Legal Updates

What Contract? Unsigned Email Satisfies Signature Requirement under Texas Statute of Frauds

The Statute of Frauds is an age-old law requiring certain agreements be in writing and signed by the parties to be a binding contract. If you are thinking calligraphy, feathered pens and beautiful cursive signatures, think again. A Texas Court of Appeals recently ruled that merely having your name in the “From” field of an email constitutes a signature for purposes of satisfying the Texas Statute of Frauds. Khoury v. Tomlinson, 518 S.W.3d. 568 (Tex. App. 2017).

In the events that lead to the Khoury case, John Khoury had invested $400,000 in PetroGulf, Ltd., a company that purportedly had contracts to transport oil from Iraq to Syria and other Middle Eastern countries, in return for repayment of his investment with substantial interest. After no payments were made to Mr. Khoury, he met with Mr. Tomlinson, the President and CEO of PetroGulf, Ltd., who agreed to repay him the $400,000 over 4 or 5 years at a new interest rate. One week after the meeting, an email exchange ensued between Mr. Khoury and Mr. Tomlinson.  Read it here.

In response to Mr. Khoury’s recap of the in-person meeting that included Mr. Tomlinson’s agreement to repay him his $400,000 investment, Mr. Tomlinson replied, stating “[w]e are in agreement.” Mr. Tomlinson did not sign his name nor was a signature block included. Instead, his email ended with the all too familiar phrase “sent from my iPhone.”

After never being repaid his $400,000 investment, Mr. Khoury sued Mr. Tomlinson for, among other claims, breach of contract based on the theory that the parties had formed a contract in the above emails. Mr. Tomlinson argued that the contract was barred by the Statute of Frauds because it was not signed, but the Court of Appeals disagreed. Under the Uniform Electronic Transactions Act (“UETA”), which has been adopted by Texas and all other states except Illinois, Washington and New York, an electronic signature satisfies the signature requirement of the Statute of Frauds. The question the Khoury court addressed was what constitutes a “signature” under the UETA. The email at issue in Khoury was not signed, did not include a name in the body of the email and did not have a signature block at the end of the email. Nevertheless, based on the language of the UETA, and cases in other states that held that an email header (see Int’l Casings Grp., Inc. v. Premium Standard Farms, Inc., 358 F. Supp. 2d 863, 873 (W.D. Mo. 2005)) and the “From” field in an email constitute an electronic “signature” under the UETA (see Kluver v. PPL Mont., LLC, 293 P. 3d 817, 822-23 (Mont. 2012)), the court held that the mere inclusion of Mr. Tomlinson’s name in the “From” field was evidence sufficient to establish that the email was “signed” and thus satisfied the signature requirement of the Texas Statute of Frauds.

Regardless of whether they knew it at the time, the emails between Mr. Khoury and Mr. Tomlinson created a valid and enforceable contract, and Mr. Tomlinson breached that contract. To avoid this problem, it may be wise to add a disclaimer to your emails specifically stating that nothing in the email shall be deemed an electronic signature for purposes of the relevant state statute or under the Electronic Signatures in Global and National Commerce Act, the federal counterpart to the UETA. This case should also serve as a lesson to the large number of email-users who negotiate agreements via email and wish to avoid unintentionally entering into a contract, to be conscious, calculated and wary of using unequivocal language of agreement in an email.