to be valid, it must contain certain elements. Obviously what these are varies, depending on where you are in the world. But some contract requirements are common across all legal systems.
We’re going to focus on the UK and the US in this post, so if you’re based elsewhere you’ll need to check the laws in your country.
In the UK, for a text message to be a contract it must include:
- offer and acceptance – one party must make an offer that another party accepts
- consideration – something of value needs to pass in each direction e.g. a fee for a service
- the intention to be legally bound – both parties must intend the message or messages to be a contract
- contractual capacity – both parties must have the capacity to enter into a contract i.e. have the mental capacity to understand what they’re doing.
In the US a text message can be a legal document under the Electronic Signatures in Global and National Commerce Act, or E-Sign Act for short.
This says that a text message can be a unilateral or bilateral contract as long as there’s a clear way to say you agree to be bound by it – like checking a box, replying “yes” or “I agree”, etc. They must also include an actual notice e.g. a link to a full contract document.
Just like with UK contracts, there are certain elements that must also be present for an American contract to be valid:
- offer and acceptance – same as in the UK
- awareness – both parties must be aware of what they’re getting into
- consideration – as above
- capacity – as above
- legality – US contracts are governed by the laws of the jurisdiction they’re signed in. And if the federal and state laws differ, the Contract Clause of the US Constitution takes precedence.
To find out more about what these specific elements involve, check out this detailed guide to the elements of a contract.
As mentioned above, the law doesn’t state what form of communication a contract must take. So as long as all the elements we mention above are present in your text message or message chain, it’s likely to be legally enforceable as a contract.
And that means the consequences for breaking it will be the same as any other. It doesn’t matter if it’s in an electronic message, face-to-face, or even written on a napkin (as the Virginia Supreme Court held in the case of Lucy v. Zehmer). This applies to both businesses and individual people.
Does a text message need a signature to be legally binding?
Contrary to what a lot of people believe, a contract doesn’t need to have a wet ink signature or an electronic signature to be legally binding (although there are some exceptions to this). Imagine a text message trail which goes something like this:
Robert: Will you come round next week and help me put together some flat-packed furniture?
Anna: Only if you buy me dinner at that new place on the high street.
Robert: Yes, of course. I’ll even throw in dessert.
This is, in fact, a legally binding contract, because it contains all the elements we mention above. No signature is needed as there’s a clear acceptance of the terms of the agreement – “Yes, of course.”
So if Anna helps Robert build that chest of drawers, then he later refuses to get her the salted caramel cheesecake she’s been craving all week, he’s in fact in breach of contract.
But if Robert doesn’t reply, or says “It depends how good you are with an allen key”, then there’s no breach of contract.
Obviously every text message conversation is different. So whether or not it creates a legally binding contract will come down to the individual content.
If you find yourself negotiating with someone over WhatsApp then the phrase “subject to contract” is your best friend. As long as you make it clear that nothing will be set in stone until you have a formal document in place at a later date, you should be all good.
Need help managing contracts?
Just because text messages can be legally binding contracts, that doesn’t make them the best way to create legal relationships. Properly drafted and managed contracts are far more reliable.
If you’re looking for a more efficient and reliable way to create contracts, give Juro a try. Juro is the all-in-one contract automation platform that helps visionary legal counsel and the teams they enable to create, execute and manage contracts in one unified workspace. Fill in the form below to find out more.