Years ago, in probably my first or second year of practice, a client, let’s call him Hank, once admonished me: “Handshake deals are the best deals in life, Ku.” I had asked him to produce a written contract for a manufacturing/sales deal he had with one of his customers. I had assumed that an experienced and savvy businessperson like him would surely have something in writing. Hank, after all, had been in his line of business for over two decades.
Having advised businesses for a decade since, I can say that Hank was both right and wrong. The type of trust that two parties must have with each other before a savvy businessperson like Hank would even consider having a “handshake deal” is rare. And I am sure he was saluting such trusting relationships. On the other hand, and you can call it a sampling bias, I get far more calls because a “handshake deal” was not working out as parties had expected.
The common and rightful advice is to have something written to keep everyone honest or to protect everyone. These days, businesses (and business deals) move in unpredictable ways with ferocious speed. Having something in a writing that everyone agreed to while still cool-headed and before any money and effort exchanged hands should encourage everyone to act towards the common goal.
But in a world where written communications happen so fast, so casually, and so often, what turns such digital writing into an agreement between parties?
Recording a business deal has been a long-standing practice—clay tablets, parchments, letters, faxes, and now emails and so on. And we have laws to guide contract writing practices including the so-called “Mailbox Rule” and the “Battle of Forms,” etc. And more recently, we’ve seen the UETA (Uniform Electronic Transactions Act) and E-SIGN Act (Electronic Signatures in Global and National Commerce Act) at the federal level in the US and the states’ adoption of those laws.
The general legal regime is fairly complicated and varied depending on the jurisdiction, but in the United States, many business agreements are required to be in writing for them to be enforceable. In other words, Hank might not be able to enforce all his deals in court unless he had those “handshake deals” in writing somewhere. One of the most important parts of having an enforceable written agreement is that the writing must be signed by the party in order to be bound by the contract.
What makes a signature acceptable is fairly liberal—from the traditional hand-written “wet” signature (in some cases, you still have to have a real signature), initials, typed signatures, e-signature, rubber stamp, etc. Generally speaking, for the signature to be binding, there also has to be an intent by the signing party as well.
But we are moving faster than ever. As businesspeople get more comfortable with exchanging business ideas over their mobile devices through texts and other messenger apps, things are moving faster and faster. As of this post, few courts have yet dealt with whether text messages can constitute an enforceable agreement. The consensus thus far seems to be that the content of a text message can indeed form the substance of an agreement. But another consensus forming is that there must still be a signature to bind a text message agreement.
Be careful what you promise in writing, whether digitally or the old-fashioned way, and how you deal with these business deals. Your next text message could form a binding agreement.