Court considers electronic signature requirements for agency contract

An Arizona appellate court recently examined whether a real estate licensee’s emails to her clients constituted electronic signatures on a buyer agency contract when the real estate licensee failed to physically sign the written agreement.

The real estate licensee represented the buyers in a home search over an 18 month period. A series of agency agreements were signed, with the final agreement expiring in 2007. Years later, the licensee sent the buyers an email about some properties that she thought the buyers may find interesting. When the buyers expressed interest, the licensee emailed the buyers a new Buyer Agency Agreement and asked them to sign it. The buyers printed the agreement, signed it, and emailed the agreement back to the licensee. Upon receipt, the licensee sent an email back to the buyers thanking them. The licensee’s email correspondence contained an electronic business card that contained her name, address, telephone number and photograph.  The licensee never actually signed the agreement.

During the six-month period of the agency agreement, the buyers purchased a home without the licensee’s knowledge. The licensee filed a lawsuit against the buyers for breach of contract. The buyers filed a motion to dismiss the lawsuit arguing that the agreement was never signed by the licensee or broker. The trial court agreed with the buyers and dismissed the case.

On appeal, the Arizona Court of Appeals reversed the decision of the trial court and sent the case back to the lower court for further proceedings. Specifically, the court ruled that it was a factual issue to be determined by the trier-of-fact as to whether the emails from the licensee to the buyers constituted an “electronic signature.” In Arizona, the law provides that an electronic signature satisfies any law that requires a signature if the parties intended the transaction be governed by electronic means. Therefore, the licensee would need to show at trial that the parties had agreed to a contract electronically and that her email to the buyers constituted an electronic signature.

Under Pennsylvania’s Statute of Frauds, the licensee likely could have enforced the agreement even without her signature since it was signed by the buyers, “the party against whom enforcement is sought.” If required, however, the Electronic Transactions Act defines an electronic signature as any “electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”

Similar to the Arizona decision, the issue of whether any particular record is “signed” is a question of fact. The critical element is the intention to execute or adopt the sound, symbol or process for the purpose of signing the related record, along with the necessity that the electronic signature be linked or logically associated with the record. One’s voice on an answering machine may suffice, as would the inclusion of one’s name as a part of an email, so long as the signer possessed the requisite intention.

It is important to note that, in Pennsylvania, where a non-electronic consumer contract contains a provision in the document authorizing that part of it be conducted electronically, the consumer must express agreement in a separate acknowledgment. But this does not appear to be the case here. The question is whether the reply of the licensee was sufficient to accept the agreement, not whether the parties needed to authorized electronic acceptance. For the sake of clarity, however, the better practice is to print the agreement, sign it, and return a fully executed copy to the consumer.

Mr. Marsico and Mr. Evenhuis are attorneys with Caldwell & Kearns which serves as general counsel to PAR. A portion of their practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. They routinely counsel employers on employee relations issues as one of the voices of the PAR Legal Hotline.