The Electronic Signature: a Trap to the Unwary in Real Estate

by Donald H. Upjohn

Fall 2001

The advent of e-mail has created a revolution in communications. Related to this development has been the growth of electronic commerce. Most users of personal computers have some experience purchasing on-line. To date, these transactions are generally for personal items such as books, clothes and plane tickets. Now, if one is not careful, he or she may sell or purchase an apartment or farm by a click of the mouse.

Historically, parties to a real estate transaction have the protection of the requirement that the sale or purchase must be evidenced by a writing signed by the party to be charged. This protection is called the Statute of Frauds and exists as a statute in Oregon .

In 2000, Congress adopted the Electronic Signatures in Global and National Commerce Act, a wide-ranging statute designed to promote and facilitate electronic commerce. This federal act pre-empted state law unless the state adopted satisfactory legislation to meet the requirements of the federal law.

The 2001 Oregon Legislature passed uniform state legislation - the Uniform Electronic Transaction Act (UETA) - intended to implement and replace the new federal law. Generally between Oregon residents UETA should apply. Still, questions remain.

The UETA is less inclusive than the federal act. For instance, the federal act applies to all real property transactions while the UETA appears to apply only to those in business, commercial or governmental affairs.

There are also questions of conflict of laws. The UETA controls situations between Oregon residents but what of interstate communications? The internet, after all, is worldwide.

The full impact of these statutes will take years to determine, but in the short run they appear to have changed some of the well established rules in real estate.

Consider the following example:

Paul , an Oregon resident, sends e-mail to Barbara, an Oregon resident, that says:

"I will sell my triplex for $120,000 in cash provided you complete the sale before Christmas",

and Barbara e-mails her reply somewhat hurriedly:

"OK".

Based on these electronic messages, it may well be that the parties have entered into a binding contract.

But what if Paul decides the property is worth $180,000? What if Barbara isn't sure where she is going to get the money? Under traditional rules, neither would be bound until he or she signs a document. In today's electronic world, both face the prospect of being caught in a situation where the sale or purchase could be enforced by the other.

There may be other defenses to enforcing these types of contracts. The definition of an electronic signature, for instance, includes an "intent" requirement. Nonetheless, the mere prospect of being involved in legal dispute can be trouble enough considering the toll in time, anxiety and cost.

The lesson from all of this? Be careful with your e-mail. The rules of buying and selling property may now be different when dealing on the internet than they are when dealing face-to-face.