BOLTZ’ Proposed Amendment to the
Uniform Electronic Transactions Act(UETA)
Texas Business And Commerce Code § 322.001 et seq.
Proposal. Amend the Uniform Electronic Transactions Act (UETA), Texas Business And Commerce Code § 322.003 (b) by adding the following additional exemption to the UETA:
(3) real estate transactions and other matters controlled in the Statute of Frauds, Texas Business And Commerce Code §26.01 are exempt from this Act History. To avoid the catastrophic consequences to an individual of misunderstandings, incompleteness and deception in real estate transactions, on April 16, 1677 the English Parliament enacted Bill 29 Chas. 2 c. 3, authored by Lord Nottingham and entitled An Act for Prevention of Frauds and Perjuries and known to us as the Statute of Frauds. Every state in the United States and every province in Canada have enacted the same or similar language in their Statute of Frauds. For the last 337 years this Act has served and been the mechanism of the real estate industry, controlled every real estate transaction, guided every negotiation and been taught in every real estate school. This all changed on October 31, 2013.
Event. On October 31, 2013, the Corpus Christie Court of Appeals ruled in Dittman v. Cerone (Civ.App.—Corpus Christie Mem. Opinion No. 13-11-00196-CV 2013) that three e-mails discussing a possible future purchase of land created an enforceable option sales contract under the Statute of Frauds. In this case, a real estate broker negotiating the sale of one parcel discussed the possible terms of the sale of a second parcel in two e-mails to the buyer. The owner later sent a third e-mail continuing the discussions of some of the acceptable terms. There was never any contract for the sale of the second parcel, but the Court ruled that a valid option contract had been formed by making the following findings:
- The requirement that the seller sign the contract was satisfied under the UETA by the e-mails of the broker and owner because any transmission attributable to a person is treated as a signature and because the owner admitted authorizing the communication;
- Although brokers are not authorized to bind their clients because they are special agents, the court found that the agent bound the owner;
- Although the e-mails were on-going negotiations and proposals, the Court found they created a contract because the UETA instructs consideration of events and communications outside the e-mails and because the Court found all of the elements of a contract by cobbling together the various e-mails;
- The broker’s name on the e-mails was deemed to be the same as his handwritten signature or his authorized electronic signature, and
- Because the Court deemed the e-mails as an enforceable promise, the seller’s refusal to sale supported a finding that the seller committed fraud and awarded civil damages.
Compelling Justifications. The essence of the Statute of Frauds is that it is a mechanism of formal verification of the concurrent intentions of the parties to agree upon specifically enumerated terms. Real estate transactions must be exempted from the UETA because:
- Modern technology has availed an ever increasing variety of communication mechanisms and means of storing them. E-mails and the newly emerging technologies are the means of conducting and facilitating routine exchanges and explorations. The inherent danger of elevating these casual exchanges to contract formation is an invitation to perpetrate on the public the catastrophic consequences of the misunderstandings, disputes and deceptions that the English Parliament protected against in 1667;
- The UETA creates unreasonable liability to realtors and the parties by creating the likelihood of inadvertent and unintended contracts;
- TREC, HAR, TAR, NAR and many others have created many forms that imbed the current laws, the procedures to closing and consumer protections that will be lost and the road to closing will become chaos without the formal promulgated forms;
- Litigation will sky rocket over the claims and disputes and courtrooms will become title companies;
- With the limited terms of three e-mails, closings will become argumentative and confrontational
- The Act is too broad. It states that if you use electronic means: that you have agreed to conduct your business electronically and that you will be bound by the totality and the consequences of your short term or long term communications that may have been changed over the course of dealing; that you signed a document by having your name, voice, attachment, reference to something or logo anywhere in the transmission; if the communication is storable by any means, it can become an enforceable transaction; a communication plus outside circumstances may make one liable; a contract can be formed even if a person did not even know that electronic agents were sending transmissions in their behalf, and
- 7. Hundreds of thousands of realtors and millions of people in the real estate business must be immediately retrained